Hecla Mining Company
Hecla Mining Company
Incorporated: 1891 as Hecla Mining Company
Sales: $166.8 million (1996)
Stock Exchanges: New York Vancouver American
SICs: 3339 Primary Nonferrous Metals, Not Elsewhere Classified; 1031 Lead & Zinc Ores; 1044 Silver Ores; 1041 Gold Ores
The oldest of Idaho’s pioneer mining companies, Hecla Mining Company mines and processes silver, gold, and industrial minerals in the United States and Mexico. Hecla Mining earned the bulk of its income initially from its namesake Hecla mine, which yielded substantial ores of lead for four decades. Following the closure of its mainstay Hecla mine in the mid-1940s, the company subsisted on zinc before dabbling in uranium and securing its second mainstay mine, a silver-lead mine named Lucky Friday. Hecla Mining ran into trouble during the 1970s with copper production, but strong silver prices revived the company and fueled an aggressive growth program during the early 1980s that included two important acquisitions, Day Mines, Inc. in 1981 and Ranchers Exploration and Development Corporation in 1984. These acquisitions significantly strengthened Hecla Mining’s silver holdings and brought it into the production of industrial minerals. During the late 1990s, the company derived nearly half of its sales from industrial minerals, more than 40 percent from gold, and 10 percent from silver and lead.
The cause for Hecla Mining’s formation occurred six years before the company’s incorporation, when James Toner claimed the Hecla mine on May 5,1885. At the time, Hecla was an unremarkable, 20-acre claim situated on a hillside, representing one hope among thousands of others in the Coeur d’Aleñes of Idaho. The region was alive with activity during the late 19th century, inundated by wave after wave of prospectors who scoured the countryside in search of fortune, each bounding their respective plots of land with hastily scribbled claim notices and each hoping to find the vein of Idaho’s mother lode. The rush was on, but for many of the fortune-seekers who flocked to the area, rich veins of ore never materialized, and once-promising plots became worthless tracts of scrubland. Such was the case with the Hecla claim, at least in the mind of Toner, who held onto the rights for a few short years before selling it to another hopeful prospector. The claim passed from hand to hand following Toner’s ownership, the land on the hillside neglected, as the promise of Hecla was lost amid the frenzy for silver, lead, and gold.
Six years passed before anyone gave any serious thought to developing the Hecla claim, but by the beginning of the 1890s the Hecla mine was regarded as a “full-fledged lead prospect,” according to the area’s local newspaper, the Wallace Press. Ownership of the Hecla mine by this point had passed from Toner to an Idaho miner and subsequently to a local merchant before falling into the hands of an agent for Montana investors, its final sales price a modest $150. Other investors soon secured an interest in the mine, and by the fall of 1891 plans were being developed to form an operating company for the promising Hecla mine. On October 14,1891, Hecla Mining Company was incorporated and capitalized for $500,000 by seven businessmen, some local and others from the East, primarily Chicago and Milwaukee. Once formed, Hecla Mining limped from the starting gate, but the company’s inaugural year of business marked an historic occasion. Hecla Mining, despite its hesitant start, became the longest-surviving member of the pioneer mining companies dotting the Coeur d’Aleñes.
The long legacy of mining conducted under the auspices of Hecla Mining began with a nine-year span much like the first six years of its namesake mine. Inactivity characterized much of the 1890s for Hecla Mining, as the company joined ranks with the dozens of other infant mining companies in Idaho, doing little to distinguish it from its brethren. Throughout the bulk of the 1890s, the company’s directors invested only a modicum of resources and energy into Hecla, opting instead to lease the mine or raise money through assessments and forego serious exploration into the depths below the 20-acre site first staked by Toner. Hecla, as it had during the latter half of the 1880s, waited in the wings while other mining properties basked in the limelight. According to one estimate, Hecla produced ores worth no more than $14,000 during its first seven years under Hecla Mining’s operation, a period that saw the area surrounding the mine fall under martial law on two occasions. While the territory embracing Wallace, Idaho, fought fitfully through its growing pains, Hecla Mining’s management resolved to start anew after the company’s lackluster start and reorganized the company in 1898, by which time more than half of the original founders had either died, moved elsewhere, or divested their interests.
The new version of the company emerged with a much greater capitalization—twice the amount of 1891—and exuded decidedly more vigor. Eight additional claims were purchased for $36,000, and Hecla Mining, after years of languishing in the background, moved resolutely forward, its directors intent on shaping the company into a regional force. As the new century began, and the promise of substantial growth neared, work was underway to bolster the infrastructure of the Hecla mine so the property could begin producing ore and the company could begin paying dividends. Roughly $40,000 was earmarked for tunnel building, tunnel renovation, and for the rental of a mill, enabling the company to pay its first dividend by the summer of 1900. By the end of the year, Hecla had sold $229,550 worth of ore and paid $100,000 in dividends, signalling the beginning of Hecla Mining’s existence as a going, thriving enterprise.
