<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-8491
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HECLA MINING COMPANY
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 82-0126240
- --------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83814-8788
- ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
208-769-4100
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for at least the past 90 days. Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding November 10, 1995
- --------------------------------------- -----------------------------
Common stock, par value $0.25 per share 48,254,357 shares
<PAGE> 2
HECLA MINING COMPANY and SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
I N D E X
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Page
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PART I. - Financial Information
Item 1 - Consolidated Balance Sheets - September 30,
1995 and December 31, 1994 3
- Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1995 and 1994 4
- Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995
and 1994 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. - Other Information
Item 1 - Legal Proceedings 27
Item 6 - Exhibits and Reports on Form 8-K 30
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<PAGE> 3
PART I - FINANCIAL INFORMATION
HECLA MINING COMPANY and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,157 $ 7,278
Accounts and notes receivable 31,946 23,516
Income tax refund receivable 250 247
Inventories 18,045 18,616
Other current assets 2,329 1,597
--------- ---------
Total current assets 59,727 51,254
Investments 2,395 6,476
Restricted investments 14,992 13,553
Properties, plants and equipment, net 170,953 257,908
Other noncurrent assets 7,889 5,391
--------- ---------
Total assets $ 255,956 $ 334,582
========= =========
LIABILITIES
-----------
Current liabilities:
Accounts payable and accrued expenses $ 13,958 $ 13,570
Accrued payroll and related benefits 2,561 2,724
Preferred stock dividends payable 2,012 2,012
Accrued taxes 1,586 925
Accrued reclamation costs 2,259 4,254
--------- ---------
Total current liabilities 22,376 23,485
Deferred income taxes 359 359
Long-term debt 31,164 1,960
Accrued reclamation costs 32,206 27,162
Other noncurrent liabilities 4,812 4,098
--------- ---------
Total liabilities 90,917 57,064
--------- ---------
SHAREHOLDERS' EQUITY
--------------------
Preferred stock, $0.25 par value,
authorized 5,000,000 shares, issued
and outstanding - 2,300,000
liquidation preference $117,012 575 575
Common stock, $0.25 par value,
authorized 100,000,000 shares;
issued 1995 - 48,307,629;
issued 1994 - 48,144,274 12,077 12,036
Capital surplus 330,258 328,995
Retained deficit (172,420) (63,437)
Net unrealized gain on investments 336 3,396
Foreign currency translation adjustment (4,898) (3,158)
Less common stock reacquired at cost;
1995 - 62,272 shares, 1994 - 62,355 shares (889) (889)
--------- ---------
Total shareholders' equity 165,039 277,518
--------- ---------
Total liabilities and shareholders' equity $ 255,956 $ 334,582
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<PAGE> 4
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(dollars and shares in thousands, except for per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- ----------------------------------
Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales of products $ 41,203 $ 35,279 $ 119,154 $ 99,666
Cost of sales and other direct
production costs 32,413 25,216 97,953 80,257
Depreciation, depletion and
amortization 7,015 4,217 18,580 10,493
--------- --------- --------- ---------
39,428 29,433 116,533 90,750
--------- --------- --------- ---------
Gross profit 1,775 5,846 2,621 8,916
--------- --------- --------- ---------
Other operating expenses:
General and administrative 3,106 2,611 7,570 8,950
Exploration 2,671 2,403 4,879 6,502
Depreciation and amortization 97 81 265 443
Reduction in carrying value of
mining properties 97,387 - - 97,387 - -
Provision for closed operations and
environmental matters 4,069 449 4,296 1,073
--------- --------- --------- ---------
107,330 5,544 114,397 16,968
--------- --------- --------- ---------
Income (loss) from operations (105,555) 302 (111,776) (8,052)
--------- --------- --------- ---------
Other income (expense):
Interest and other income 4,185 793 6,476 4,113
Gain (loss) on investments (1,051) 38 2,842 1,129
Foreign exchange gain (loss) (12) - - 150 - -
Interest expense:
Total interest cost (650) (476) (1,236) (2,523)
Less amount capitalized 474 - - 850 1,751
--------- --------- --------- ---------
2,946 355 9,082 4,470
--------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary loss (102,609) 657 (102,694) (3,582)
Income tax (provision) benefit (114) 159 (251) 272
--------- --------- --------- ---------
Income (loss) before extraordinary loss (102,723) 816 (102,945) (3,310)
Extraordinary loss on early retirement
of long-term debt - - (10) - - (833)
--------- --------- --------- ---------
Net income (loss) (102,723) 806 (102,945) (4,143)
Preferred dividends (2,013) (2,013) (6,038) (6,038)
--------- --------- --------- ---------
Net loss applicable to common
shareholders $(104,736) $ (1,207) $(108,983) $ (10,181)
========= ========= ========= =========
Net loss per common share:
Loss applicable to common shareholders
before extraordinary loss $ (2.17) $ (0.03) $ (2.26) $ (0.22)
Extraordinary loss on early retirement
of long-term debt - - - - - - (0.02)
--------- --------- --------- ---------
Net loss per common share $ (2.17) $ (0.03) $ (2.26) $ (0.24)
========= ========= ========= =========
Cash dividends per common share $ - - $ - - $ - - $ - -
========= ========= ========= =========
Weighted average number of common
shares outstanding 48,237 48,075 48,178 42,957
========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<PAGE> 5
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------
Sept. 30, 1995 Sept. 30, 1994
-------------- --------------
<S> <C> <C>
Operating activities:
Net loss $(102,945) $ (4,143)
Noncash elements included in net loss:
Depreciation, depletion and amortization 18,845 10,936
(Gain) loss on disposition of properties, plants
and equipment (3,484) 14
Gain on investments (2,842) - -
Extraordinary loss on early retirement of
long-term debt - - 833
Accretion of interest on long-term debt - - 2,000
Reduction in carrying value of mining properties 97,387 - -
Provision for reclamation and closure costs 3,707 905
Change in:
Accounts and notes receivable (7,224) (7,182)
Income tax refund receivable (3) (785)
Inventories 571 300
Other current assets (732) (145)
Accounts payable and accrued expenses 388 (356)
Accrued payroll and related benefits (163) 548
Accrued taxes 661 319
Noncurrent liabilities 56 (181)
--------- ---------
Net cash provided by operating activities 4,222 3,063
--------- ---------
Investing activities:
Additions to properties, plants and equipment (33,083) (57,511)
Proceeds from disposition of properties,
plants and equipment 3,069 13,406
Proceeds from the sales of investments 4,685 3,217
Purchase of investments and increase in cash
surrender value of life insurance (822) (1,926)
Change in funds held in escrow - - (13,497)
Proceeds from maturity of short-term investments - - 27,552
Purchase of restricted investments (1,439) - -
Other, net (1,249) (2,795)
--------- ---------
Net cash applied to investing activities (28,839) (31,554)
--------- ---------
Financing activities:
Proceeds from exercise of stock warrants 1,239 - -
Common stock issued under stock option plans 91 1,726
Dividends on preferred stock (6,038) (6,038)
Issuance of common stock - - 63,499
Early retirement of long-term debt - - (50,169)
Borrowing on long-term debt 41,000 - -
Repayment on long-term debt (11,796) - -
Decrease in deferred revenue - - (36)
--------- ---------
Net cash provided by financing activities 24,496 8,982
--------- ---------
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents (121) (19,509)
Cash and cash equivalents at beginning of period 7,278 40,031
--------- ---------
Cash and cash equivalents at end of period $ 7,157 $ 20,522
========= =========
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest (net of amount capitalized) $ 21 $ 16,497
Income tax payments, (net of refunds) $ 169 $ 397
(See Note 8 of Notes to Consolidated Financial Statements for other noncash
investing activity)
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<PAGE> 6
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The notes to the consolidated financial statements as of December 31,
1994, as set forth in the Company's 1994 Annual Report on Form 10-K,
substantially apply to these interim consolidated financial statements
and are not repeated here.
Note 2. The financial information given in the accompanying unaudited interim
consolidated financial statements reflects all adjustments which are,
in the opinion of management, necessary to a fair statement of the
results for the interim periods reported. All such adjustments are of
a normal recurring nature. All financial statements presented herein
are unaudited. However, the balance sheet as of December 31, 1994,
was derived from the audited consolidated balance sheet included in
the consolidated financial statements referred to in Note 1 above.
Note 3. The components of the income tax (provision) benefit for the nine
months ended September 30, 1995 and 1994 are as follows (in
thousands):
1995 1994
------- -------
Current:
State income tax provision $ (251) $ (208)
Federal income tax benefit - - 480
------- -------
Total current (provision) benefit (251) 272
Deferred provision - - - -
------- -------
Total $ (251) $ 272
======= =======
The Company's income tax provision for the nine months of 1995 and
1994 varies from the amount that would have been provided by applying
the statutory rate to the loss before income taxes primarily due to
the non-utilization of net operating losses.
Note 4. Inventories consist of the following (in thousands):
Sept. 30, Dec. 31,
1995 1994
--------- --------
Concentrates and metals in transit
and other products $ 2,093 $ 5,568
Industrial mineral products 6,172 5,995
Materials and supplies 9,780 7,053
-------- --------
$ 18,045 $ 18,616
======== ========
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<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Note 5. In July 1991, the Coeur d'Alene Indian Tribe (the "Tribe") brought a
lawsuit, under the Comprehensive Environmental Response Liability Act
of 1980 (CERCLA), in Idaho Federal District Court against the Company
and a number of other mining companies asserting claims for damages to
natural resources located downstream from the Bunker Hill Superfund
Site located at Kellogg, Idaho, over which the Tribe alleges some
ownership or control. The Company has answered the Tribe's complaint
denying liability for natural resource damages and asserted a number
of defenses to the Tribe's claims, including a defense that the Tribe
has no ownership or control over the natural resources they assert
have been damaged. In July 1992, in a separate action between the
Tribe and the State of Idaho, the Idaho Federal District Court
determined that the Tribe does not own the beds, banks and waters of
Lake Coeur d'Alene and the lower portion of its tributaries, the
ownership of which is the primary basis for the natural resource
damage claims asserted by the Tribe against the Company. Based upon
the Tribe's appeal of the July 1992 District Court ownership decision
to the 9th Circuit U.S. Court of Appeals, the court in the natural
resource damage litigation issued an order on October 30, 1992,
staying the court proceedings in the natural resource damage
litigation until a final decision is handed down on the question of
the Tribe's title. On December 9, 1994, the 9th Circuit Court
reversed the decision of the Idaho District Court and remanded the
case of the Tribe's ownership for trial before the District Court.
The Company has been advised that the State will seek an appeal of the
9th Circuit Court decision to the U.S. Supreme Court. In July 1994,
the United States, as Trustee for the Coeur d'Alene Tribe, initiated a
separate suit in Idaho Federal District Court seeking a determination
that the Coeur d'Alene Tribe owns approximately the lower one-third of
Lake Coeur d'Alene. The State has denied the Tribe's ownership of any
portion of Lake Coeur d'Alene and its tributaries. The legal
proceedings related to the Tribe's natural resource damages claim
against the Company and other mining companies continue to be stayed.
On July 18, 1995, the Department of Interior (DOI) notified the
Company and six other companies (several with assets and resources
greater than the Company) that the federal natural resource trustees
(Fish and Wildlife Service and U.S. Forest Service) identified the
Company and the other six companies as potentially responsible parties
(PRPs) for damages resulting from injury to federal natural resources
with respect to the Coeur d'Alene River Basin in North Idaho. The DOI
letter further notifies the Company that the federal trustees
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<PAGE> 8
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
intend to bring suit against these companies to recover the alleged
damages under CERCLA. In September 1995, the Company, together with
the other PRPs, entered into a tolling agreement with the United
States pursuant to which the United States agreed not to initiate
litigation in this matter until March 8, 1996, so long as the parties
are pursuing settlement opportunities in good faith. In this
connection, the PRPs agreed not to assert the statute of limitation as
a defense if it were to occur during this period.
In 1991, the Company initiated litigation in the Idaho State District
Court in Kootenai County, Idaho, against a number of insurance
carriers which provided comprehensive general liability insurance
coverage to the Company and its predecessors. The Company believes
that the insurance companies have a duty to defend and indemnify the
Company under their policies of insurance relating to claims asserted
against the Company by the Environmental Protection Agency (EPA) and
the Tribe. In two separate decisions issued in August 1992 and March
1993, the court ruled that the primary insurance companies had a duty
to defend the Company in the Tribe's lawsuit, but that no carrier had
a duty to defend the Company in the EPA proceeding. During 1995, the
Company entered into settlement agreements with a number of the
insurance carriers named in the litigation. The Company has received
a total of $2.8 million under the terms of the settlement agreements.
Thirty percent (30%) of these settlements is payable to the EPA to
reimburse the U.S. Government for past costs under the Bunker Hill
Consent Decree. Litigation is still pending against other insurers.
At September 30, 1995, the Company has not reduced its environmental
accrual to reflect any anticipated insurance proceeds.
In June 1994, a judgment was entered against the Company in Idaho
State District Court in the amount of $10.0 million in compensatory
damages and $10.0 million in punitive damages based on a jury verdict
rendered in late May 1994 with respect to a lawsuit previously filed
against the Company by Star Phoenix Mining Company ("Star Phoenix"), a
former lessee of the Star Morning Mine, over a dispute between the
Company and Star Phoenix concerning the Company's November 1990
termination of the Star Phoenix lease of the Star Morning Mine
property. A number of other claims by Star Phoenix and certain
principals of Star Phoenix against the Company in the lawsuit were
dismissed by the State District Court. On May 3, 1995, the District
Court issued its final opinion and order on a number of post-trial
issues pending before the Court. The Opinion and Order included the
Court's
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<PAGE> 9
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
denial of the post-trial motions filed by Star Phoenix and certain of
its principals regarding claims which had been previously dismissed by
the Court during trial. The Court also awarded Star Phoenix
approximately $300,000 in attorneys' fees and costs. The Company's
post-trial motions were denied by the State District Court, and the
Company has appealed the District Court judgment to the Idaho State
Supreme Court. Star Phoenix has cross appealed certain trial court
discovery determinations. The Company expects briefing on both
appeals to be completed in November 1995. Post-judgment interest will
accrue during the appeal period; the current interest rate is 10.875%.
In order to stay the ability of Star Phoenix to collect on the
judgment during the pending of the appeal, the Company has posted an
appeal bond in the amount of $27.2 million representing 136% of the
District Court judgment. The Company pledged U.S. Treasury Notes
totaling $10.0 million as collateral for the appeal bond. This
collateral amount is included in restricted investments at December
31, 1994 and September 30, 1995. The Company intends to vigorously
pursue its appeal to the Idaho Supreme Court and it has been the
Company's position, and at the current time it remains the Company's
position, that it will not enter into a settlement with Star Phoenix
for any material amount. Although the ultimate outcome of the appeal
of the Idaho District Court judgment is subject to the inherent
uncertainties of any legal proceeding, based upon the Company's
analysis of the factual and legal issues associated with the
proceeding before the Idaho District Court and based on the opinions
of outside counsel, as of the date hereof, it is management's belief
that the Company should ultimately prevail in this matter, although
there can be no assurance in this regard. Accordingly, the Company
has not accrued any liability associated with this litigation.
The Company is subject to other legal proceedings and claims which
have arisen in the ordinary course of its business and have not been
finally adjudicated. Although there can be no assurance as to the
ultimate disposition of these matters and the proceedings disclosed
above, it is the opinion of the Company's management, based upon the
information available at this time, that the expected outcome of these
matters, individually or in the aggregate, will not have a material
adverse effect on the results of operations and financial condition of
the Company and its subsidiaries.
