Hecla’s 100%-owned and operated Greens Creek mine in southeast Alaska is one of the largest and lowest-cost primary silver mines in the world, and is the cash generating engine of the Company. Last year, Greens Creek produced 8.5 million ounces of silver at a cash cost, after by-product credits, per silver ounce of $3.91 (a non GAAP measure), and 60,566 ounces of gold (1). Production in 2016 is expected to be 8.3 million silver ounces at a cash cost, after by-product credits of $6.00 an ounce (1).
(1) Cash cost, after of by-product credits, per silver ounce represents a non-GAAP measurement, a reconciliation of which to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found in the legal page of this website.
Hecla’s various subsidiaries own 100% of the Greens Creek mine located in Southeast Alaska. The Greens Creek orebody contains silver, zinc, gold and lead, and lies within the Admiralty Island National Monument, an environmentally sensitive area. The Greens Creek property includes 17 patented lode claims and one patented mill site claim, in addition to property leased from the U.S. Forest Service. Greens Creek also has title to mineral rights on approximately 7,500 acres of federal land adjacent to the properties. Total property package encompasses 23-square miles. The entire project is accessed by boat and served by 13 miles of road, and consists of the mine, an ore concentrating mill, a dry stacked tailings facility, a ship-loading facility, camp facilities, and a ferry dock.
The Greens Creek deposit is a polymetallic, stratiform, massive sulfide deposit. The host rock consists of predominantly marine sedimentary, and mafic to ultramafic volcanic and plutonic rocks, which have been subjected to multiple periods of deformation. These deformational episodes have imposed multiple folding of the orebodies to create a complex geometry. Mineralization occurs discontinuously along the contact between a structural hanging wall of quartz mica carbonate phyllites, and a structural footwall of graphitic and calcareous argillite.
Ore lithologies fall into two broad groups: massive ores with over 50% sulfides and white ores with less than 50% sulfides. The massive ores are further subdivided as either being base-metal or pyrite dominant. Massive ores vary greatly in precious-metal grade from uneconomic to bonanza Au (>.5 opt) and Ag (>100 opt). White ores are subdivided into three groups by the dominant gangue mineralogy; white carbonate, white siliceous, and white baritic ore. These ores tend to be base-metal poor and precious-metal rich. Major sulfide minerals are pyrite, sphalerite, galena, and tetrahedrite/tennanite.
Greens Creek is an underground mine which produces approximately 2,100 to 2,300 tons of ore per day. The primary mining methods are cut and fill and longhole stoping.
The Greens Creek unit has historically been powered completely by diesel generators located on site. However, an agreement was reached during 2005 to purchase excess hydroelectric power from the local power company, Alaska Electric Light and Power Company (“AEL&P”). Installation of the necessary infrastructure was completed in 2006, and use of hydroelectric power commenced during the third quarter of 2006. This project has reduced production costs at Greens Creek to the extent power has been available. Low lake levels and increased demand in the Juneau area combined to restrict the amount of power available to Greens Creek prior to 2009. In 2009 and 2010, the mine received an increased proportion of its power needs from AEL&P. Hydroelectric power was also available during 2011, but to a lesser extent compared to the previous two years due to lower precipitation. During 2012, the mine again received an increased proportion of its power needs from AEL&P. When weather conditions are not favorable to maintain lake water levels, the mine relies on diesel-generated power. In the past three years, most of the power has come from AEL&P.
There are three main phases to the mining process: development, production, and backfilling.
Development – the tunneling or accessing phase
Using plans from the geology and engineering departments, miners drive tunnels 15ft high by 15ft wide to access the various ore zones to be mined.
Production – the extraction phase
The method of extraction depends upon the geological nature of the orebody involved. Some of the smaller, more contorted orebodies are extracted using the same tunneling procedure as the development phase. In other more massive orebodies, larger scale extraction methods are used, sometimes producing voids of up to 150ft long, 25ft wide and 120ft deep.
Backfilling – the replacement phase
The voids created during the production phase are filled up with a combination of mill waste (tailings) and cement. This “backfilling” process stabilizes the production voids and allows extraction of the ore beside, above, and even below the backfilled area.
|(years ended December 31)|
|Cash cost per ounce of silver, after by-product credits, ($/oz) (1)||$(1.29)||$2.70||$4.42||$2.89||$3.91|
- (footnotes)(1) Cash cost, after by-product credits, per silver or gold ounce is a non-GAAP measurement. A reconciliation of cash cost, after by-product credits, per silver or gold ounce to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) can be found in the legal page of this website.
