With a significant decline in metal prices during 2013, mining companies are cutting costs and focusing on their most promising properties for next year.
Laura Skaer, executive director of Spokane-based American Exploration & Mining Association, formerly the Northwest Mining Association, says many companies have tightened their belts heading into 2014. However, Skaer adds that the demand for metals is expected to rise in the next year.
“The mid- to-long-term outlook is good, because demand will go up, but we’re in a down cycle right now,” Skaer says. “Precious metal commodities are cyclical.”
Silver has been selling recently for about $20 per troy ounce, down from about $33 per troy ounce a year ago. Gold has been selling at roughly $1,200 a troy ounce recently, down from nearly $1,700 a year ago.
“There’s virtually no capital available for the junior mining sector,” Skaer says. “Companies are really struggling just to hang on to their properties, because the condition of the economy is such that there is no extra capital.”
Skaer adds, “The bigger companies are consolidating, looking at ways to do things more efficiently with fewer people. Some are refocusing on core assets. Where they might have looked at exploring, they’re abandoning it, at least for the short run.”
In the Inland Northwest, this year brought the departure of one major mining company here, Coeur Mining Inc., which moved its headquarters to Chicago from Coeur d’Alene.
Coeur d’Alene-based Hecla Mining Co., however, this year ramped up to full production at its Lucky Friday mine in North Idaho and reported strong performance at its Greens Creek property in Alaska. Hecla also added a producing underground gold mine to its portfolio this year, with the June 1 acquisition of the Casa Berardi property in western Quebec.
For all of 2013, Hecla expects silver production of between 8 million and 9 million ounces. Total gold production at Casa Berardi since June 1 is expected to reach about 62,000 ounces.
Jim Sabala, Hecla senior vice president and chief financial officer, says the company is in a strong financial position entering next year, with $238 million in cash reserves. Sabala asserts that Hecla is able to perform well despite lower silver prices because the company maintains efficient operating costs. He says the company’s cash cost for silver production this year has been about $6.50 per ounce.
“Hecla had a very good year in 2013,” Sabala says, citing the Casa Berardi acquisition and Hecla’s overall silver production nearing the high end of the company’s projection for this year. “For 2014, we expect additional production because Lucky Friday will be at full production for the entire year.”
On Nov. 5, Hecla reported a third-quarter net loss of $8.6 million, up from a loss of $1 million in the year-earlier period. Hecla attributed the loss to lower average silver, gold, and zinc prices; interest expense from an offering of senior notes in April; and costs relating to the acquisition of Vancouver, British Columbia-based Aurizon Mines Ltd. in gaining the Casa Berardi mine.
Phillips S. Baker Jr., Hecla’s president and CEO, said in the earnings press release that the company is continuing to reduce capital, exploration, and pre-development expenditures.
For 2014, Baker said, “We believe Hecla is well positioned to weather any further weakness in metals prices and to take advantage of the higher prices we expect in the future.”
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