Note 6. On October 1, 1995, the Company amended the terms of its August 30,
1994 unsecured revolving and term loan facility. Under the amended
terms, the Company can
<PAGE> 10
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
borrow up to $55.0 million. Amounts may be borrowed on a revolving
credit basis through July 31, 1998, and are repayable in eight
quarterly installments beginning on October 31, 1998. The Company may
select a floating rate based on the primary bank's prime interest rate
or fixed interest rates for up to six months. The fixed interest
rates are based on LIBOR or the CD rate and range from LIBOR +.8% or
the CD rate +.8% to LIBOR +1.425% or the CD rate +1.425% depending on
the level of outstanding borrowings. To maintain compliance with the
covenants of the credit facility, the Company must maintain a 1.5 to
1.0 current ratio and a defined fixed charge coverage ratio of 1.5 to
1.0. As of September 30, 1995, the Company was in compliance with all
restrictive covenants of the credit facility. Amounts available under
the facility are based on a debt to cash flow calculation, which must
not exceed a maximum of 4.0 to 1.0. At September 30, 1995 and October
31, 1995, there were $30.0 million and $35.0 million, respectively,
outstanding under the Company's revolving and term loan facility
classified as long-term debt.
As a result of the recent developments at the Grouse Creek mine (see
Note 9 of Notes to Consolidated Financial Statements), the Company
will be meeting with the banks for the credit facility to discuss the
status of the credit facility and consider the possible renegotiation
of certain terms and covenants of the credit facility.
Note 7. In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" (SFAS No. 121). This Statement requires that long-lived
assets and certain identifiable intangibles to be held and used by the
Company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing the review for recoverability, the Company
is required to estimate the future cash flows expected to result from
the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is
recognized as the amount of the carrying value which is in excess of
discounted future cash flows. The Company has adopted the provisions
of SFAS No. 121 at September 30, 1995. The adoption of the provisions
of SFAS No. 121 had no material affect on the results of operations or
financial condition and liquidity of the Company that would not have
been experienced otherwise regardless of its adoption.
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<PAGE> 11
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Note 8. On September 27, 1995, the Company sold its Apex Unit processing
facility for $8.0 million, plus certain working capital items totaling
an additional $1.4 million, recognizing a gain on the sale totaling
approximately $3.2 million. Under the terms of the agreement, the
Company received $4.4 million in cash at closing (including the $1.4
million in certain working capital items) and accepted a note
receivable for the remaining $5.0 million. Under the note, $3.0
million, plus accrued interest at NationsBank's published Prime Rate,
is due on September 27, 1996, and the balance of $2.0 million, plus
accrued interest at NationsBank's prime rate plus one percent, is due
on September 27, 1997.
Note 9. Following completion of the Company's third quarter, as a result of
its periodic review of the status of various mining properties, the
Company determined that certain adjustments were required to properly
reflect the estimated net realizable values of such properties. These
adjustments, totaling $97.4 million, consisted of write-downs of
properties, plants and equipment for the Company's interest in the
Grouse Creek mine ($97.0 million) and the Company's interest in the
Consolidated Silver Corporation's Silver Summit mine ($0.4 million).
The Grouse Creek mine carrying value write-down was necessary due to
significantly higher than expected operating costs per gold ounce
which was due to much lower than anticipated gold grades being
realized from the proven and probable ore reserves. The Consolidated
Silver Corporation's Silver Summit mine write-down was necessary due
to the decision by Consolidated Silver Corporation to sell the closed
mine at a price less than the Company's carrying value. Both
adjustments were reported as a reduction in carrying value of mining
properties at September 30, 1995.
Note 10. During its periodic review of environmental litigation during the
third quarter of 1995, the Company increased its liability for
remedial activity costs at the Bunker Hill Superfund Site by $3.4
million due to higher than previously estimated costs. As adjusted at
September 30, 1995, the Company has estimated and established a total
remaining liability at the Bunker Hill Superfund Site for remedial
activity costs of $13.3 million. Concurrently, the Company increased
its estimate of liability for remedial activity costs in the Coeur
d'Alene Mining District by $0.3 million due to higher than previously
estimated costs. Both of these third quarter adjustments totaling
$3.7 million were recorded as a provision for closed operations and
environmental matters at September 30, 1995.
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<PAGE> 12
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The Company is primarily involved in the exploration, development,
mining and processing of gold, silver, lead, zinc and industrial
minerals. As such, the Company's revenues and profitability are
strongly influenced by world prices of gold, silver, lead and zinc,
which fluctuate widely and are affected by numerous factors beyond the
Company's control, including inflation and the worldwide forces of
supply and demand. The aggregate effect of these factors is not
possible to accurately predict. In the following descriptions, where
there are changes that are attributable to more than one factor, the
Company presents each attribute describing the change in descending
order relative to the attribute's importance to the overall change.
The Company incurred net losses applicable to common shareholders in
the third quarter of 1995 and 1994 totaling $104.7 million and $1.2
million, respectively. The results for 1995 include third quarter
write-downs totaling $97.4 million related to the Company's interest in
the Grouse Creek property ($97.0 million), which is discussed further
below, and the Company's interest in the Consolidated Silver
Corporation's Silver Summit mine ($0.4 million).
If the average market prices of metals for the first nine months of
1995 remain constant for the balance of the year, the Company expects
to continue to experience net losses applicable to common shareholders.
For 1995, the Company is currently anticipating a net loss applicable
to common shareholders in the range of $108.0 million to $118.0 million
after the expected preferred stock dividends totaling approximately
$8.0 million for the year. However, due to the volatility of metals
prices and the significant impact metal price changes can have on the
Company's operations, there can be no assurance that the actual results
of operations for the year ending December 31, 1995 will be as
forecasted.
The variability of metals prices requires that the Company, in
assessing the impact of prices on recoverability of its assets,
exercise judgment as to whether price changes are temporary or are
likely to persist. The Company performs a comprehensive evaluation of
the recoverability of its assets on a periodic basis. The evaluation
includes a review of estimated future cash
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<PAGE> 13
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
flows against the carrying value of the assets. Asset write-downs may
occur from time to time if the Company determines that the carrying
values attributed to individual assets are not recoverable given
reasonable expectations for future market conditions.
During the third quarter of 1995 and continuing into the fourth quarter
1995, the Grouse Creek mine, which began production in December 1994
and in which the Company has an 80% interest, experienced significantly
higher than expected per gold ounce operating costs and significantly
less than expected operating margins resulting from higher than
expected start-up costs and lower than expected gold ore grade. Mining
to date has indicated that mill grade ore occurs in thinner, less
continuous structures than originally interpreted. Based on its
periodic review of the carrying values of the Company's mining
properties, the Company determined that a 1995 third quarter carrying
value adjustment totaling $97.0 million was required to properly
reflect the estimated net realizable value of its interest in the
Grouse Creek Joint Venture. The amount of the adjustment was based on
the Company's carrying value of its interest in the Grouse Creek mine
in excess of estimated discounted future cash flows. A revised life-
of-mine cash flow analysis was developed early in the fourth quarter of
1995 for this purpose which recognizes the geologic complexity of the
Sunbeam deposit as determined from mining experience to date and
includes a revised interpretation of the geologic data. The Company
currently plans to continue mining on the Sunbeam pit through June 1996
and perform further ore confirmation drilling of the Grouse deposit to
evaluate the feasibility of mining operations beyond June 1996.
In 1995, the Company expects to produce approximately 168,000 ounces of
gold compared to 128,000 ounces of gold in 1994. The 1995 production
estimate includes 70,000 ounces from the La Choya mine, 68,000 ounces
from the Company's 80% interest in the Grouse Creek mine, 21,000 ounces
from the Company's interest in the American Girl mine and an additional
9,000 ounces from other sources. The Company's expected increase in
gold production in 1995 compared to 1994 reflects the anticipated
production levels at the Grouse Creek and La Choya Mines, which offset
the decrease in gold production due to the completion of operations at
the Republic mine in February 1995.
The Company's share of silver production for 1995 is expected to be
approximately 2.2 million ounces compared to actual 1994 silver
production of 1.6 million ounces.
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<PAGE> 14
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
The expected increase in silver production in 1995 compared to 1994 is
primarily due to the new production at the Grouse Creek mine and the
resumption of operations at the Lucky Friday mine in December 1994,
after the ore-conveyance accident suspended operations on August 30,
1994.
The Company's production of industrial minerals is expected to increase
slightly in 1995 to 1,011,000 tons from about 986,000 tons in 1994.
Additionally in 1995, the Company expects to ship approximately 847,000
cubic yards of landscape material from Mountain West Products compared
to 655,000 cubic yards in 1994.
RESULTS OF OPERATIONS
FIRST NINE MONTHS 1995 COMPARED TO FIRST NINE MONTHS 1994
The Company incurred a net loss of approximately $102.9 million ($2.14
per common share) in the first nine months of 1995 compared to a net
loss of approximately $4.1 million ($0.10 per common share) in the same
period of 1994. After $6.0 million in dividends to shareholders of the
Company's Series B Cumulative Preferred Stock, the Company's net loss
applicable to common shareholders for the first nine months of 1995 was
approximately $109.0 million, or $2.26 per common share, compared to
$10.2 million, or $0.24 per common share in the comparable 1994 period.
The increased loss in 1995 compared to the same period in 1994 was due
to a variety of factors, the most significant of which was the write-
down of the Company's interest in the Grouse Creek mine as discussed
above.
Sales of the Company's products increased by approximately $19.5
million, or 19.6%, in the first nine months of 1995 as compared to the
same period of 1994, principally the result of (1) increased product
sales totaling $36.7 million, most notably from the Grouse Creek mine
where production commenced in December 1994 and the La Choya mine, as
well as from the Company's industrial minerals operations. These
factors were partially offset by decreased sales at the other mines in
the metals segment, the impact of which is approximately $18.1 million,
attributable to (1) decreased gold and silver production at the
Republic mine which completed operations in February 1995 and (2)
decreased gold production at the American Girl mine due to the
completion of underground mining operations in January 1995.
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<PAGE> 15
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Comparing the average metal prices for the nine months of 1995 with the
comparable period for 1994, gold decreased slightly to $383.78 per
ounce from $383.85 per ounce, silver decreased 3% to $5.17 per ounce
from $5.33 per ounce, lead increased by 18.5% to $0.276 per pound from
$0.233 per pound, and zinc increased 8% to $0.471 per pound from $0.436
per pound.
In the first nine months of 1995, cost of sales and other direct
production costs increased approximately $17.7 million, or 22%, from
the comparable 1994 period primarily due to (1) production costs of
$20.4 million incurred at the Grouse Creek mine during 1995 where
production commenced in December 1994; (2) production cost increases at
Mountain West Products ($4.1 million) due principally to increased
production as well as increased freight and raw materials costs (some
of which was passed along to customers); (3) production cost increases
resulting from increased production at Kentucky-Tennessee Clay
Company's (K-T Clay's) Kaolin and Ball Clay divisions totaling
approximately $2.0 million and $1.1 million, respectively; (4)
production cost increases at the La Choya mine and the Apex Unit
totaling approximately $1.9 million and $1.2 million, respectively,
primarily due to increased production at these locations in the 1995
period; and (5) production cost increases at Colorado Aggregate Company
($1.2 million) related principally to a change in product mix
requirements. These increases in cost of sales and other direct
production costs were partially offset by decreases in operating costs
at other operations totaling $14.3 million. These decreases are
primarily due to (1) decreased production costs at the Republic mine
totaling approximately $7.7 million which is the result of the
completion of operations in February 1995; (2) decreased cost of sales
in the 1995 period at the American Girl mine totaling $2.2 million due
to decreased production; (3) decreased standby costs at the Greens
Creek mine totaling $1.8 million in the 1995 period, a direct result of
management's decision to further develop the mine and recommence
production; and (4) decreased production costs at the Lucky Friday mine
totaling approximately $1.8 million due to the receipt of insurance
proceeds and decreased production as the mine ramped back up to normal
production levels in the 1995 period after the temporary suspension of
operations discussed above.
Cost of sales and other direct production costs as a percentage of
sales increased to 82.2% in the first nine months of 1995 from 80.5% in
the comparable 1994 period, primarily due to the increased production
costs at the Grouse Creek mine.
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<PAGE> 16
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Cash and full production cost per gold ounce increased to $306 and $423
for the first nine months of 1995 from $270 and $331 in the comparable
1994 period, respectively. The increase in both the cash and full
production costs per gold ounce is primarily attributable to increased
per ounce production costs at the Grouse Creek and American Girl mines
during the 1995 period, partially offset by decreased per ounce
production costs at the La Choya mine.
Cash and full production cost per silver ounce decreased to $4.73 and
$5.95 in the first nine months of 1995 from $5.73 and $7.00 in the
comparable 1994 period, respectively. The decreases in the cost per
silver ounce are due primarily to decreased production costs in the
1995 period at the Lucky Friday mine.
Depreciation, depletion and amortization increased by approximately
$8.1 million, or 77.1%, in the 1995 period compared to the 1994 period,
primarily the result of (1) production commencing at the Grouse Creek
mine in December 1994, where most depreciable assets are depreciated on
a unit-of-production basis, the impact of which increased depreciation
expense approximately $8.9 million and (2) increased production at the
La Choya mine where significant assets are also depreciated on a unit-
of-production basis, which increased depreciation expense approximately
$0.9 million. These increases in depreciation, depletion and
amortization were partially offset by a decrease in the depreciation
expense at the Republic mine totaling $1.6 million.
Other operating expenses increased by $97.4 million, or 574%, in the
1995 period from the 1994 period, due principally to (1) the reduction
in carrying value of mining properties for the Company's interest in
the Grouse Creek mine ($97.0 million) and the Company's interest in the
Consolidated Silver Corporation's Silver Summit mine ($0.4 million);
and (2) the third quarter adjustment to increase the Company's
allowance for liability for environmental remediation activity costs at
the Bunker Hill Superfund Site ($3.4 million) and the Coeur d'Alene
Mining district ($0.3 million). These increases were partially offset
by (1) decreased exploration expenses totaling approximately $1.6
million and (2) decreased general and administrative expenses totaling
$1.4 million in the 1995 period as a result of 1994 Equinox Resources
Ltd. general and administrative expenses which were nonrecurring in
1995.
Other income was approximately $9.1 million in the 1995 period compared
to $4.5 million in the 1994 period. The
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<PAGE> 17
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
increase in other income during 1995 was primarily a result of the $3.4
million gain recognized on the sale of certain common stock investments
and the $3.2 million gain on sale of the Apex processing facility,
partially offset by a $1.1 million write-down for certain common stock
investments. Total interest cost decreased $1.3 million in the 1995
period principally due to the June 1994 retirement of long-term debt,
partially offset by a $0.9 increase in interest expense during 1995
related to new borrowings under the Company's revolving and term credit
facility (described below). The capitalized interest costs decrease of
$0.9 million in the 1995 period principally due to the completion of
the Grouse Creek project was partially offset by increased
capitalization on the Rosebud, Greens Creek, American Girl and the
Lucky Friday-Gold Hunter projects.
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1994
The Company incurred a net loss of approximately $102.7 million ($2.13
per common share) in the third quarter of 1995 compared to net income
of approximately $0.8 million ($0.02 per common share) in the same
period of 1994. After $2.0 million in dividends to shareholders of the
Company's Series B Cumulative Preferred Stock, the Company's net loss
applicable to common shareholders was approximately $104.7 million
($2.17 per common share) and $1.2 million ($0.03 per common share) for
the third quarter of 1995 and 1994, respectively. The increased loss
in 1995 compared to the same period in 1994 was due to a variety of
factors, the most significant of which was the write-down of the
Company's interest in the Grouse Creek mine discussed above.