The mine holds current proven and probable silver reserves of 88.7 million ounces, 677,000 ounces of proven and probable gold reserves, as well as 218,400 tons of lead and 582,640 tons of zinc in proven and probable reserves.
There are an additional 13 million ounces of silver measured and indicated resource and 41.7 million ounces of silver inferred resources. Measured and indicated gold resources measure 128,000 ounces and inferred gold resources measured 300,000 ounces.
Drilling efforts over the past 11 years have replaced production and added new reserves. Exploration efforts are ongoing along the trend of numerous orebodies underground and aggressively exploring the highly prospective 23-square-mile land package on surface.
Information with respect to proven and probable ore reserves, measured, and inferred resources is set forth below, and represents our 100% ownership of Greens Creek after April 16, 2008.
|(As of December 31, 2015 unless otherwise noted)|
|(000)||(oz/ton)||(oz/ton)||(%)||(%)||(000 oz)||(000 oz)||(Tons)||(Tons)|
|Proven Reserves (a)||10||20.8||0.12||3.7||9.0||210||1||370||910|
|Probable Reserves (a)||7,204||12.3||0.09||3.0||8.1||88,523||676||218,030||581,730|
|Proven and Probable Reserves||7,214||12.3||0.09||3.0||8.1||88,733||677||218,400||582,640|
|Measured Resources (b)||-||-||-||-||-||-||-||-||-|
|Indicated Resources (b)||1,227||10.6||0.10||3.0||7.5||13,015||128||36,710||92,260|
|M&I Resources (b)||1,227||10.6||0.10||3.0||7.5||13,015||128||36,710||92,260|
|Inferred Resources (b)||3,255||12.8||0.09||2.8||6.7||41,730||300||89,630||219,540|
- (footnotes)Note: All estimates are in-situ except for the proven reserve at Greens Creek which is in a surface stockpile. Resources are exclusive of reserves. Totals may not represent the sum of parts due to rounding.
(a) Mineral reserves are based on $1,100 gold, $14.50 silver, $0.90 lead, $0.90 zinc, unless otherwise stated.
(b) Mineral resources are based on $1,300 gold, $20.00 silver, $0.95 lead, $0.90 zinc and $3.00 copper, unless otherwise stated.
Reporting requirements in the United States for disclosure of mineral properties are governed by the SEC and included in the SEC’s Securities Act Industry Guide 7, entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” (Guide 7). However, the Company is also a “reporting issuer” under Canadian securities laws, which require estimates of mineral resources and reserves to be prepared in accordance with Canadian National Instrument 43-101 (NI 43-101). NI 43-101 requires all disclosure of estimates of potential mineral resources and reserves to be disclosed in accordance with its requirements. Such Canadian information is being included here to satisfy the Company’s “public disclosure” obligations under Regulation FD of the SEC and to provide U.S. holders with ready access to information publicly available in Canada.
Reporting requirements in the United States for disclosure of mineral properties under Guide 7 and the requirements in Canada under NI 43-101 standards are substantially different. This website contains a summary of certain estimates of the Company, not only of proven and probable reserves within the meaning of Guide 7, which requires the preparation of a “final” or “bankable” feasibility study demonstrating the economic feasibility of mining and processing the mineralization using the three-year historical average price for any reserve or cash flow analysis to designate reserves and that the primary environmental analysis or report be filed with the appropriate governmental authority, but also of mineral resource and mineral reserve estimates estimated in accordance with the definitional standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. The terms “measured resources”, “indicated resources,” and “inferred resources” are Canadian mining terms as defined in accordance with NI 43-101. These terms are not defined under Guide 7 and are not normally permitted to be used in reports and registration statements filed with the SEC in the United States, except where required to be disclosed by foreign law. The term “resource” does not equate to the term “reserve”. Under Guide 7, the material described herein as “indicated resources” and “measured resources” would be characterized as “mineralized material” and is permitted to be disclosed in tonnage and grade only, not ounces. The category of “inferred resources” is not recognized by Guide 7. Investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into proven or probable reserves. “Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of such a “resource” will ever be upgraded to a higher category or will ever be economically extracted. Investors are cautioned not to assume that all or any part of a “resource” exists or is economically or legally mineable. Investors are also especially cautioned that the mere fact that such resources may be referred to in ounces of silver and/or gold, rather than in tons of mineralization and grades of silver and/or gold estimated per ton, is not an indication that such material will ever result in mined ore which is processed into commercial silver or gold.