Hecla prospered in the years to follow, its mining activities flourishing as the nation’s consumption of lead increased. The demand for lead was stimulated by strong demand for sheeting from the chemical industry, sheathing for cable, and paint production, but in 1907 a nationwide financial panic brought the encouraging growth in the lead market to a screeching halt. Lead prices picked up again during World War I, only to collapse at the war’s conclusion, as Hecla Mining’s management was introduced to the capriciousness of fluctuating market prices.
Roller coaster lead prices was not the only problem executives in Wallace had to contend with, for the first decades of the 20th century were pocked with labor strife, pitting the company’s miners against those at the company’s headquarters, where those in charge were already involved in a heated battle. Inside the corporate offices, there was enough rancor without the added enmity stemming from labor problems because the directors of the company were waging a contentious debate against each other over the development of a zinc mine named Star. For years, those opposed to sinking money into the Star mine fought those in favor of branching out into zinc, with the outcome ultimately settled in court. The pro-Star faction won, and in 1922 Hecla Mining and another premier mining company in the Coeur d’Aleñes called Bunker Hill & Sullivan agreed to develop the Star mine for zinc, a multimillion dollar project that signalled a turning point for Hecla Mining.
In reference to the Star deal, one chronicler of Hecla Mining’s past noted that the decision to go ahead into zinc “changed Hecla from a company with a mine to a company bent on extending its operating life indefinitely,” but however symbolic the move may have been the reality of the project was far less meaningful. By the time the mine was ready to begin producing, a point reached after considerable investment, the Great Depression had begun to exercise its stifling grip on the nation’s economy. Metals prices began to plummet, and Hecla Mining’s directors chose to shut down the Star mine in 1930, resolving to keep it closed until, in their words, “the metal situation justifies resumption.” The mine remained closed for five-and-a-half years, eating through nearly $4 million before its subsidiary company, Sullivan Mining Company, paid its first dividend in 1936. As it did to the Star project, the crippled economy affected other aspects of Hecla Mining’s business, engendering tough financial times for the mining concern, but although beaten, the company never succumbed to the deleterious economic conditions. The 1930s were spent further developing mines and searching for new ones, a search that was becoming increasingly important to the company’s survival as the 1940s neared.
Hecla Mining Company is a precious metals company with an important industrial minerals component. Our business is to create value for our shareholders by discovering, acquiring, developing, producing and marketing mineral resources at a profit. To achieve our mission we will: Manage all business activities in a safe, environmentally responsible and cost-effective manner; Give preference to projects where Hecla can be the operator; Provide an environment for achieving personal excellence and growth for all our people; Willingly accept our responsibility to be a good corporate citizen by contributing to the well-being of the communities where we work and live; Conduct our business with integrity and honesty.
1944: The Hecla Is Lost
Entering the 1940s, the Hecla mine had been producing substantial yields of ore for four decades, proving to be an invaluable, sustaining force for Hecla Mining. Time, however, was running out, and the company’s directors knew it. In the foreseeable future, they realized they would reach a point when they could no longer count on their mainstay mine to support the company and consequently would have to face the daunting challenge of operating Hecla Mining without the Hecla mine. That dreaded moment of uncertainty arrived in 1944, when the Hecla mine was closed at a depth of 3,600 feet, after yielding more than nine million tons of ore and realizing $81 million in net smelter returns. There were other, smaller mines operating in Hecla Mining’s fold, and the Star mine had at last begun to produce appreciable income, but from 1944 on Hecla Mining was without a large mine, operating in one sense like a ship adrift without a keel to guide its course. The search was on for something to compensate for the loss of the Hecla, but until that something was found Hecla Mining operated much like a holding company, a corporate shell with partial stakes in various ventures but without a discernible, defining force inside.
During the immediate postwar years, Hecla Mining’s financial position was tenuous, made unsteady by the lack of a large mine from which the company could regulate production according to market prices. Every effort was expended to find a new golden goose but nothing turned up immediately. The company lived of the income derived from its zinc production at Star during this period while the search continued. In one notable failure, Hecla Mining invested in a silver mine named Rock Creek, pouring in roughly $500,000 to develop the mine before divesting the property at a loss in 1955. Other attempts to find a reliable, revenue-generating engine brought Hecla Mining far afield and out of the mining industry altogether, such as the company’s diversification in the late 1950s. Hecla Mining acquired a Seattle-based manufacturer of movable ceiling panels called Accesso Systems, Inc. and Ace Concrete Company in Spokane, but diversification never delivered great profits, underscoring the need for a second large mine.