Sales of the Company's products increased by approximately $5.9
million, or 16.8%, in the third quarter of 1995 as compared to the same
period of 1994, principally the result of increased product sales
totaling $13.3 million, most notably from the Grouse Creek mine where
production commenced in December 1994 and the La Choya mine, as well as
from the Company's industrial minerals operations. These factors were
partially offset by decreased sales at the other mines in the metals
segment, the impact of which was approximately $7.4 million,
attributable to (1) decreased gold and silver production at the
Republic mine which completed operations in February 1995 and (2)
decreased gold production at the American Girl mine due to the
completion of underground mining operations in January 1995.
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<PAGE> 18
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Comparing the average metal prices for the third quarter of 1995 with
the comparable period for 1994, gold decreased 0.4% to $384.31 per
ounce from $385.81 per ounce, silver decreased to $5.33 per ounce from
$5.34 per ounce, lead increased by 4.1% to $0.278 per pound from $0.267
per pound, and zinc increased 4.3% to $0.458 per pound from $0.439 per
pound.
Cost of sales and other direct production costs increased approximately
$7.2 million, or 28.5%, from the third quarter of 1994 to the third
quarter of 1995 primarily due to (1) production costs of $5.8 million
incurred at the Grouse Creek mine where production commenced in
December 1994; (2) production cost increases at Mountain West Products
totaling $1.6 million due principally to increased production as well
as increased freight and raw materials costs; (3) increased production
costs at K-T Clay Company's Kaolin division totaling approximately $1.4
million due to increased production during 1995; (4) production cost
increases at the La Choya mine totaling approximately $1.1 million due
to increased production in 1995; (5) production cost increases at Lucky
Friday totaling $0.9 million; and (6) production cost increases at the
Apex Unit due to increased production and sales ($0.7 million). These
increases in cost of sales and other direct production costs were
partially offset by decreases in operating costs at other operations
totaling $4.7 million. These decreases are primarily due to (1)
decreased production costs at the Republic mine totaling approximately
$2.7 million which was the result of the completion of operations in
February 1995; (2) decreased cost of sales in the 1995 period at the
American Girl mine totaling $0.8 million due to decreased production;
and (3) decreased standby costs at the Greens Creek mine totaling $0.7
million in the 1995 period, a direct result of management's decision to
further develop the mine and recommence production.
Cost of sales and other direct production costs as a percentage of
sales increased to 78.7% in the third quarter of 1995 from 71.5% in the
comparable 1994 period, primarily due to the increased production costs
at the Grouse Creek mine.
Cash and full production cost per gold ounce increased to $263 and $383
for the third quarter of 1995 from $213 and $279 in the comparable 1994
period, respectively. The increase in both the cash and full
production costs per gold ounce is primarily attributable to increased
per ounce production costs at the Grouse Creek and American Girl mines
during the 1995 period.
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<PAGE> 19
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
In the third quarter of 1995, cash production cost per silver ounce
increased to $4.57 from $4.50 in the third quarter of 1994 related
principally to higher cash production costs nearly offset by increased
production and by-product credits for lead and zinc. Full production
cost per silver ounce decreased to $5.71 from $5.84 during the same
period due primarily to increased by-product credits from lead and zinc
attributable to improved prices and production for these products,
partially offset by noncash depreciation charges in the 1995 period as
a result of increased tons of ore mined.
Depreciation, depletion and amortization increased by approximately
$2.8 million, or 66.4%, from the 1994 period to the 1995 period,
primarily the result of (1) production commencing at the Grouse Creek
mine in December 1994 ($2.8 million) and (2) increased production at
the La Choya mine where most assets are depreciated on a unit-of-
production basis, which increased depreciation expense approximately
$0.3 million. These increases in depreciation, depletion and
amortization were partially offset by a decrease in the depreciation
expense at the Republic mine totaling $0.5 million.
Other operating expenses increased by $101.8 million from the 1994
period to the 1995 period, due principally to (1) the reduction in
carrying value of mining properties for the Company's interest in the
Grouse Creek mine ($97.0 million) and the Company's interest in the
Consolidated Silver Corporation's Silver Summit mine ($0.4 million) and
the third quarter adjustment to increase the Company's liability for
environmental remediation activity costs at the Bunker Hill Superfund
Site ($3.4 million) and the Coeur d'Alene Mining district ($0.3
million).
Other income was approximately $2.9 million in the 1995 period compared
to $0.4 million in the 1994 period. The 1995 period increase was
primarily a result of the $3.2 million gain recognized on the sale of
the Apex processing facility, partially offset by a $1.1 million write-
down for certain common stock investments. Total interest cost
increased $0.2 million in the 1995 period principally due to the
increased borrowings under the Company's revolving and term credit
facility. Capitalized interest costs increased $0.5 million in the
1995 period principally due to the increased capitalization on the
Rosebud, Greens Creek, American Girl and the Lucky Friday-Gold Hunter
projects.
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<PAGE> 20
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
FINANCIAL CONDITION AND LIQUIDITY
A substantial portion of the Company's revenue is derived from the sale
of products, the prices of which are affected by numerous factors
beyond the Company's control. Prices may change dramatically in short
periods of time and such changes have a significant effect on revenues,
profits and liquidity of the Company. The Company is also subject to
many of the same inflationary pressures as the U.S. economy in general.
The Company continues to implement cost-cutting measures in an effort
to reduce per unit production costs. Management believes, however,
that the Company may not be able to continue to offset the impact of
inflation over the long term through cost reductions alone. However,
the market prices for products produced by the Company have a much
greater impact than inflation on the Company's revenues and
profitability. Moreover, the discovery, development and acquisition of
mineral properties are in many instances unpredictable events. Future
metals prices, the success of exploration programs, changes in legal
and regulatory requirements, and other property transactions can have a
significant impact on the need for capital.
At September 30, 1995, assets totaled approximately $256.0 million and
shareholders' equity totaled approximately $165.0 million. Cash and
cash equivalents decreased slightly to $7.2 million at September 30,
1995 from $7.3 million at the end of 1994.
Operating activities provided approximately $4.2 million of cash during
the first nine months of 1995. The primary sources of cash were from
the La Choya mine and the Industrial Minerals segment. Partially
offsetting these primary sources was a $7.2 million increase in
accounts and notes receivable due to (1) the buildup of product
receivables at Lucky Friday during 1995 as the property returned to
normal production levels after the ore-conveyance accident suspended
production in August 1994; (2) the buildup of product receivables at
Grouse Creek due to commencement of operations in December 1994; and
(3) the increases in product receivables at K-T Clay Company's Kaolin
division and Mountain West Products due to the 1995 acquisitions of the
Langley and Western Bark operations. Principal noncash charges
included in operating activities include (1) the carrying value
adjustments of the Company's interest in the Grouse Creek mine and the
Company's interest in the Consolidated Silver Corporation's Silver
Summit mine ($97.4 million) and (2) depreciation, depletion and
amortization of $18.8 million.
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<PAGE> 21
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
The Company's investing activities used $28.8 million of cash during
the first nine months of 1995. The most significant use of cash was
$33.1 million of property, plant and equipment additions described
below and the transfer of $1.4 million to restricted investments for
additional reclamation bonding requirements related to ongoing
operations. These were partially offset by proceeds from sale of
certain common stock investments ($4.7 million) and proceeds from the
sale of the Apex processing facility and other assets ($3.1 million).
During the first nine months of 1995, the primary additions to
property, plant and equipment were $8.2 million at the K-T Clay Ball
and Kaolin industrial minerals divisions, $7.0 million at the Greens
Creek mine, $5.0 million at the Grouse Creek mine, $2.3 million at the
La Choya mine, $2.2 million at Mountain West Products, $3.2 million at
the Rosebud project, and $1.4 million at the Lucky Friday-Gold Hunter
project. Included in the K-T Clay Ball and Kaolin industrial minerals
additions was the $6.3 acquisition of the property, plant and equipment
of J.M. Huber Corporation's kaolin operation in Langley, South
Carolina. Included in the Mountain West Products amount is the $1.8
million acquisition of the property, plant and equipment of the Western
Bark operations in Idaho and South Dakota.
During the first nine months of 1995, $24.5 million was provided from
financing activities. The major sources of cash were (1) proceeds from
borrowings on the Company's revolving and term loan credit facility
totaling $30 million, net of repayments totaling $11 million and (2)
proceeds from the exercise of stock warrants and options totaling $1.3
million. These were partially offset by payments of preferred stock
dividends of $6.0 million.
The Company estimates that remaining capital expenditures in 1995 will
be approximately $11.3 million. These expenditures consist primarily
of (1) the Company's share of development expenditures at the Greens
Creek project of approximately $3.6 million and (2) additional
development expenditures at the Rosebud project and the Grouse Creek
and American Girl mines totaling approximately $3.0 million, $1.5
million and $1.5 million, respectively.
The Company intends to fund these capital expenditures through a
combination of cash flow from operating activities and borrowings from
its revolving and term credit facility which, subject to certain
conditions, provides for borrowings up to a maximum of $55.0 million.
The Company's estimate of its capital expenditure requirements assume,
with respect to the Greens Creek and
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<PAGE> 22
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
American Girl properties, that the Company's joint venture partners
will not default with respect to their respective portions of
development costs and capital expenditures. However, because the
Grouse Creek mine ore grades have fallen far short of expectations as
discussed above, the Company is not certain of its joint venture
partner's, Great Lakes Minerals Inc. (Great Lakes), ability in this
project to fund past due or future cash calls. Great Lakes is in
arrears on funding past joint venture cash calls totaling $2.2 million
through September 30, 1995 and $3.1 million through October 31, 1995.
Great Lakes has recently paid a portion of its past due cash calls
($238,000 received on October 31, 1995) and has verbally agreed to
remit proceeds from its share of future production to the joint
venture, which is expected to cover its share of ongoing operating cash
requirements.
Subject to final approval by the Company's Board of Directors, the
Company estimates that capital expenditures to be incurred in 1996
other than for the Grouse Creek property will be approximately $29.2
million. These expenditures consist primarily of development
expenditures at the Greens Creek mine ($17.9 million), the Rosebud
project ($3.5 million), and the Lucky Friday-Gold Hunter project ($3.1
million), as well as expenditures at other operating locations totaling
$4.7 million. Depending upon the determination to be made with respect
to further development of the Grouse Creek property and the portion of
contribution made by Great Lakes, 1996 capital expenditures are
expected to be between $4.0 million and $11.6 million.
These planned capital expenditures will depend, in large part, on the
Company's ability to obtain the required funds in addition to those
expected to be available from operations and amounts available under
its revolving and term loan credit facility. The expected 1996 capital
expenditures referred to above for the Rosebud project totaling $3.5
million, represent an estimate of costs to maintain the present status
of the project until a decision is made to develop the property.
Construction of the Rosebud project will be deferred until adequate
financing arrangements can be made.
Pursuant to a Registration Statement filed with the Securities and
Exchange Commission in the third quarter of 1995 and declared
effective, the Company can, at its option, offer debt securities,
common shares, preferred shares, or warrants in an amount not to exceed
$100 million in the aggregate, although there can be no assurance that
any financing will be available or that
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<PAGE> 23
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
some combination of these financing alternatives will occur.
On October 1, 1995, the Company amended the terms of its August 30,
1994 unsecured revolving and term loan facility. Under the amended
terms, the Company can borrow up to $55.0 million. Amounts may be
borrowed on a revolving credit basis through July 31, 1998, and are
repayable in eight quarterly installments beginning on October 31,
1998. The Company may select a floating rate based on the primary
bank's prime interest rate or fixed interest rates for up to six
months. The fixed interest rates are based on LIBOR or the CD rate and
range from LIBOR +.8% or the CD rate +.8% to LIBOR +1.425% or the CD
rate +1.425% depending on the level of outstanding borrowings. To
maintain compliance with the covenants of the credit facility, the
Company must maintain a 1.5 to 1.0 current ratio and a defined fixed
charge coverage ratio of 1.5 to 1.0. As of September 30, 1995, the
Company was in compliance with all restrictive covenants of the credit
facility. Amounts available under the facility are based on a debt to
cash flow calculation, which must not exceed a maximum of 4.0 to 1.0.
At September 30, 1995 and October 31, 1995, there were $30.0 million
and $35.0 million, respectively, outstanding under the Company's
revolving and term loan facility classified as long-term debt.
As a result of the recent developments at the Grouse Creek mine, the
Company will be meeting with banks for the credit facility to discuss
the status of the credit facility and consider the possible
renegotiation of certain terms and covenants of the credit facility.
The Company's planned environmental and reclamation expenditures for
the balance of 1995 are estimated to be approximately $2.2 million,
principally for activities at the Bunker Hill Superfund Site, Durita
mine, the Coeur d'Alene River Basin, and the Republic mine.
Exploration expenditures for the balance of 1995 are expected to be
approximately $1.2 million. The Company's exploration strategy is to
focus further exploration at or in the vicinity of its currently owned
properties. Accordingly, these expenditures will be incurred
principally at Rosebud, Grouse Creek, American Girl, Lucky Friday, and
Mexican exploration targets.
In the normal course of its business, the Company uses forward sales
commitments and commodity put and call option contracts to manage its
exposure to fluctuations in
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<PAGE> 24
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
the prices of certain metals which it produces. Contract positions are
designed to ensure that the Company will receive a defined minimum
price for certain quantities of its production. Gains and losses, and
the related costs paid or premiums received, for contracts which hedge
the sales prices of commodities are deferred and included in income as
part of the hedged transaction. Revenues from the aforementioned
contracts are recognized at the time contracts are closed out by
delivery of the underlying commodity or settlement of the net position
in cash. The Company is exposed to certain losses, generally the
amount by which the contract price exceeds the spot price of a
commodity, in the event of nonperformance by the counterparties to
these agreements. At September 30, 1995, the Company had forward sales
commitments through January 1997 for 17,500 ounces of gold at an
average price of $409.95 per ounce. The Company has also purchased
options to put 63,900 ounces of gold to the counterparties at an
average price of $389.24 per ounce. Concurrently, the Company sold
options to allow the counterparties to call 63,900 ounces of gold from
the Company at an average price of $466.38 per ounce. There was no net
cost associated with the purchase and sale of these options which
expire, in tandem, on a monthly basis through December 1997. At
September 30, 1995 the estimated fair value of the Company's purchased
gold put options was approximately $521,000. If the Company chooses to
close its offsetting short gold call option positions, it would incur a
liability of approximately $82,000. The London Final gold price at
September 30, 1995 was $384.00. In addition, at September 30, 1995,
the Company had sold forward 1,350 metric tons of lead at an average
price of $683.50 per metric ton, or $0.31 per pound. These commitments
extend over the period October 1995 to December 1995. The estimated
value of these lead forward sales contracts is not significant. The
nature and purpose of these forward sales contracts does not presently
expose the Company to any significant net loss. All of the
aforementioned contracts are designated as hedges at September 30,
1995.
The decline of the peso during the last year has not and is not
expected to significantly impact results at the La Choya mine or K-T
Clay de Mexico, S.A. de C.V. as both funding for operations and sales
are denominated in dollars. In the first nine months of 1995, a net
foreign exchange gain totaling $0.2 million has been recorded relating
to both of the Company's Mexican operations. Continued declines in the
Mexican peso, however, could adversely impact the Company's Mexican
operations.