Greens Creek milled 814,397 tons containing nearly 11 million ounces of silver and 90,398 ounces of gold, and gold and silver reserves decreased 8%. The decrease is due to mining depletion and the significantly lower silver reserve prices relative to 2014 prices. It should be noted that although infilling drilling was completed, the resource/reserve model for the NWW zone was not updated in time for 2015 year-end reporting. The NWW current resource includes 800,200 silver ounces and 13,000 gold ounces in the indicated category and 18.5 million silver ounces and 91,700 gold ounces in the inferred category. The drilling results suggest a high proportion of this resource should convert to reserves. The NWW zone update should be completed during the first quarter of 2016 and is anticipated at minimum to replace in 2016 the current reserve deficit from 2015. Large inferred resources in the Deep 200 South (9.6 million silver ounces and 76,500 gold ounces) and East Ore (11.4 million silver ounces and 106,000 gold ounces) are targeted for infill drilling in 2016 and large portions are expected to be converted to reserves in 2016.
At Greens Creek, definition drilling is refining the resources of the NWW and Deep 200 South Zones. Exploration drilling of the 9A and 5250 trends expanded the resource along the projected mineralization trends. Recent drilling of the lower NWW Zone has generally confirmed and upgraded the resource model of the shared and upper limbs. Assay results from this drilling include 86.8 oz/ton silver, 0.19 oz/ton gold, 4.9% zinc, and 2.2% lead over 17.2 feet and 46.9 oz/ton silver, 0.22 oz/ton gold, 17.4% zinc, and 6.2% lead over 9.5 feet. Drilling has defined additional West Wall mineralization up to 205 feet down-dip from the current resource model and includes an intercept of 14.7 oz/ton silver, 0.04 oz/ton gold, 12.2% zinc, and 4.7% lead over 12.3 feet about 70 feet down-dip of the current model.
Follow-up to historic high-grade drill intersections of the 9A Zone has defined continuous mineralization proximal to the Maki Fault block. Exploration drilling has defined a complexly folded horizon of mineralization stretching about 180 feet along strike and 320 feet along dip. Drilling of the Deep 200 South Zone in the past few years has defined three stacked folds of high-grade mineralization that represent up to 600 feet of down-dip continuity. Recent drilling of the folded upper bench mineralization to the south has defined mineralization of similar extent, thickness, and geometry compared to the resource model. A recent exploration hole to the south intersected intermittent mineralization and the resource remains open to the south.
Exploration drilling of the down-plunge projection of the 5250 trend of mineralization intercepted strong mineralization within argillite that dips down toward the Deep 200 South bench. Recent exploration drilling at the southern extent of the East Ore Zone above and below the Klaus Shear intersected the mine contact but had weak mineralization indicating that the contact folds sharply into the fault.
Greens Creek is exploring a number of areas on the 23-square-mile land package which could potentially lead to additional reserves and resources, further extending the mine life or even leading us to find another deposit like Greens Creek. There are over 30 miles of mine horizon where mineralization has been identified and projected along surface on our property.
East Ore Zone
The company has retained a contractor to engineer the planned re-access into the East Ore Zone for the development of a mine plan that will extend Greens Creek’s mine life.
Currently, reserves in the East Ore Zone are 683,000 tons at 13 ounces per ton silver and 7.89% zinc. East Ore Zone resources consist of 1.2 million tons at 12.6 ounces per ton silver and 7.14% zinc. Exploration potential remains along strike to the southeast.
The Deep 200 South resource has been extended and defined by diamond drilling from the 1147 exploration development level but requires additional definition drilling to move the high precious-metal rich resource to a reserve status. Development has begun on a new development drift that will provide a drill platform and future production access. Once this drill platform is in place and drilling is complete, engineering work and construction planning will begin to bring this portion of the 200 South into reserve and production.