US silver and gold producer Hecla Mining on Thursday announced that it would curtail most development work and reduce the workforce of its operations in Nevada, which had failed to generate the cash flow that the company had hoped for.
Following a review of its Nevada operations, Hecla announced that only the currently developed ore at Fire Creek would be mined and that the Midas mine would continue until year-end, while its Hollister mine would be shuttered.
These changes would result in the retrenchment of 25% of the Nevada workforce.
The company stated that remained committed to exploring Hatter Graben, which was one of the key reasons why it acquired the Nevada operations. The Hatter Graben vein provides the next leg of growth at Hollister, but the level of development activity would be curtailed to reduce cash consumption. The focus would be on surface drilling to gain more information about potential expansions of the deposit and to plan an efficient route to development for when development was restarted.
The production guidance for the Nevada operations was lowered from 76 000 oz to 60 000 oz, for a total gold-equivalent production guidance of 63 000 oz. The group’s overall guidance was reduced from 290 000 oz to 274 000 oz, or a gold-equivalent guidance of 558 000 oz.
Overall, Hecla is aiming to reduce its spending by $25-million this year, which should allow the organisation to generate sufficient cash flow without having to borrow more money.
“Hecla has a strong commitment to operate within cash flow as demonstrated by the positive free cash flow over the past three years and longer,” said president and CEO Phillips Baker, noting that the Nevada operations had not generated the cash flow hoped for.
“We still see lots of opportunities to improve costs, manage water, improve recoveries and explore but only plan to do it within cash flow.”
Baker said should Hecla need to borrow more, it would be in compliance with its covenants.