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Hecla Mining to Increase Annual Silver Production at Lucky Friday Shaft Project

Hecla Mining Company (NYSE:HL) today provided an update on the #4 Shaft Project at its Lucky Friday mine in Mullan, Idaho, which Hecla believes could increase the mine's annual silver production by approximately 50% from current levels and extend the mine life beyond 2030.

Total estimated capital expenditures for the #4 Shaft Project could range from $150 and $200 million, for an internal shaft descending from the 4900 level to the 7800 level. Engineering is underway to determine the feasibility of constructing the shaft to an ultimate depth of 8800 feet.

“This is a major milestone in the mine's history and we are very excited about the organic growth opportunity at Lucky Friday”

Since project inception in 2007, Hecla's Board of Directors has approved approximately $55 million of capital expenditures for prefeasibility, feasibility, front-end engineering and design, and early-phase development of the #4 Shaft Project. By year-end 2010, $50 million will have been invested in the detailed engineering and design of the shaft, excavation of the hoist room and off-shaft development access to shaft facilities, and placement of orders for major equipment.

Hecla management currently expects to make a final technical and commercial feasibility determination and seek final approval by the Board of Directors for completion of the #4 Shaft Project no later than the middle of 2011. If approved, Hecla estimates that the project would be completed by the end of 2014.

"This is a major milestone in the mine's history and we are very excited about the organic growth opportunity at Lucky Friday," said Phillips S. Baker, Jr., President and Chief Executive Officer. "The mine has been in production for more than 68 years and we believe that it may extend much further into the future with the addition of the #4 Shaft. With no debt and approximately $200 million of cash on hand at June 30, 2010, Hecla is currently well positioned to fund all of its capital requirements internally."

Project Update

The development of a new #4 Shaft and related infrastructure at Lucky Friday, when completed, would increase annual silver production from current levels of approximately 3 million ounces to 5 million ounces, with an expected average total cash cost of less than $4.00 per ounce of silver in the first five years of operation. The two key drivers for this potential increase of silver production are: 1) ore grade is expected to increase from the current grade of 10.4 ounces of silver per ton to over 14 ounces of silver per ton (a corresponding increase in lead ore grade is also expected); and 2) mill throughput of ore is expected to increase from approximately 350 thousand tons to 375 thousand tons annually.

The company has made good progress on preliminary construction activities. Excavation of the hoist room was completed ahead of schedule in the third quarter of 2010 and the foundations for the main production hoist are currently being constructed. Off-shaft development is planned at multiple locations between the 4700 and 7500 levels.

Major long-lead equipment items received to date include the permanent hoist, underground concrete trucks, and temporary sinking plant facilities.

Expected #4 Shaft Project key development milestones are as follows:

Project Capital Update & Valuation

The total capital investment required to complete the #4 Shaft Project is estimated to be between $150 to $200 million, for a shaft descending from the 4900 level to the 7800 level. By year-end, the company will have invested approximately $50 million since project inception in 2007. Assuming Board authorization for completion of the #4 Shaft Project, the balance of the capital requirement ($100 to $150 million) would be distributed over the next four years, with 2011, 2012 and 2013 being the more capital intensive years. The Company believes that cash on hand combined with free cash flow from existing operations should be sufficient to fund completion of the #4 Shaft Project. Included below are indicative project valuation metrics based on metals prices of $15.00 per ounce of silver and $0.80 per pound of lead and zinc:

The IRR(pretax) decreases to 11% at $11 silver and $0.80 lead and zinc. At recent prices of $23 silver and $1.10 lead and zinc, the IRR(pretax) increases to 40%.

Source:

Hecla Mining Company

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