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<PAGE> 25
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
As described in Note 5 of Notes to Consolidated Financial Statements,
the Company is a defendant in a legal action filed in November 1990 by
Star Phoenix and certain principals of Star Phoenix, asserting that the
Company breached the terms of Star Phoenix's lease agreement for the
Company's Star Morning mine and that the Company interfered with
certain contractual relationships of Star Phoenix relating to the
Company's 1990 termination of such lease agreement. In June 1994,
judgment was entered by the Idaho State District Court against the
Company in the legal proceeding in the amount of $10.0 million in
compensatory damages and $10.0 million in punitive damages based on a
jury verdict rendered in the case in late May 1994. The Company's
post-trial motions were denied by the District Court, and the Company
has appealed the judgment to the Idaho State Supreme Court. Post-
judgment interest will accrue during the appeal period. In order to
stay the ability of Star Phoenix to collect on the judgment during the
pending of the appeal, the Company posted an appeal bond in the amount
of $27.2 million representing 136% of the District Court judgment. The
Company pledged U.S. Treasury Notes totaling $10.0 million as
collateral for the $27.2 million bond. The Company intends to
vigorously pursue its appeal to the Idaho Supreme Court and it has been
the Company's position, and at the current time it remains the
Company's position, that it will not enter into a settlement with Star
Phoenix for any material amount. Although the ultimate outcome of the
appeal of the judgment is subject to the inherent uncertainties of any
legal proceeding, based on the Company's analysis of the factual and
legal issues associated with the proceeding before the District Court
and based upon the opinions of outside counsel, as of the date hereof,
it is management's belief that the Company should ultimately prevail in
this matter, although there can be no assurance in this regard.
Although there can be no assurance as to the ultimate outcome of these
matters and the proceedings disclosed above, it is the opinion of the
Company's management, based upon the information available at this
time, that the outcome of these matters, individually, or, in the
aggregate, will not have a material adverse effect on the results of
operations and financial condition of the Company and its subsidiaries.
OTHER
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.
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<PAGE> 26
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" (SFAS No. 121). This Statement
requires that long-lived assets and certain identifiable intangibles to
be held and used by the Company be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In performing the review for
recoverability, the Company is required to estimate the future cash
flows expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying
amount of the asset, an impairment loss is recognized as the amount of
the carrying value which is in excess of discounted future cash flows.
The Company has adopted the provisions of SFAS No. 121 at September 30,
1995. The adoption of the provisions of SFAS No. 121 had no material
affect on the results of operations or financial condition and
liquidity of the Company that would not have been experienced otherwise
regardless of its adoption.
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<PAGE> 27
PART II - OTHER INFORMATION
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
In July 1991, the Coeur d'Alene Indian Tribe (the "Tribe") brought a
lawsuit, under the Comprehensive Environmental Response Liability Act
of 1980 (CERCLA), in Idaho Federal District Court against the Company
and a number of other mining companies asserting claims for damages to
natural resources located downstream from the Bunker Hill Superfund
Site located at Kellogg, Idaho, over which the Tribe alleges some
ownership or control. The Company has answered the Tribe's complaint
denying liability for natural resource damages and asserted a number of
defenses to the Tribe's claims, including a defense that the Tribe has
no ownership or control over the natural resources they assert have
been damaged. In July 1992, in a separate action between the Tribe and
the State of Idaho, the Idaho Federal District Court determined that
the Tribe does not own the beds, banks and waters of Lake Coeur d'Alene
and the lower portion of its tributaries, the ownership of which is the
primary basis for the natural resource damage claims asserted by the
Tribe against the Company. Based upon the Tribe's appeal of the July
1992 District Court ownership decision to the 9th Circuit U.S. Court of
Appeals, the court in the natural resource damage litigation issued an
order on October 30, 1992, staying the court proceedings in the natural
resource damage litigation until a final decision is handed down on the
question of the Tribe's title. On December 9, 1994, the 9th Circuit
Court reversed the decision of the Idaho District Court and remanded
the case of the Tribe's ownership for trial before the District Court.
The Company has been advised that the State will seek an appeal of the
9th Circuit Court decision to the U.S. Supreme Court. In July 1994,
the United States, as Trustee for the Coeur d'Alene Tribe, initiated a
separate suit in Idaho Federal District Court seeking a determination
that the Coeur d'Alene Tribe owns approximately the lower one-third of
Lake Coeur d'Alene. The State has denied the Tribe's ownership of any
portion of Lake Coeur d'Alene and its tributaries. The legal
proceedings related to the Tribe's natural resource damages claim
against the Company and other mining companies continue to be stayed.
On July 18, 1995, the Department of Interior (DOI) notified the Company
and six other companies (several with assets and resources greater than
the Company) that the federal natural resource trustees (Fish and
Wildlife Service and U.S. Forest Service) identified the Company and
the other six companies as potentially responsible parties (PRPs) for
damages resulting from injury to
-27-
<PAGE> 28
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
federal natural resources with respect to the Coeur d'Alene River Basin
in North Idaho. The DOI letter further notifies the Company that the
federal trustees intend to bring suit against these companies to
recover the alleged damages under CERCLA. In September 1995, the
Company, together with the other PRPs, entered into a tolling agreement
with the United States pursuant to which the United States agreed not
to initiate litigation in this matter until March 8, 1996, so long as
the parties are pursuing settlement opportunities in good faith. In
this connection, the PRPs agreed not to assert the statute of
limitation defense if it were to occur during this period.
In 1991, the Company initiated litigation in the Idaho State District
Court in Kootenai County, Idaho, against a number of insurance carriers
which provided comprehensive general liability insurance coverage to
the Company and its predecessors. The Company believes that the
insurance companies have a duty to defend and indemnify the Company
under their policies of insurance relating to claims asserted against
the Company by the Environmental Protection Agency (EPA) and the Tribe.
In two separate decisions issued in August 1992 and March 1993, the
court ruled that the primary insurance companies had a duty to defend
the Company in the Tribe's lawsuit, but that no carrier had a duty to
defend the Company in the EPA proceeding. During 1995, the Company
entered into settlement agreements with a number of the insurance
carriers named in the litigation. The Company has received a total of
$2.8 million under the terms of the settlement agreements. Thirty
percent (30%) of these settlements is payable to the EPA to reimburse
the U.S. Government for past costs under the Bunker Hill Consent
Decree. Litigation is still pending against other insurers. At
September 30, 1995, the Company has not reduced its environmental
accrual to reflect any anticipated insurance proceeds.
In June 1994, a judgment was entered against the Company in Idaho State
District Court in the amount of $10.0 million in compensatory damages
and $10.0 million in punitive damages based on a jury verdict rendered
in late May 1994 with respect to a lawsuit previously filed against the
Company by Star Phoenix Mining Company ("Star Phoenix"), a former
lessee of the Star Morning Mine, over a dispute between the Company and
Star Phoenix concerning the Company's November 1990 termination of the
Star Phoenix lease of the Star Morning Mine property. A number of
other claims by Star Phoenix and certain principals of Star Phoenix
against the Company in the lawsuit were
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<PAGE> 29
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
dismissed by the State District Court. On May 3, 1995, the District
Court issued its final opinion and order on a number of post-trial
issues pending before the Court. The Opinion and Order included the
Court's denial of the post-trial motions filed by Star Phoenix and
certain of its principals regarding claims which had been previously
dismissed by the Court during trial. The Court also awarded Star
Phoenix approximately $300,000 in attorneys' fees and costs. The
Company's post-trial motions were denied by the State District Court,
and the Company has appealed the District Court judgment to the Idaho
State Supreme Court. Star Phoenix has cross appealed certain trial
court discovery determinations. The Company expects briefing on both
appeals to be completed in November 1995. Post-judgment interest will
accrue during the appeal period; the current interest rate is 10.875%.
In order to stay the ability of Star Phoenix to collect on the judgment
during the pending of the appeal, the Company has posted an appeal bond
in the amount of $27.2 million representing 136% of the District Court
judgment. The Company pledged U.S. Treasury Notes totaling $10.0
million as collateral for the appeal bond. This collateral amount is
included in restricted investments at December 31, 1994 and September
30, 1995. The Company intends to vigorously pursue its appeal to the
Idaho Supreme Court and it has been the Company's position, and at the
current time it remains the Company's position, that it will not enter
into a settlement with Star Phoenix for any material amount. Although
the ultimate outcome of the appeal of the Idaho District Court judgment
is subject to the inherent uncertainties of any legal proceeding, based
upon the Company's analysis of the factual and legal issues associated
with the proceeding before the Idaho District Court and based on the
opinions of outside counsel, as of the date hereof, it is management's
belief that the Company should ultimately prevail in this matter,
although there can be no assurance in this regard. Accordingly, the
Company has not accrued any liability associated with this litigation.
The Company is subject to other legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. Although there can be no assurance as to the ultimate
disposition of these matters and the proceedings disclosed above, it is
the opinion of the Company's management, based upon the information
available at this time, that the expected outcome of these matters,
individually or in the aggregate, will not have a material adverse
effect on the results of operations and financial condition of the
Company and its subsidiaries.
-29-
<PAGE> 30
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1(b) - First Amendment to Credit Agreement dated October 1,
1995
12 - Fixed Charge Coverage Ratio Calculation for the nine
months ended September 30, 1994 and 1995
13.1 - Third Quarter Report to Shareholders for the quarter
ending September 30, 1995, for release dated November
10, 1995
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
Items 2, 3 and 5 of Part II are omitted from this report as inapplicable.
-30-
<PAGE> 31
HECLA MINING COMPANY and SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HECLA MINING COMPANY
----------------------------------
(Registrant)
Date: November 14, 1995 By /s/ ARTHUR BROWN
----------------------------------
Arthur Brown, Chairman, President
and Chief Executive Officer
Date: November 14, 1995 By /s/ S. E. Hilbert
----------------------------------
S. E. Hilbert
Assistant Controller
(Chief Accounting Officer)
-31-
<PAGE> 32
EXHIBIT INDEX
-------------
Exhibit
No. Description
- -------- -----------------------
10.1(b) First Amendment to Credit Agreement dated October 1, 1995
12 Fixed Charge Coverage Ratio Calculation for the nine months
ended September 30, 1994 and 1995
13.1 Third Quarter Report to Shareholders for the quarter ending
September 30, 1995, for release dated November 10, 1995
27 Financial Data Schedule
-32-
<PAGE> 1
Exhibit 10.1(b)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (herein called the "AMENDMENT")
made as of the 1st day of October, 1995, by and among HECLA MINING COMPANY, a
Delaware corporation (herein called "BORROWER"), Colorado Aggregate Company of
New Mexico, a New Mexico corporation, Kentucky-Tennessee Clay Company, a
Delaware corporation, K-T Feldspar Corporation, a North Carolina corporation,
Mountain West Products, Inc., an Idaho corporation, and NATIONSBANK OF TEXAS,
N.A., a national banking association (in its capacity as Agent under the
Original Agreement, herein called "AGENT"), and Lenders named in the Original
Agreement referred to below ("LENDERS"),
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain Credit
Agreement dated as of August 30, 1994 (the "ORIGINAL AGREEMENT") for the purpose
and consideration therein expressed, whereby Lenders became obligated to make
loans to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original Agreement
to provide for the purposes and consideration set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement and in
consideration of the loans which may hereafter be made by Lenders to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS AND REFERENCES
SECTION 1.1. TERMS DEFINED IN THE ORIGINAL AGREEMENT. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
SECTION 1.2. OTHER DEFINED TERMS. Unless the context otherwise requires,
the following terms when used in this Amendment shall have the meanings assigned
to them in this Section 1.2.
"AMENDMENT" shall mean this First Amendment to Credit Agreement.
"AMENDMENT DOCUMENTS" shall mean this Amendment, the Renewal Notes and
the Pledge Agreement.
"CREDIT AGREEMENT" shall mean the Original Agreement as amended
hereby.
"PLEDGE AGREEMENT" shall mean that certain Pledge Agreement dated as
of October 1, 1995, between Borrower and Agent covering Bonds purchased
with funds drawn under the Bond LC.
<PAGE> 2
"RENEWAL NOTES" shall mean promissory notes in the form of Exhibit A
made by Borrower payable to the order of each Lender in an amount equal to
such Lender's Percentage Share of the Maximum Loan Amount.
ARTICLE II.
AMENDMENTS TO ORIGINAL AGREEMENT
SECTION 2.1. DEFINED TERMS. (a) The definitions of "BASE RATE,"
"COMMITMENT PERIOD," "FINAL MATURITY DATE," "LETTERS OF CREDIT," "LOAN
BALANCE", "MAXIMUM LOAN AMOUNT", "OBLIGATIONS", "PERCENTAGE SHARE", "PERMITTED
DEBT" and "SPREAD" in Section 1.1 of the Original Agreement are hereby amended
in their entirety to read as follows:
"`BASE RATE' means
(a) ON EACH DAY PRIOR TO NOVEMBER 1, 1995:
(i) the Prime Rate if the Loan Balance is EQUAL TO OR LESS THAN
$20,000,000; or
(ii) the Prime Rate plus 0.125% per annum if the Loan Balance is
GREATER THAN $20,000,000; and
(b) ON NOVEMBER 1, 1995 AND ON EACH DAY THEREAFTER DURING THE COMMITMENT
PERIOD:
(i) the Prime Rate if the Loan Balance on such day is EQUAL TO OR
LESS THAN 50% of the Maximum Loan Amount;
(ii) the Prime Rate plus 0.25% per annum if NEW EQUITY HAS NOT BEEN
ISSUED and the Loan Balance on such day is EQUAL TO OR LESS THAN 75% BUT
GREATER THAN 50% of the Maximum Loan Amount;
(iii) the Prime Rate plus 0.125% per annum if NEW EQUITY HAS BEEN
ISSUED and the Loan Balance on such day is EQUAL TO OR LESS THAN 75% BUT
GREATER THAN 50% of the Maximum Loan Amount;
(iv) the Prime Rate plus 0.50% per annum if NEW EQUITY HAS NOT BEEN
ISSUED and the Loan Balance on such day IS GREATER THAN 75% of the Maximum
Loan Amount; or
(v) the Prime Rate plus 0.375% per annum if NEW EQUITY HAS BEEN
ISSUED and the Loan Balance on such day IS GREATER THAN 75% of the Maximum
Loan Amount; and
(c) ON EACH DAY AFTER THE END OF THE COMMITMENT PERIOD:
(i) the Prime Rate plus .125% per annum if the Loan Balance on such
day is EQUAL TO OR LESS THAN 50% of the Maximum Loan Amount;
(ii) the Prime Rate plus 0.375% per annum if NEW EQUITY HAS NOT BEEN
ISSUED and the Loan Balance on such day is EQUAL TO OR LESS THAN 75% BUT
GREATER THAN 50% of the Maximum Loan Amount;
(iii) the Prime Rate plus 0.25% per annum if NEW EQUITY HAS BEEN
ISSUED and the Loan Balance on such day is EQUAL TO OR LESS THAN 75% BUT
GREATER THAN 50% of the Maximum Loan Amount;
<PAGE> 3
(iv) the Prime Rate plus 0.625% per annum if NEW EQUITY HAS NOT BEEN
ISSUED and the Loan Balance on such day IS GREATER THAN 75% of the Maximum
Loan Amount; or
(v) the Prime Rate plus 0.50% per annum if NEW EQUITY HAS BEEN ISSUED
and the Loan Balance on such day IS GREATER THAN 75% of the Maximum Loan
Amount.
