Hecla holds a 29.73% interest in the Greens Creek mine. Greens Creek produced a total of 2.6 million ounces of silver and 20,218 ounces of by-product gold for Hecla’s account in 2007, at the low average total cash cost of negative $5.47 per ounce of silver. The average ore grade was 15.45 ounces of silver per ton. In 2008, Greens Creek is expected to produce at approximately the same rate as 2007, with a potential for a low or possibly negative total cash costs per ounce.
Kennecott Greens Creek Mining Company’s geology and engineering staff computes the estimated ore reserves, and provides the weighted average metals prices used in the reserve estimates, for the Greens Creek unit, with technical support from Rio Tinto PLC. We review geologic interpretation and reserve methodology, but the reserve compilation is not independently confirmed by us in its entirety. Information with respect to our 29.73% share of production, average costs per ounce of silver produced and proven and probable ore reserves is set forth in the following table.
Year Ended December 31, reflects 29.73% interest| Production | 2007 | 2006 | 2005 | |
| Ore milled (tons) | 217,691 | 217,676 | 213,354 | |
| Silver (ounces) | 2,570,701 | 2,636,083 | 2,873,532 | |
| Gold (ounces) | 20,218 | 18,713 | 21,631 | |
| Zinc (tons) | 18,612 | 17,670 | 19,209 | |
| Lead (tons) | 6,252 | 6,242 | 6,515 | |
| Average Cost per Ounce of Silver Produced (1) |
2007 | 2006 | 2005 | |
| Cash operating cost | ($6.06) | ($4.20) | $1.30 | |
| Total cash costs | ($5.27) | ($3.47) | $1.46 | |
| Total production costs | ($1.93) | ($0.30) | $4.02 | |
| Proven & Probable Ore Reserves(2,3,4,5,6) | 2007 | 2006 | 2005 | |
| Total tons | 2,513,700 | 2,282,574 | 2,223,872 | |
| Silver (ounces per ton) | 13.7 | 14.4 | 14.5 | |
| Gold (ounces per ton) | 0.11 | 0.11 | 0.12 | |
| Zinc (percent) | 10.2 | 10.4 | 10.2 | |
| Lead (percent) | 3.8 | 4 | 3.9 | |
| Contained silver (ounces) | 34,497,800 | 32,913,002 | 32,150,190 | |
| Contained gold | 270,000 | 257,101 | 256,959 | |
| Contained zinc (tons) | 255,900 | 237,187 | 227,807 | |
| Contained lead (tons) | 95,300 | 90,919 | 86,465 |
(1) Includes by-product credits from gold, lead and zinc production. Cash costs per ounce of silver represent measurements that are not in accordance with GAAP that management uses to monitor and evaluate the performance of our mining operations. We believe cash costs per ounce of silver provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties.
(2) Estimates of proven and probable ore reserves for the Greens Creek unit as of December 2007, 2006 and 2005 are derived from successive generations of reserve and feasibility analyses for different areas of the mine each using a separate assessment of metals prices. The weighted average prices used were determined by the Kennecott Greens Creek Mining Company, and differ from the prices used by us, for example, in making such calculations for our Lucky Friday unit. The average prices used for the Greens Creek unit were:
| 2007 | 2006 | 2005 | |
| Silver | $8.00 | $6.00 | $5.79 |
| Gold | $529 | $446 | $381 |
| Lead | $0.27 | $0.27 | $0.31 |
| Zinc | $0.58 | $0.47 | $0.44 |
(3) Ore reserves represent in-place material, diluted and adjusted for expected mining recovery. Mill recoveries of ore reserve grades differ by ore zones and are expected to average 77% for silver, 69% for gold, 80% for zinc and 72% for lead.
(4) The changes in reserves in 2007 versus 2006 and 2006 versus 2005 are due to addition of new drill data, increases in forecasted precious metals prices, which has resulted in the addition of new reserves based on updated estimates for certain orebodies, partially offset by depletion due to production.
(5) We only report probable reserves at the Greens Creek unit, which are based on average drill spacing of 50 to 100 feet. Proven reserves typically require that mining samples are partly the basis of the ore grade estimates used, while probable reserve grade estimates can be based entirely on drilling results. Cutoff grade assumptions vary by orebody and are developed based on reserve prices, anticipated mill recoveries and smelter payables and cash operating costs. Cutoff grades range from $70 per ton net smelter return to $100 per ton net smelter return.
(6) An independent review by AMEC E&C, Inc. was completed for reserve models in 2005 for the 200 South, 5250 and Southwest Bench deposits.