If the Prime Rate or the Loan Balance changes after the date hereof, the
Base Rate shall be automatically increased or decreased, as the case may
be, without notice to Borrower from time to time as of the effective time
of each change in the Prime Rate or the Loan Balance. The Base Rate shall
in no event, however, exceed the Highest Lawful Rate."
"`COMMITMENT PERIOD' means the period from and including the date
hereof until and including July 31, 1998 (or, if earlier, the day on which
the Notes first become due and payable in full).
"`FINAL MATURITY DATE' means July 31, 2000.
"`LETTERS OF CREDIT' means the standby letters of credit issued by
Issuing Bank at the application of Borrower, and the Bond LC."
"`LOAN BALANCE' means during each Quarterly Period, the amount of the
average aggregate unpaid principal balance of the Loans calculated for the
immediately preceding Quarterly Period, as determined by Agent in its sole
discretion. As used in this definition of Loan Balance, "Quarterly Period"
means each of the following periods for each calendar year: (i) the period
from and including January 1 until and including March 31, (ii) the period
from and including April 1 until and including July 30, (iii) the period
from and including July 1 until and including September 30, and (iv) the
period from and including October 1 until December 31.
"`MAXIMUM LOAN AMOUNT' means the amount of $55,000,000.
"`OBLIGATIONS' means (a) all Debt from time to time owing by any of
the Related Persons to Agent or any Lender under or pursuant to any of the
Loan Documents, including without limitation all LC Obligations plus (b)
all Hedging Obligations.
"`PERCENTAGE SHARE' means, with respect to any Lender (a) when used
in Sections 2.1 or 2.4, in any Request for Advances or when no Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name
on Schedule 3, and (b) when used otherwise, the percentage obtained by
dividing (i) the sum of the unpaid principal balance of such Lender's Loan
at the time in question plus the Matured LC Obligations which such Lender
has funded pursuant to Section 2A.3(b) plus the portion of the Maximum
Drawing Amount which such Lender might be obligated to fund under Section
2A.3(b), divided by (ii) the sum of the aggregate unpaid principal balance
of all Loans at such time plus the aggregate amount of LC Obligations
outstanding at such time.
"`PERMITTED DEBT' means (i) if the aggregate outstanding Funded Debt
is equal to or less than $15,000,000, all of such Funded Debt which matures
after the Final Maturity Date and is not subject to terms which are more
restrictive than the terms and conditions set forth in this Agreement, as
determined by Majority Lenders in their sole discretion; and (ii) if the
aggregate outstanding Funded Debt is greater than $15,000,000, all of such
<PAGE> 4
Funded Debt which matures after the Final Maturity Date and is not subject
to terms which are more restrictive than the terms and conditions set forth
in this Agreement, as determined by Majority Lenders in their sole
discretion; provided that such Funded Debt shall not constitute Permitted
Debt unless either (A) Majority Lenders have exercised the Pricing
Adjustment Option and the Loan Documents have been amended to provide for
the increase in the Base Rate and the Spread pursuant thereto or (B) Agent
has notified Borrower that Majority Lenders will not exercise the Pricing
Adjustment Option.
"`SPREAD' means
(a) ON EACH DAY PRIOR TO NOVEMBER 1, 1995:
(i) 0.80% per annum if the Loan Balance is equal to or less than
$20,000,000 or
(ii) 0.925% per annum if the Loan Balance is greater than $20,000,000;
and
(b) ON NOVEMBER 1, 1995 AND ON EACH DAY THEREAFTER DURING THE COMMITMENT
PERIOD:
(i) 0.80% per annum if the Loan Balance on such day is EQUAL TO OR
LESS THAN 25% of the Maximum Loan Amount;
(ii) 0.925% per annum if the Loan Balance on such day is EQUAL TO OR
LESS THAN 50% BUT GREATER THAN 25% of the Maximum Loan Amount;
(iii) 1.175% per annum if NEW EQUITY HAS NOT BEEN ISSUED and the
Loan Balance on such day is EQUAL TO OR LESS THAN 75% BUT GREATER THAN 50%
of the Maximum Loan Amount;
(iv) 1.05% per annum if NEW EQUITY HAS BEEN ISSUED and the Loan
Balance on such day is EQUAL TO OR LESS THAN 75% BUT GREATER THAN 50% of
the Maximum Loan Amount;
(v) 1.425% per annum if NEW EQUITY HAS NOT BEEN ISSUED and the Loan
Balance on such day IS GREATER THAN 75% of the Maximum Loan Amount; or
(vi) 1.30% per annum if NEW EQUITY HAS BEEN ISSUED and the Loan
Balance on such day IS GREATER THAN 75% of the Maximum Loan Amount; and
(c) ON EACH DAY AFTER THE END OF THE COMMITMENT PERIOD:
(i) 0.925% per annum if the Loan Balance on such day is EQUAL TO OR
LESS THAN 25% of the Maximum Loan Amount;
(ii) 1.05% per annum if the Loan Balance on such day is EQUAL TO OR
LESS THAN 50% BUT GREATER THAN 25% of the Maximum Loan Amount;
(iii) 1.30% per annum if NEW EQUITY HAS NOT BEEN ISSUED and the
Loan Balance on such day is EQUAL TO OR LESS THAN 75% BUT GREATER THAN 50%
of the Maximum Loan Amount;
(iv) 1.175% per annum if NEW EQUITY HAS BEEN ISSUED and the Loan
Balance on such day is EQUAL TO OR LESS THAN 75% BUT GREATER THAN 50% of
the Maximum Loan Amount;
<PAGE> 5
(v) 1.55% per annum if NEW EQUITY HAS NOT BEEN ISSUED and the Loan
Balance on such day IS GREATER THAN 75% of the Maximum Loan Amount; or
(vi) 1.425% per annum if NEW EQUITY HAS BEEN ISSUED and the Loan
Balance on such day IS GREATER THAN 75% of the Maximum Loan Amount.
If the Loan Balance changes, the Spread shall be automatically increased
or decreased, as the case may be, without notice to Borrower from time to
time as of the effective time of each change in the Loan Balance."
(b) The following definitions of "BOND" and "BOND LC" are hereby added to
Section 1.1 of the Original Agreement immediately following the definition of
"BASE RATE PORTION:"
"`BONDS' means the bonds issued under the Indenture."
"`BOND LC' means that certain letter of credit issued by Issuing Bank
substantially in the form of Schedule 4, which provides for payment of the
Bonds, and any letter of credit issued by Issuing Bank in substitution therefor
in accordance with the terms of this Agreement and the original Bond LC."
(c) The following definition of "HEDGING OBLIGATIONS" is hereby added to
Section 1.1 of the Original Agreement immediately following the definition of
"HAZARDOUS MATERIALS:"
"`HEDGING OBLIGATIONS' means all of the following:
(i) any and all present or future obligations of one or more of the
Related Persons to any one or more Lenders (or any affiliate of any Lender)
according to the terms of any present or future interest or currency rate
swap, rate cap, rate floor, rate collar, exchange transaction, forward rate
agreement, or other exchange or rate protection agreements or any option
with respect to any such transaction now existing or hereafter entered into
between any of the Related Persons and one or more parties constituting any
Lender (or any affiliate of any Lender); and
(ii) any and all present or future obligations of one or more Related
Persons to any one or more Lenders (or to any affiliate of any Lender)
according to the terms of any present or future swap agreements, cap,
floor, collar, exchange transaction, forward agreement or other exchange
or protection agreements relating to gold or other minerals, or any option
with respect to any such transaction now existing or hereafter entered into
between any of the Related Persons and one or more parties constituting any
Lender (or any affiliate of any Lender)."
(d) The following definition of "INDENTURE" is hereby added to Section 1.1
of the Original Agreement immediately following the definition of "HIGHEST
LAWFUL RATE:"
"`INDENTURE' means that certain Indenture of Trust dated as of October
1, 1995 between The Industrial Development Corporation of Custer County,
Idaho and Norwest Bank of Minnesota, National Association, as Trustee,
pursuant to which the solid waste disposal revenue bonds (Hecla Mining
Company Project) series 1995 are being issued."
(e) The following definition of "LETTER OF CREDIT SUBLIMIT" is hereby
added to Section 1.1 of the Original Agreement immediately following the
definition of "LENDERS:"
<PAGE> 6
"`LETTER OF CREDIT SUBLIMIT' means the amount of $10,000,000."
(f) The following definition of "LOAN AGREEMENT" is hereby added to
Section 1.1 of the Original Agreement immediately following the definition of
"LENDERS:"
"`LOAN AGREEMENT' means that certain Loan Agreement dated as of
October 1, 1995, between Borrower and the Industrial Development
Corporation of Custer County, Idaho."
(g) the following definition of "NEW EQUITY" is hereby added to Section
1.1 of the Original Agreement immediately following the definition of
"NATIONSBANK:"
"`NEW EQUITY' means issuance of common stock of Borrower after October
1, 1995, in a single transaction or multiple transactions, for an aggregate
purchase price (net of costs of issuance and commissions) of at least
Fifteen Million Dollars ($15,000,000)."
(h) the following definition of "PRICING ADJUSTMENT OPTION" is hereby
added to Section 1.1 of the Original Agreement immediately following the
definition of "PERSON:"
"`PRICING ADJUSTMENT OPTION' means the right of Majority Lenders, in
the event that Funded Debt ever exceeds $15,000,000, to increase the Base
Rate and the Spread by an amount determined by Majority Lenders, in their
sole discretion, to be necessary to reflect market interest rates for a
borrower with a financial condition similar to Borrower and a credit
facility similar to this Agreement and to require Borrower and Subsidiary
Guarantors to amend the Loan Documents to provide for such increase."
SECTION 2.2. FACILITY FEES; LETTER OF CREDIT FEES. Section 2.5 of the
Original Agreement is hereby amended in its entirety as follows:
"Section 2.5 Facility Fees; Letter of Credit Fees.
(a) In consideration of each Lender's commitment to make Advances,
Borrower will pay to Agent for the account of Lenders a nonrefundable
annual facility fee in the amount of 0.325% of the Maximum Loan Amount.
Each such fee shall be payable in advance, on the date hereof and on each
anniversary of the date hereof until this Agreement shall have been
terminated.
(b) In consideration of the issuance of each Letter of Credit by
Issuing Bank, Borrower agrees to pay to Issuing Bank for the account of
Lenders, on the date of issuance thereof, a letter of credit fee equal to
the greater of (i) the amount calculated by applying the Spread to the face
amount of such Letter of Credit for the term thereof or (ii) $500."
SECTION 2.3. CASH FLOW PROJECTIONS. The second sentence of Section 2.8(b)
of the Original Agreement is hereby amended in its entirety to read as follows:
"Within seven (7) days after receipt of the Borrower Projections, each
Lender shall notify Agent whether or not it approves the Borrower
Projections (any Lender's failure to so notify the Agent shall be deemed
approval of the Borrower Projections by such Lender) and within ten (10)
days after receipt of the Borrower Projections, Agent shall notify Borrower
whether Majority Lenders have approved the Borrower Projections, and if not
<PAGE> 7
approved (i) the reason for withholding such approval and (ii) the Borrower
Projections, as adjusted by Majority Lenders in their reasonable
discretion, as they deem necessary based on the information concerning
Borrower then available to Majority Lenders (the "Adjusted Projections").
SECTION 2.4. LETTERS OF CREDIT; BOND LC. Section 2A.1 of the Original
Agreement is hereby amended in its entirety to read as follows:
"Section 2A.1. Letters of Credit; Bond LC.
(a) Terms Applicable to all Letters of Credit Including Bond LC.
Subject to the terms and conditions hereof, Issuing Bank agrees to issue
from time to time during the Commitment Period, in reliance on the
agreements of Lenders set forth in Section 2A.3(b), at Borrower's
application, such Letters of Credit as Borrower may from time to time
request, so long as:
(i) the sum of (A) the aggregate amount of LC Obligations at
such time, plus (B) the amount of such Letter of Credit, does not
exceed the Letter of Credit Sublimit;
(ii) the sum of (A) the aggregate amount of Advances
outstanding at the time such Letter of Credit is issued plus (B) the
aggregate amount of LC Obligations at such time, plus (C) the amount
of such Letter of Credit, does not exceed the Maximum Loan Amount;
(iii) the form and terms of such Letter of Credit are
satisfactory to Issuing Bank in its sole and absolute discretion;
(iv) the expiration date of such Letter of Credit is on or before
the Business Day immediately preceding the last day of the Commitment
Period, unless otherwise agreed to by Majority Lenders; and
(v) the issuance of such Letter of Credit shall not cause the
Total Debt to Cash Earnings Ratio to exceed 4.0 to 1.0 (calculated
using Total Debt as of the date of issuance of such Letter of Credit,
and including the amount of such Letter of Credit, and using Cash
Earnings as of the end of the most recent Fiscal Quarter).
(b) Terms Applicable to Bond LC. (i) Each Lender hereby agrees
that the form of the Bond LC attached hereto as Schedule 4 is
acceptable to it and hereby consents to the issuance of the Bond LC
in such form; provided that (A) all of the terms and conditions set
forth in Section 2A.1(a) above, (B) all other conditions precedent to
the issuance of a Letter of Credit hereunder, and (C) all conditions
precedent to the purchase of the Bonds set forth in Section IV of that
certain Placement Agreement by and among Borrower, The Industrial
Development Corporation of Custer County, Idaho, and NationsBank,
N.A., except for delivery of an opinion of Thompson & Knight, P.C.,
counsel for Agent, and the Bond LC, have been satisfied. (Such
consent shall not obligate the Issuing Bank to obtain such Lender's
consent to the issuance or extension of the term of any Letter of
Credit or the extension of the term of the Bond LC except any
extension of the expiration date beyond the last day of the Commitment
Period.)
<PAGE> 8
(ii) The term of the Bond LC may be extended at the written
request of Borrower (in this subparagraph called "Request for
Extension") for an additional period determined by the Issuing Bank
if the Issuing Bank shall have given written notice to Borrower of
such extension and shall have delivered to the Trustee a notice in the
form of Annex E to the Bond LC (and the Trustee shall have accepted
such notice) at least forty-five (45) days prior to the end of the
then effective expiration date of the Bond LC, subject to the terms
and conditions set forth in this Agreement and the Bond LC, and
subject to earlier termination of the Bond LC in accordance with its
terms. If the Issuing Bank shall not have received from Borrower a
Request for Extension at least ninety (90) days prior to the then
effective expiration date of the Bond LC, Issuing Bank shall have no
obligation to consider extending the term of the Bond LC. Issuing
Bank shall notify Borrower whether or not it shall extend the term of
the Bond LC within forty-five (45) days after Issuing Bank's receipt
of a Request for Extension. Any determination to extend the term of
the Letter of Credit shall be made at Issuing Bank's sole discretion;
no course of dealing or other circumstances shall require the Issuing
Bank to extend the Letter of Credit.
SECTION 2.5. CASH COLLATERAL FOR LC OBLIGATIONS. Paragraph (a) of Section
2A.8 of the Original Agreement is hereby amended and restated in its entirety
to read as follows:
"(a) Cash Collateral for LC Obligations.
(i) Acceleration. If the Obligations, or any part thereof, become
immediately due and payable pursuant to Article VII, then all LC
Obligations shall become immediately due and payable without regard for
actual drawings or payments on the Letters of Credit and Borrower shall
immediately pay to Agent for the account of the Issuing Bank an amount
equal to the aggregate LC Obligations then outstanding.
(ii) Long-term Letters of Credit. If in accordance with the terms of
Section 2A.1 of this Agreement, Majority Lenders have agreed to extend the
expiration date of any Letter of Credit beyond the last Business Day of the
Commitment Period, on such Business Day Borrower will pay to Agent for the
account of the Issuing Bank an amount equal to the aggregate LC Obligations
relating to such Letters of Credit, in addition to all other amounts then
due under the Loan Documents.
(iii) Required Prepayment Amount. If at the time Borrower is
required to pay all or part of a Required Prepayment Amount pursuant to
Section 2.8, the amount of Obligations, other than LC Obligations, then
outstanding is less than the amount of the Required Prepayment Amount then
due, Borrower shall pay to Agent for the account of Issuing Bank the amount
by which (A) the amount of the Required Prepayment Amount then due exceeds
(B) the amount of Obligations, other than LC Obligations, then outstanding,
(in each case the "Excess Amount") to be held pursuant to Section 2.A8. So
long as no Default or Event of Default has occurred and is continuing, upon
written request of Borrower to Agent within thirty (30) days after the end
of any Fiscal Quarter for which the Total Debt to Cash Earnings Ratio
exceeds 4.0 to 1.0 without any additional Required Prepayment Amount, Agent
shall remit to Borrower the Cash Collateral deposited pursuant to this
subsection in the amount so requested."
<PAGE> 9
SECTION 2.6. OPTIONAL PREPAYMENTS. Section 2.7 of the Original Agreement
is hereby amended in its entirety to read as follows:
"Section 2.7. Optional Prepayments. Borrower may, upon one Business
Day's notice to each Lender, from time to time and without premium or
penalty prepay the Notes, in whole or in part, so long as the aggregate
amounts of all partial prepayments of principal on the Notes equals
$500,000 or any higher integral multiple of $500,000, and so long as
Borrower pays any costs with respect to the prepayment of any Fixed Rate
Portion due under Section 2.13. Each partial prepayment of principal made
after the end of the Commitment Period shall be applied to the regular
installments of principal due under the Notes in the inverse order of their
maturities. Each prepayment of principal under this section shall be
accompanied by all interest then accrued and unpaid on the principal so
prepaid. Any principal or interest prepaid pursuant to this section shall
be in addition to, and not in lieu of, all payments otherwise required to
be paid under the Loan Documents at the time of such prepayment."
SECTION 2.7. BOOKS, FINANCIAL STATEMENTS AND REPORTS. The following two
new paragraphs (v) and (vi) are hereby added to Section 5.1(b) of the Original
Agreement immediately after paragraph (iv) thereof.
(v) A copy of the final Rosebud project feasibility study to Agent
and Lenders upon completion thereof; and
(vi) A quarterly variance report explaining material variances between
actual versus budgeted amounts for all material business units of Borrower,
including information such as unit price and cost data, capital
expenditures, revenues, and operating costs.
SECTION 2.8. EVENTS OF DEFAULT. The following new paragraphs (k) and (l)
are hereby added to Section 7.1 of the Original Agreement immediately after 1(j)
thereof and shall read as follows:
"(k) an `Event of Default' occurs and is continuing under the
Indenture or under the Loan Agreement; and
(l) any party to the Indenture fails to observe or perform any of the
covenants, conditions, or agreements of the Indenture or the Bonds in any
material respect, or any party to the Loan Agreement fails to observe or
perform any of the covenants, conditions, or agreements of the Loan
Agreement in any material respect, and such failure has not been waived or
not cured within any applicable grace period."
SECTION 2.9. SCHEDULES; EXHIBITS. Schedule 3 hereto is hereby added as
Schedule 3 to the Original Agreement, Schedule 4 hereto is hereby added as
Schedule 4 to the Original Agreement, and Exhibit A hereto is hereby substituted
for Exhibit A to the Original Agreement.
ARTICLE III.
CONDITIONS OF EFFECTIVENESS
SECTION 3.1. EFFECTIVE DATE. This Amendment shall become effective as of
the date first above written when, and only when:
(a) Agent shall have received each of the Amendment Documents duly
executed and delivered by Borrower;
<PAGE> 10
(b) Agent shall have additionally received all of the following documents,
each document (unless otherwise indicated) being dated the date of receipt
thereof by Agent, duly authorized, executed and delivered, and in form and
substance satisfactory to Agent:
(i) a certificate of a duly authorized officer of Borrower to the
effect that all of the representations and warranties set forth in Article
IV hereof are true and correct at and as of the time of such effectiveness;
(ii) a certificate of the Secretary of Borrower dated the date of the
Amendment Documents certifying that attached thereto is a true and complete
copy of resolutions adopted by the Board of Directors of Borrower
authorizing the execution, delivery and performance of the Amendment
Documents and certifying the names and true signatures of the officers of
Borrower authorized to sign the Amendment Documents;
(iii) an opinion of counsel to Borrower in the form attached
hereto as Exhibit B; and
(iv) such supporting documents as Agent may reasonably request.
(c) Agent shall have received for the account of Lenders an upfront fee
in the amount of $55,000.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF BORROWER. In order to
induce each Lender to enter into the Amendment Documents, Borrower represents
and warrants to each Lender that:
(a) The representations and warranties contained in Section 4.1 of the
Original Agreement are true and correct at and as of the time of the
effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver the Amendment
Documents and is and will continue to be duly authorized to borrow monies and
to perform its obligations under the Credit Agreement. Borrower has duly taken
all corporate action necessary to authorize the execution and delivery of the
Amendment Documents and to authorize the performance of the obligations of
Borrower hereunder.
(c) The execution and delivery by Borrower of the Amendment Documents, the
performance by Borrower of its obligations thereunder and the consummation of
the transactions contemplated thereby do not and will not conflict with any
provision of law, statute, rule or regulation or of the certificate of
incorporation and bylaws of Borrower, or of any material agreement, judgment,
license, order or permit applicable to or binding upon Borrower, or result in
the creation of any lien, charge or encumbrance upon any assets or properties
of Borrower. Except for those which have been obtained, no consent, approval,
authorization or order of any court or governmental authority or third party is
required in connection with the execution and delivery by Borrower of the
Amendment Documents.
<PAGE> 11
(d) When duly executed and delivered, each of the Amendment Documents and
the Credit Agreement will be a legal and binding obligation of Borrower,
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the enforcement
of creditors' rights and by equitable principles of general application.
(e) The audited annual Consolidated financial statements of Borrower dated
as of December 31, 1994 and the unaudited quarterly Consolidated financial
statements of Borrower dated as of June 30, 1995 fairly present the Consolidated
financial position at such dates and the Consolidated statement of operations
and the changes in Consolidated financial position for the periods ending on
such dates for Borrower. Copies of such financial statements have heretofore
been delivered to each Lender. Since June 30, 1995, no material adverse change
has occurred in the financial condition or businesses or in the Consolidated
financial condition or businesses of Borrower.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. RATIFICATION OF AGREEMENTS. The Original Agreement as hereby
amended is hereby ratified and confirmed in all respects. The Loan Documents,
as they may be amended or affected by the various Amendment Documents, are
hereby ratified and confirmed in all respects. Any reference to the Credit
Agreement in any Loan Document shall be deemed to refer to this Amendment also
and any reference in any Loan Document to any other document or instrument
amended, renewed, extended or otherwise affected by any Amendment Document shall
also refer to such Amendment Document. Any reference to the Note in any other
Loan Document shall be deemed to be a reference to the Renewal Note issued and
delivered pursuant to this Amendment. The execution, delivery and effectiveness
of the other Amendment Documents shall not, except as expressly provided herein
or therein, operate as a waiver of any right, power or remedy of Lender under
the Credit Agreement or any other Loan Document nor constitute a waiver of any
provision of the Credit Agreement or any other Loan Document.
SECTION 5.2. SURVIVAL OF AGREEMENTS. All representations, warranties,
covenants and agreements of Borrower herein shall survive the execution and
delivery of the Amendment Documents and the performance hereof, including
without limitation the issuance of the Renewal Notes, and shall further survive
until all of the Obligations are paid in full. All statements and agreements
contained in any certificate or instrument delivered by Borrower or any Related
Person hereunder or under the Credit Agreement to any Lender shall be deemed to
constitute representations and warranties by, and/or agreements and covenants
of, Borrower under the Amendment Documents and under the Credit Agreement.
SECTION 5.3. MARKING OF ORIGINAL NOTE. Lender shall promptly mark each
Lender's original Note either "renewed and extended" or "ineffective" and shall
deliver a photocopy thereof to Borrower.
SECTION 5.4. GOVERNING LAW. The Amendment Documents shall be governed by
and construed in accordance with the laws of the State of Texas and any
applicable laws of the United States of America in all respects, including
construction, validity and performance.
SECTION 5.5. COUNTERPARTS. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.
<PAGE> 12
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
HECLA MINING COMPANY, Borrower
By: /s/ John P. Stilwell
--------------------------------------------
John P. Stilwell
Vice President-Finance and Treasurer
COLORADO AGGREGATE COMPANY OF NEW
MEXICO INC., Subsidiary Guarantor
By: /s/ J. Gary Childress
--------------------------------------------
J. Gary Childress
Vice President
KENTUCKY-TENNESSEE CLAY COMPANY,
Subsidiary Guarantor
By: /s/ J. Gary Childress
--------------------------------------------
J. Gary Childress
Vice President
K-T FELDSPAR CORPORATION,
Subsidiary Guarantor
By: /s/ J. Gary Childress
--------------------------------------------
J. Gary Childress
Vice President
MOUNTAIN WEST PRODUCTS, INC.
Subsidiary Guarantor
By: /s/ Michael B. White
--------------------------------------------
Michael B. White
Vice President
<PAGE> 13
NATIONSBANK OF TEXAS, N.A.,
Agent and Lender
By: /s/ Ilene S. Larimore
--------------------------------------------
Name: Ilene S. Larimore
Title: Senior Vice President
SEATTLE-FIRST NATIONAL BANK, Lender
By: /s/ Joe Poole
--------------------------------------------
Joe Poole, Vice President
BANK OF AMERICA, IDAHO, N.A., Lender
By: /s/ John A. MacPhee
--------------------------------------------
John A. MacPhee, Vice President
FIRST SECURITY BANK OF IDAHO, N.A.,
Lender
By: /s/ Vicki Riga
--------------------------------------------
Vicki Riga, Vice President
<PAGE> 14
SCHEDULE 3
LENDER'S PERCENTAGE SHARES
Percentage Share
Name of Bank Percentage Share of Maximum Amount
------------ ---------------- -----------------
NationsBank of Texas, N.A., 50% $27,500,000
Agent and Lender
Seattle First National Bank, 25% 13,750,000
Lender
Bank of America, Idaho, N.A., 12.5% 6,875,000
Lender
First Security Bank of Idaho, 12.5% 6,875,000
Lender
=============================================
MAXIMUM AMOUNT $55,000,000
<PAGE> 15
SCHEDULE 4
FORM OF BOND LC
<PAGE>
<PAGE> 16
EXHIBIT A
PROMISSORY NOTE
$_____________ Dallas, Texas ______________, 1995
FOR VALUE RECEIVED, the undersigned, Hecla Mining Company, a Delaware
corporation (herein called "Borrower"), hereby promises to pay to the order
of _________________________________________, a national banking association
(herein called "Lender"), the principal sum of
_________________________________ DOLLARS ($__________), or, if greater or
less, the aggregate unpaid principal amount of the Loan made under this Note
by Lender to Borrower pursuant to the terms of the Credit Agreement (as
hereinafter defined), together with interest on the unpaid principal balance
thereof as hereinafter set forth, both principal and interest payable as
herein provided in lawful money of the United States of America at the
offices of the Agent under the Credit Agreement, 901 Main Street, Dallas,
Texas 75202 or at such other place within Dallas County, Texas, as from time
to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Credit Agreement
dated as of August 30, 1994, among Borrower, NationsBank of Texas, N.A., as
Agent, and the lenders (including Lender) referred to therein (herein, as
from time to time supplemented, amended or restated, called the "Credit
Agreement"), and is a "Note" as defined therein, (b) is subject to the terms
and provisions of the Credit Agreement, which contains provisions for
payments and prepayments hereunder and acceleration of the maturity hereof
upon the happening of certain stated events, and (c) renews and extends, but
does not novate or extinguish, that certain Promissory Note dated August 30,
1994, made by Borrower payable to the order of Lender in the original
principal amount of ___________________ Dollars ($___________). Payments on
this Note shall be made and applied as provided herein and in the Credit
Agreement. Reference is hereby made to the Credit Agreement for a
description of certain rights, limitations of rights, obligations and duties
of the parties hereto and for the meanings assigned to terms used and not
defined herein.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the last day of each
October, January, April and July of each year, beginning October 31, 1995,
and (ii) any day on which past due interest or principal is owed hereunder
and is unpaid. If the terms hereof or of the Credit Agreement provide
that payments of interest or principal hereon shall be deferred from one
Base Rate Payment Date to another day, such other day shall also be a Base
Rate Payment Date.
"Fixed Rate Payment Date" means, with respect to any Fixed Rate
Portion: (i) the day on which the related Interest Period ends (and, if
such Interest Period is three months or longer, the three-month
anniversary of the first day of such Interest Period), and (ii) any day on
which past due interest or past due principal is owed hereunder with
respect to such Fixed Rate Portion and is unpaid. If the terms hereof or
of the Credit Agreement provide that payments of interest or principal
with respect to such Fixed Rate Portion shall be deferred from one Fixed
Rate Payment Date to another day, such other day shall also be a Fixed
Rate Payment Date.
<PAGE> 17
The principal amount of this Note shall be due and payable in eight (8)
quarterly installments, each of which shall be equal to one-eighth (1/8) of
the aggregate unpaid principal balance of this Note at the end of the
Commitment Period, and shall be due and payable on each Base Rate Payment
Date, beginning with the first Base Rate Payment Date to occur after the end
of the Commitment Period, and continuing regularly thereafter until the Final
Maturity Date, at which time the unpaid principal balance of this Note and
all interest accrued hereon shall be due and payable in full.
The Base Rate Portion of the Loan (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Base Rate in effect on such day. On each Base Rate
Payment Date Borrower shall pay to the holder hereof all unpaid interest
which has accrued on the Base Rate Portion to but not including such Base
Rate Payment Date. Each Fixed Rate Portion of the Loan (exclusive of any
past due principal or interest) shall bear interest on each day during the
related Interest Period at the related Fixed Rate in effect on such day. On
each Fixed Rate Payment Date relating to such Fixed Rate Portion Borrower
shall pay to the holder hereof all unpaid interest which has accrued on such
Fixed Rate Portion to but not including such Fixed Rate Payment Date. All
past due principal of and past due interest on the Loan shall bear interest
on each day outstanding at the Late Payment Rate in effect on such day, and
such interest shall be due and payable daily as it accrues. Notwithstanding
the foregoing provisions of this paragraph: (a) this Note shall never bear
interest in excess of the Highest Lawful Rate, and (b) if at any time the
rate at which interest is payable on this Note is limited by the Highest
Lawful Rate (by the foregoing clause (a) or by reference to the Highest
Lawful Rate in the definitions of Base Rate, Fixed Rate, and Late Payment
Rate), this Note shall bear interest at the Highest Lawful Rate and shall
continue to bear interest at the Highest Lawful Rate until such time as the
total amount of interest accrued hereon equals (but does not exceed) the
total amount of interest which would have accrued hereon had there been no
Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum amount of interest which, under applicable law,
may be charged on this Note, and this Note is expressly made subject to the
provisions of the Credit Agreement which more fully set out the limitations
on how interest accrues hereon. In the event applicable law provides for a
ceiling under Texas Revised Civil Statutes Annotated article 5069-1.04, that
ceiling shall be the indicated rate ceiling and shall be used in this Note
for calculating the Highest Lawful Rate and for all other purposes. The term
"applicable law" as used in this Note shall mean the laws of the State of
Texas or the laws of the United States, whichever laws allow the greater
interest, as such laws now exist or may be changed or amended or come into
effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally
agree to pay reasonable attorneys' fees and collection costs to the holder
hereof in addition to the principal and interest payable hereunder.
<PAGE> 18
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration
of the maturity of this Note, diligence in collecting, the bringing of any
suit against any party and any notice of or defense on account of any
extensions, renewals, partial payments or changes in any manner of or in this
Note or in any of its terms, provisions and covenants, or any releases or
substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE
FEDERAL LAW.
HECLA MINING COMPANY
By: /s/ John P. Stilwell
--------------------------------------------
John P. Stilwell
Vice President-Finance and Treasurer
<PAGE> 19
EXHIBIT B
OPINION OF BORROWER'S COUNSEL
October __, 1995
NationsBank of Texas, N.A., as Agent under
the Agreement referred to below
901 Main Street
Dallas, Texas 75202
Attention: Energy Banking Group
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 3.1(c)(iii)
of the First Amendment to Credit Agreement of even date herewith (the
"Amendment"), which amends that certain Credit Agreement dated August 30,
1994 (the "Original Agreement"; the Original Agreement as amended by the
Amendment, the "Agreement"), by and among Hecla Mining Company ("Borrower"),
Colorado Aggregate Company of New Mexico, Inc., a Delaware corporation,
Kentucky-Tennessee Clay Company, a Delaware corporation and K-T Feldspar
Corporation, a Delaware corporation (each individually, a "Subsidiary
Guarantor" and collectively, "Subsidiary Guarantors"), NationsBank of Texas,
N.A., as Agent, and the Lenders named therein. The Agreement provides for
credit in the maximum principal amount of $55,000,000 to be made available by
Lenders to Borrower, in accordance with the terms and provisions therein
contained. Terms which are defined in the Agreement and which are used but
not defined herein shall have the meanings given them in the Agreement.
We have acted as counsel for Borrower and each Subsidiary Guarantor in
connection with the transactions provided for in the Agreement. As such
counsel we have assisted in the negotiation of the Amendment and the other
Loan Documents and have advised our clients of their duties and obligations
thereunder. We have examined executed counterparts (or, where indicated,
photostatic copies of executed counterparts) of the documents listed in
Schedule 1. We have discussed the matters addressed in this opinion with
officers and representatives of Borrower and each Subsidiary Guarantor to the
extent we have deemed appropriate to enable us to render this opinion. In
particular, but without limitation, we have confirmed that Borrower and each
Subsidiary Guarantor acknowledges, understands and agrees that the Loan
Documents as written set forth the entire understanding and agreement of the
parties thereto.
In preparing this opinion we have also examined original counterparts or
photostatic or certified copies of all other instruments, agreements,
certificates, records and other documents (whether of Borrower or any
Subsidiary Guarantor, their officers, directors, shareholders and
representatives, public officials, or other persons) which we have considered
relevant hereto. In making this examination we have assumed the genuineness
of all signatures and the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as photostatic or certified copies, and the authenticity of the originals
of such copies.
<PAGE> 20
Based upon the foregoing, and subject to the qualifications and
exceptions hereinafter set forth, we are of the opinion that:
1. Each of Borrower and the Subsidiary Guarantors is duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. Each of Borrower and the Subsidiary Guarantors has all
requisite corporate power to enter into the Loan Documents and to perform its
obligations thereunder.
2. Each of Borrower and the Subsidiary Guarantors is duly qualified to
transact business and in good standing in all jurisdictions where the
character of its properties or the nature of its activities makes such
qualification necessary.
3. All of the outstanding capital stock of each Subsidiary Guarantor
is owned of record and, to the best of our knowledge, beneficially by
Borrower. All of such outstanding capital stock has been duly authorized and
validly issued and is fully paid and non-assessable. To the best of our
knowledge, no Subsidiary Guarantor has any obligation or commitment to issue
any other shares of capital stock, nor has any Subsidiary Guarantor granted
any options with respect thereto.
4. The Amendment, the Replacement Notes made payable to Lenders, the
Pledge Agreement (as used herein the terms Replacement Notes and Pledge
Agreement shall have the meanings assigned to them in the Amendment) and the
Credit Agreement (herein collectively referred to as the "Loan Documents")
have been duly authorized, executed and delivered by Borrower and each
Subsidiary Guarantor. The Loan Documents constitute legal valid and binding
instruments and agreements of Borrower and the Subsidiary Guarantors, and the
obligations of Borrower and the Subsidiary Guarantors thereunder are
enforceable in accordance with the terms thereof.
5. The execution, delivery and performance by Borrower and each
Subsidiary Guarantor of the Loan Documents and the consummation of the
transactions contemplated thereby, will not and did not (a) violate or
contravene any provision of the charter or bylaws of Borrower or any
Subsidiary Guarantor, or, (b) to the best of our knowledge, conflict with or
result in a breach of any material term or provision of or constitute a
default under or result in the maturing of any indebtedness pursuant to any
indenture, mortgage, deed of trust, note or loan agreement, or other material
agreement or instrument, of which we have knowledge to which Borrower or any
Subsidiary Guarantor is a party or by which any of them or any of their
various properties are bound, or, (c) result in a violation of any law, rule
or regulation or, to the best of our knowledge, any judgment, order, decree,
determination or award of any court or governmental authority which is now in
effect and applicable to Borrower or any Subsidiary Guarantor or to any of
their properties. To the best of our knowledge, neither Borrower nor any
Subsidiary Guarantor is in default under or in violation of any law, rule,
regulation, judgment, order, decree, determination, award, indenture,
mortgage, deed of trust, note, loan agreement or other material agreement or
instrument of which we have knowledge or in violation of its charter or
bylaws.
<PAGE> 21
6. To the best of our knowledge, no consent, approval, authorization
or order of any court or governmental agency or of any third party is or was
required (a) for the execution and delivery by Borrower or any Subsidiary
Guarantor of the Loan Documents, (b) for the consummation of the transactions
contemplated thereby, or (c) for the performance by Borrower or any
Subsidiary Guarantor of their various obligations thereunder.
7. To the best of our knowledge there are no actions, suits,
proceedings or investigations pending or threatened against or affecting
Borrower or any Subsidiary Guarantor or any of their various properties in
any court or governmental agency (a) seeking to enjoin, or questioning the
legality or validity of, the performance by Borrower or any Subsidiary
Guarantor of any of their various obligations under the Loan Documents, or
(b) which have, or would have if adversely determined, a material adverse
effect on the ability of Borrower or any Subsidiary Guarantor to perform such
obligations.
8. To the best of our knowledge, (a) the representations and
warranties of Borrower and each Subsidiary Guarantor in the Loan Documents
are and were true and correct in all material respects on the date hereof and
on the dates when made, and (b) there does not exist on the date hereof any
Default or Event of Default under the Credit Agreement.
9. In the course of our representation of Borrower and each Subsidiary
Guarantors in connection with the negotiation of the Agreement, we discussed
with officers and representatives of Borrower and each Subsidiary Guarantor,
to the extent we deemed appropriate, the terms and provisions of the
Agreement. Nothing came to our attention in the course of such
representation or discussions which has led us to believe that the
representations and warranties of Borrower and each Subsidiary Guarantor in
the Amendment or the Agreement are not or were not true and correct in all
material respects on the date hereof and on the dates when made or that there
exists on the date hereof any Default or Event of Default under the
Agreement.
This opinion is limited by, subject to and based on the following:
(a) This opinion is limited in all respects to the General Corporation
Law of the State of Delaware, the laws of the State of Colorado and
applicable federal law; however, we are not members of the bar of the State
of Delaware and our knowledge of its General Corporation Law is derived from
a reading of that statute without consideration of any judicial or
administrative interpretations thereof.
(b) In rendering the opinion expressed in the second sentence of
paragraph 4 hereof, we have assumed that the Loan Documents have been duly
authorized, executed and delivered by Agent and each Lender (to the extent
that each is a party thereto).
(c) In connection with opinions expressed herein as being limited "to
the best of our knowledge", our examination has been limited to discussions
with the officers and representatives of Borrower and each Subsidiary
Guarantor in the course of this transaction, and our knowledge of the affairs
of Borrower and each Subsidiary Guarantor as their counsel, and we have made
no independent investigations as to the accuracy or completeness of any
representations, warranties, data or other information, written or oral, made
or furnished by any of them to us, to Agent or to any Lender.
<PAGE> 22
(d) We have made no examination of and express no opinion with respect
to (i) titles to or, except as to adequacy of form, descriptions of the
properties described in the Loan Documents, (ii) whether there are of record
any liens, security interests, charges or encumbrances thereon, or (iii) the
filing or recording of the Loan Documents or any financing statements or
other instruments relating thereto.
(e) The enforceability of the respective obligations of the parties to
the Loan Documents, and the availability of certain rights and remedies
provided for therein, may be limited by (i) applicable state and federal laws
and judicial decisions, but the remedies provided for in the Loan Documents
are adequate for the practical realization of the benefits provided thereby,
(ii) equitable principles which may limit the availability of certain
equitable remedies (such as specific performance) in certain instances, or
(iii) applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally.
The opinions herein expressed are for the benefit of Agent and Lenders
and may be relied upon only by Agent, Lenders and by Thompson & Knight, A
Professional Corporation, in connection with any opinion delivered by them to
Agent.
Respectfully submitted,
<PAGE> 23
SCHEDULE 1 to Borrower's Counsel Opinion
LOAN DOCUMENTS REVIEWED
1. The Original Agreement and the Amendment.
2. Replacement Note payable to the order of each Lender.
3. Pledge Agreement.
2. Omnibus Certificate of even date herewith by President and Secretary of
Borrower, with following exhibits: (a) Incumbency and Signature
Certificate of Officers of Borrower, (b) Resolutions of Board of
Directors of Borrower.
3. Omnibus Certificate of even date herewith by President and Secretary of
Colorado Aggregate Company of New Mexico, Inc., a Delaware corporation
("Colorado Aggregate") with following exhibits: (a) Incumbency and
Signature Certificate of officers of Colorado Aggregate, (b) Resolutions
of Board of Directors of Colorado Aggregate.
4. Omnibus Certificate of even date herewith by President and Secretary of
Kentucky-Tennessee Clay Company, a Delaware corporation ("Kentucky-
Tennessee Clay") with following exhibits: (a) Incumbency and Signature
Certificate of officers of Kentucky-Tennessee Clay, (b) Resolutions of
Board of Directors of Kentucky-Tennessee Clay.
5. Omnibus Certificate of even date herewith by President and Secretary of
K-T Feldspar Corporation, a Delaware corporation ("K-T Feldspar") with
following exhibits: (a) Incumbency and Signature Certificate of
officers of K-T Feldspar, (b) Resolutions of Board of Directors of K-T
Feldspar.
6. Compliance Certificate of even date herewith by a duly authorized
officer and Treasurer of Borrower.
<PAGE> 1
Exhibit 12
HECLA MINING COMPANY
Fixed Charge Coverage Ratio Calculation
For the Nine Months Ended September 30, 1994 and 1995
(dollars in thousands)
<TABLE>
<CAPTION>
9 Months 9 Months
1994 1995
---------- ----------
<S> <C> <C>
Income (loss) before extraordinary item, income taxes and
cumulative effect of changes in accounting principles $ (3,582) $(102,694)
Add: Fixed Charges 8,665 7,689
Less: Capitalized Interest (1,751) (850)
---------- ---------
Income (loss) before extraordinary item, income taxes and cumulative
effect of changes in accounting principles and fixed charges $ 3,332 $ (95,855)
========== =========
Fixed charges:
Preferred stock dividends $ 6,038 $ 6,038
Interest portion of rentals 69 415
Interest expense 2,523 1,236
Amortization of LYONs 35 - -
---------- ---------
Total fixed charges $ 8,665 $ 7,689
========== =========
Fixed Charge Ratio (a) (a)
Inadequate coverage 5,333 103,544
========== =========
Write-downs and other noncash charges:
Depreciation, depletion and amortization (mining activity) 10,493 18,580
Depreciation, depletion and amortization (corporate) 443 265
Provision for closed operations 1,073 4,296
Reduction in carrying value of mining properties - - 97,387
---------- ---------
$ 12,009 $ 120,528
========== =========
(a) Earnings for period inadequate to cover fixed charges.
</TABLE>
<PAGE> 1
[HECLA LOGO] Exhibit 13.1
HECLA REPORTS THIRD QUARTER FINANCIAL RESULTS
For the Period Ended September 30, 1995
For release: November 10, 1995
COEUR D'ALENE, IDAHO -- Hecla Mining Company (HL & HL-PrB:NYSE)
today reported a net loss for the third quarter of 1995 of $104.7 million,
or $2.17 per share. The third quarter loss includes a nonrecurring asset
write-down of $97 million associated with the Grouse Creek gold mine in
central Idaho. The loss also includes $5.1 million in accruals and write-
downs for environmental remediation at other properties and certain common
stock investments. Before write-downs and accruals, the company had a loss
for the third quarter of $2.6 million, or 5 cents per share, on revenue of
$45.4 million after a $2 million quarterly dividend payment to preferred
shareholders. Third quarter results also include a $3.2 million gain on
the sale of the Apex processing facility in southern Utah. For the first
nine months of the year, Hecla showed a net loss applicable to common
shareholders of $109 million, or $2.26 per common share, on revenue of
$125.6 million.
GROUSE CREEK UNIT
As reported on October 25, mining operations at Grouse Creek have
encountered significant shortfalls of both ore tonnage and gold grade.
Hecla is currently reevaluating the ore body and developing a revised mine
plan to optimize the project. The new ore reserve estimate and mine plan
will be completed in the first quarter of 1996. However, current
information indicates the Grouse Creek Unit will not return its investment
to Hecla due to significantly shorter mine life and fewer ounces recovered
at current metals prices. Based on this information, and applicable
accounting guidelines, Hecla's Board of Directors today determined to write
down the entire $97 million carrying value of the company's 80% interest in
the Grouse Creek Unit.
Hecla's Chief Executive Officer, Arthur Brown, said, "We will make
every attempt to keep the Grouse Creek Unit operating. We intend to cut
costs and capital expenditures, and are now looking at the most efficient
way to mine the remaining ore. On the positive side, cash costs have come
down below $300 per ounce, the mill is operating above design capacity and
Grouse Creek was recently singled out to receive two important
environmental awards by the state of Idaho. Our people have done a good
job on-site at Grouse Creek, both in terms of operating efficiency and
environmental stewardship."
OTHER OPERATIONS
Hecla's La Choya gold mine in Mexico performed above expectations
in the third quarter, producing nearly 22,000 ounces of gold at a cash cost
of $187 per ounce. The industrial minerals division had record sales in
the first nine months of 1995 of nearly $58 million, generating
$6.5 million in gross profits. At the American Girl gold mine in southern
California, a permitting delay has resulted in temporarily higher costs as
mining continued in a low grade deposit until a new ore body can be
accessed. Hecla has a 47% interest in the mine, where 1996 operating
results are expected to improve when mining commences in the new higher-
grade Oro Cruz deposit.
(more)
Contact Bill Booth, vice president-investor and public affairs, or Vicki
Veltkamp, manager-corporate communications
6500 Mineral Drive * Coeur d'Alene, Idaho 83814-8788 * 208/769-4100 * FAX
208/769-4159
<PAGE> 2
NEW DEVELOPMENTS
Redevelopment of the Greens Creek silver/gold/zinc/lead mine near
Juneau, Alaska, is on schedule, with projected start-up in early 1997.
Hecla owns a 29.7% interest in the mine, which is expected to produce more
than 3 million ounces of silver for Hecla's account in 1997 at a cash cost
of under $3.00 per ounce.
Work is continuing on delineating the deposit at Hecla's Golden
Eagle gold project in northeast Washington State. In August, Hecla signed
an earn-in agreement with Santa Fe Pacific Gold Corporation to explore and
develop the deposit. The project has identified mineral inventory of
11.3 million tons of material at an average grade of 0.1 ounce of gold per
ton. Santa Fe Pacific Gold can earn a 70% interest in the project by
spending $7.5 million over a three-year period and completing a feasibility
study.
Another promising prospect is Hecla's Rosebud gold project in
northern Nevada, where reported proven and probable reserves are 1.64
million tons of ore at an average grade of 0.356 ounce per ton, or nearly
600,000 ounces of contained gold. Brown said, "The good news at Rosebud is
that we now have all environmental permits in hand necessary to start
construction once a development decision is made and financing is
arranged."
At the Lucky Friday silver mine in North Idaho, crews continue to
work three shifts daily in the effort to reach the promising Gold Hunter
silver/lead deposit adjacent to the Lucky Friday workings. The effort is
on schedule to reach the Gold Hunter deposit and make a development
decision before the end of 1996.
OTHER MATTERS
In other business, Hecla's directors approved a $2 million
dividend payment to preferred shareholders of record on December 12, 1995,
payable January 1, 1996.
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, is
one of the United States' best-known silver producers. The company's
operations are principally in the U.S. and Mexico. Hecla also produces
gold and is a major supplier of ball clay, kaolin and other industrial
minerals.
-HL-
Contact Bill Booth, vice president-investor and public affairs, or Vicki
Veltkamp, manager-corporate communications
6500 Mineral Drive * Coeur d'Alene, Idaho 83814-8788 * 208/769-4100 * FAX
208/769-4159
<PAGE> 3
HECLA MINING COMPANY
(dollars in thousands, except per-share amounts - unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
HIGHLIGHTS 1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------
FINANCIAL DATA
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 45,387 $ 36,072 $ 125,630 $ 103,779
Gross profit 1,775 5,846 2,621 8,916
Net income (loss) (102,723) 806 (102,945) (4,143)
Net loss applicable to
common shareholders (104,736) (1,207) (108,983) (10,181)
Net loss per common share (2.17) (0.03) (2.26) (0.24)
Cash flow from operating activities 4,553 6,794 4,222 3,063
----------------------------------------------------------------------------------------------------------
SALE OF PRODUCTS BY SEGMENT
----------------------------------------------------------------------------------------------------------
Gold operations $ 17,795 $ 16,655 $ 47,902 $ 37,689
Silver operations 3,170 2,488 8,902 8,633
Industrial minerals 18,291 15,302 57,936 50,514
Specialty metals 1,947 834 4,414 2,830
---------- ---------- --------- ----------
Total sales $ 41,203 $ 35,279 $ 119,154 $ 99,666
----------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) BY SEGMENT
----------------------------------------------------------------------------------------------------------
Gold operations $ (282) $ 4,522 $ (4,652) $ 5,728
Silver operations (204) (658) 487 (3,494)
Industrial minerals 1,995 2,176 6,492 6,820
Specialty metals 266 (194) 294 (138)
---------- ----------- ---------- ----------
Total gross profit $ 1,775 $ 5,846 $ 2,621 $ 8,916
----------------------------------------------------------------------------------------------------------
PRODUCTION SUMMARY - TOTALS
----------------------------------------------------------------------------------------------------------
Gold - Ounces 44,209 40,780 119,839 91,052
Silver - Ounces 604,988 413,439 1,623,661 1,512,564
Lead - Tons 4,241 3,012 12,492 12,734
Zinc - Tons 722 490 2,118 2,335
Average cost per ounce of gold produced:
Cash production costs ($/oz.) 263 213 306 270
Full costs ($/oz.) 383 279 423 331
Average cost per ounce of silver produced:
Cash production costs ($/oz.) 4.57 4.50 4.73 5.73
Full costs ($/oz.) 5.71 5.84 5.95 7.00
----------------------------------------------------------------------------------------------------------
AVERAGE METAL PRICES
----------------------------------------------------------------------------------------------------------
Gold - Realized ($/oz.) 388 389 388 387
Gold - London Final ($/oz.) 384 386 384 384
Silver - Handy & Harman ($/oz.) 5.33 5.34 5.17 5.33
Lead - LME Cash (cents/pound) 27.8 26.7 27.6 23.3
Zinc - LME Cash (cents/pound) 45.8 43.9 47.1 43.6
</TABLE>
<PAGE> 4
HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(In thousands - unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
Sept. 30, Sept. 30,
1995 1994
-----------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss $(102,945) $ (4,143)
Noncash elements included in net loss:
Depreciation, depletion and amortization 18,845 10,936
(Gain) loss on disposition of properties, plants and equipment (3,484) 14
Gain on investments (2,842) - -
Extraordinary loss on early retirement of long-term debt - - 833
Accretion of interest on long-term debt - - 2,000
Reduction in carrying value of mining properties 97,387 - -
Provision for reclamation and closure costs 3,707 905
Change in:
Accounts and notes receivable (7,224) (7,182)
Income tax refund receivable (3) (785)
Inventories 571 300
Other current assets (732) (145)
Accounts payable and accrued expenses 388 (356)
Accrued payroll and related benefits (163) 548
Accrued taxes 661 319
Noncurrent liabilities 56 (181)
--------- ---------
Net cash provided by operating activities 4,222 3,063
--------- ---------
-----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
-----------------------------------------------------------------------------------------------------------
Additions to properties, plants and equipment (33,083) (57,511)
Proceeds from disposition of properties, plants and equipment 3,069 13,406
Proceeds from the sales of investments 4,685 3,217
Change in funds held in escrow - - (13,497)
Proceeds from maturity of short-term investments - - 27,552
Purchase of restricted investments (1,439) - -
Purchase of investments and increase in cash surrender value of life insurance (822) (1,926)
Other, net (1,249) (2,795)
--------- ---------
Net cash applied to investing activities (28,839) (31,554)
--------- ---------
-----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
-----------------------------------------------------------------------------------------------------------
Proceeds from exercise of stock warrants 1,239 - -
Common stock issued under stock option plans 91 1,726
Issuance of common stock - - 63,499
Early retirement of long-term debt - - (50,169)
Dividends on preferred stock (6,038) (6,038)
Borrowing on long-term debt 41,000 - -
Repayment on long-term debt (11,796) - -
Decrease in deferred revenue - - (36)
--------- ---------
Net cash provided by financing activities 24,496 8,982
--------- ---------
Net decrease in cash and cash equivalents (121) (19,509)
Cash and cash equivalents at beginning of period 7,278 40,031
--------- ---------
Cash and cash equivalents at end of period $ 7,157 $ 20,522
========= =========
</TABLE>
<PAGE> 5
HECLA MINING COMPANY
Consolidated Balance Sheets
(In thousands - unaudited)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1995 1994
-----------------------------------------------------------------------
ASSETS
-----------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,157 $ 7,278
Accounts and notes receivable 31,946 23,516
Income tax refund receivable 250 247
Inventories 18,045 18,616
Other current assets 2,329 1,597
--------- ---------
Total current assets 59,727 51,254
Investments 2,395 6,476
Restricted investments 14,992 13,553
Properties, plants and equipment, net 170,953 257,908
Other noncurrent assets 7,889 5,391
--------- ---------
Total assets $ 255,956 $ 334,582
========= =========
-----------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 13,958 $ 13,570
Accrued payroll and related benefits 2,561 2,724
Preferred stock dividends payable 2,012 2,012
Accrued taxes 1,586 925
Accrued reclamation costs 2,259 4,254
--------- ---------
Total current liabilities 22,376 23,485
Deferred income taxes 359 359
Long-term debt 31,164 1,960
Accrued reclamation costs 32,206 27,162
Other noncurrent liabilities 4,812 4,098
--------- ---------
Total liabilities 90,917 57,064
--------- ---------
-----------------------------------------------------------------------
SHAREHOLDERS' EQUITY
-----------------------------------------------------------------------
Preferred stock 575 575
Common stock 12,077 12,036
Capital surplus 330,258 328,995
Retained deficit (172,420) (63,437)
Net unrealized gain (loss) on investments 336 3,396
Foreign currency translation adjustment (4,898) (3,158)
Treasury stock (889) (889)
--------- ---------
Total shareholders' equity 165,039 277,518
Total liabilities and shareholders' equity $ 255,956 $ 334,582
========= =========
Common shares outstanding at end of period 48,245 48,082
========= =========
</TABLE>
<PAGE> 6
HECLA MINING COMPANY
Consolidated Statements of Operations
(In thousands, except per-share amounts - unaudited)
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
------------------------- -----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales of products $ 41,203 $ 35,279 $ 119,154 $ 99,666
Cost of sales and other direct production costs 32,413 25,216 97,953 80,257
Depreciation, depletion and amortization 7,015 4,217 18,580 10,493
--------- --------- --------- ---------
39,428 29,433 116,533 90,750
--------- --------- --------- ---------
Gross profit 1,775 5,846 2,621 8,916
Other operating expenses:
General and administrative 3,106 2,611 7,570 8,950
Exploration 2,671 2,403 4,879 6,502
Depreciation and amortization 97 81 265 443
Provision for closed operations and
environmental matters 4,069 449 4,296 1,073
Reduction in carrying value of mining
properties 97,387 - - 97,387 - -
--------- --------- --------- ---------
107,330 5,544 114,397 16,968
--------- --------- --------- ---------
Income (loss) from operations (105,555) 302 (111,776) (8,052)
--------- --------- --------- ---------
Other income (expense):
Interest and other income 4,185 793 6,476 4,113
Foreign exchange gain (loss) (12) - - 150 - -
Gain (loss) on investments (1,051) 38 2,842 1,129
Interest expense:
Total interest cost (650) (476) (1,236) (2,523)
Less amount capitalized 474 - - 850 1,751
--------- --------- --------- ---------
2,946 355 9,082 4,470
--------- --------- --------- ---------
Income (loss) before income taxes
and extraordinary item (102,609) 657 (102,694) (3,582)
Income tax (provision) benefit (114) 159 (251) 272
--------- --------- --------- ---------
Income (loss) before extraordinary item (102,723) 816 (102,945) (3,310)
Extraordinary loss on retirement of
long-term debt - - (10) - - (833)
--------- --------- --------- ---------
Net income (loss) (102,723) 806 (102,945) (4,143)
Preferred stock dividends (2,013) (2,013) (6,038) (6,038)
--------- --------- --------- ---------
Net loss applicable to common shareholders $(104,736) $ (1,207) $(108,983) $ (10,181)
========= ========= ========= =========
Net loss per common share $ (2.17) $ (0.03) $ (2.26) $ (0.24)
========= ========= ========= =========
Weighted average number of common shares outstanding 48,237 48,075 48,178 42,957
========= ========= ========= =========
Common shares outstanding at end of period 48,245 48,076
========= =========
</TABLE>
<PAGE> 7
HECLA MINING COMPANY
Production Data
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
----------------------- ----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
---------------------------------------------------------------------------------------------------------------------------
LA CHOYA UNIT
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tons of ore mined 1,310,417 575,444 2,781,845 1,547,944
Ore grade mined - Gold (oz./ton) 0.029 0.055 0.028 0.054
Gold produced (oz.) 21,799 19,074 45,480 31,992
Silver produced (oz.) 2,273 2,169 4,699 3,926
Average cost per ounce of gold produced:
Cash production costs $187 $157 $222 $255
Full cost $285 $254 $311 $353
---------------------------------------------------------------------------------------------------------------------------
REPUBLIC UNIT (1)
---------------------------------------------------------------------------------------------------------------------------
Tons of ore milled 30,517 10,269 86,741
Gold recovered grade (oz./ton) 0.43 0.13 0.39
Gold produced (oz.) 12,064 2,910 30,475
Silver produced (oz.) 77,324 15,058 212,957
Average cost per ounce of gold produced:
Cash production costs $198 $194 $234
Full cost $249 $194 $294
---------------------------------------------------------------------------------------------------------------------------
AMERICAN GIRL UNIT (Reflects Hecla's 47% share)
---------------------------------------------------------------------------------------------------------------------------
Tons of ore milled 17,709 30,807 40,943 90,261
Tons of ore to heap 155,684 168,449 615,296 408,172
Ore grade milled - Gold (oz./ton) 0.191 0.162 0.191 0.170
Ore grade to heap - Gold (oz./ton) 0.029 0.024 0.029 0.025
Gold produced (oz.) 5,436 7,644 15,985 22,496
Silver produced (oz.) 3,063 4,279 10,331 12,234
Average cost per ounce of gold produced:
Cash production costs $461 $375 $430 $344
Full cost $523 $402 $468 $368
---------------------------------------------------------------------------------------------------------------------------
GROUSE CREEK (Reflects Hecla's 80% share)
---------------------------------------------------------------------------------------------------------------------------
Tons of ore milled 476,992 1,120,461
Ore grade milled - Gold (oz./ton) 0.036 0.046
Ore grade milled - Silver (oz./ton) 0.61 0.64
Gold produced (oz.) 15,336 50,534
Silver produced (oz.) 149,314 390,273
Average cost per ounce of gold produced:
Cash production costs $293 $352
Full cost $479 $536
---------------------------------------------------------------------------------------------------------------------------
LUCKY FRIDAY UNIT
---------------------------------------------------------------------------------------------------------------------------
Tons of ore milled 43,004 30,839 117,022 119,398
Silver recovered grade (oz./ton) 10.72 10.20 10.73 10.88
Silver produced (oz.) 449,791 325,148 1,201,266 1,268,364
Lead produced (short tons) 4,241 3,012 12,492 12,734
Average cost per ounce of silver produced:
Cash production costs $4.57 $4.50 $4.73 $5.73
Full cost $5.71 $5.84 $5.95 $7.00
---------------------------------------------------------------------------------------------------------------------------
OTHER
---------------------------------------------------------------------------------------------------------------------------
Gold produced (oz.) 1,638 1,998 4,930 6,089
Silver produced (oz.) 547 4,519 2,034 15,083
(1)Republic Unit ceased operations March 31, 1995.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,157
<SECURITIES> 0
<RECEIVABLES> 31,946
<ALLOWANCES> 0
<INVENTORY> 18,045
<CURRENT-ASSETS> 59,727
<PP&E> 374,343
<DEPRECIATION> 203,390
<TOTAL-ASSETS> 255,956
<CURRENT-LIABILITIES> 22,376
<BONDS> 0
<COMMON> 12,077
0
575
<OTHER-SE> 152,387
<TOTAL-LIABILITY-AND-EQUITY> 255,956
<SALES> 119,154
<TOTAL-REVENUES> 125,630
<CGS> 97,953
<TOTAL-COSTS> 116,533
<OTHER-EXPENSES> 114,397
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 386
<INCOME-PRETAX> (102,694)
<INCOME-TAX> (251)
<INCOME-CONTINUING> (102,945)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,945)
<EPS-PRIMARY> (2.26)
<EPS-DILUTED> (2.26)
</TABLE>