Part of the solution to the company’s problem had already been found by the time diversification had started, when Hecla Mining followed a trend in the mining industry and began looking for opportunities in uranium production. The company concentrated its search on Utah’s uranium fields, and in 1954 struck an agreement with U & I Uranium, Inc., a coalition of six companies with uranium prospects. At the time U & I was in need of financial help and Hecla Mining presented itself as a savior, funnelling money into the company and gaining ownership of two bright uranium prospects, Radon, a group of ten claims and Hot Rocks, both located approximately 30 miles south of Moab, Utah. Of the two properties, Radon proved to be the most valuable, paying back Hecla Mining’s development money after its first year, an $880,000 reward that was followed by successive years of substantial profits. It was the realization of this income that enabled Hecla Mining to finance its next important purchase, the long-awaited keel of stability.
Silver in the 1950s
With the proceeds generated by Radon, Hecla Mining began to invest in a silver-lead mine named Lucky Friday, a group of six claims staked between 1899 and 1906. In 1959, Hecla Mining purchased Lucky Friday, a milestone acquisition that represented the company’s second Hecla mine, if such comparisons can be made. The acquisition of Lucky Friday was momentous, “the fulcrum that restored Hecla as an operating company with prolonged life,” according to a company historian. With the income derived from Radon and Lucky Friday, management financed the company’s next important moves, part of a long-range plan to accumulate a reserve that would allow Hecla Mining to pay dividends in recessive years as well as robust years and to expand the company on all fronts. By the mid-1960s, riding high on the shoulders of Lucky Friday, Hecla Mining was once again a thriving enterprise, earning nearly $6 million a year and with exploration offices in strategic locations such as Tucson, Reno, Salt Lake City, and Vancouver and Toronto, Canada. Its first big move with the resources stemming from Lucky Friday occurred during the 1970s, and it was a regretful misstep.
In Arizona, exploratory drilling on a copper claim jointly owned by El Paso Natural Gas and Transarizona Resources, Inc. had revealed a hefty deposit of ore, larger than El Paso cared to handle. The natural gas company began to look for a partner experienced in hard-rock drilling to take the remaining half belonging to Transarizona and operate a mine. The mine was christened Lakeshore and stood atop what was regarded as one of the largest copper deposits in the United States, capable, according to some estimates, of producing ores worth $3.7 billion. Hecla Mining, a septuagenarian as far as hard-rock drilling was concerned, neatly fit El Paso’s description for a partner, and had its own reasons to bid for a stake in Lakeshore. Involvement in a copper property as large as Lakeshore would free the company from sole dependence on lead and silver and extend the company’s productive life indefinitely, while tripling its assets and income in one daring move. There were massive profits to be made by Hecla Mining, to be sure, but there was an equally large risk associated with taking on Lakeshore, the exposure to which touched off a debate among the company’s directors as intense and divisive as the battle over whether or not to develop the Star mine roughly a half century earlier. Those opposed to developing Lakeshore railed against those in favor of a bold move into copper, and vice versa, with the faction intent on development winning once again. This time, however, the winning side did not have the opportunity to gloat over their victory. Commercial production at Lakeshore began in 1976 when copper prices were severely depressed, mired in the worst market conditions since the 1930s. One year after production began, losses in Arizona reached a staggering $46 million, leading to Hecla Mining’s worst financial year since the reorganization in 1898. By the end of the year, the embattled Lakeshore mine was closed, ending a disagreeable chapter and decade in Hecla Mining’s history.
Early 1980s Acquisitions
Desperate attempts were made to sell the Lakeshore property, but given the market conditions there were no takers. The property was eventually sold at a greatly discounted price, and management moved quickly to put the stain of Lakeshore behind it. A major reorganization ensued, contemporaneous with a strong rise in silver prices that provided the company with much-needed relief at its bleakest point in the century. From the sweeping reorganization and the succor of swelling silver prices, a new corporate philosophy was born that focused on diversification and aggressive growth. Hecla Mining was “too small to be truly viable in the corporate world,” according to its president in the company’s annual report, and the diagnosis was quickly given an antidote. In 1981, Hecla Mining made good on the words of its president, merging with Day Mines, Inc., which along with Hecla Mining represented one of the two pioneer mining companies in Idaho. The consolidation of the two veterans, now made less vulnerable to hostile takeover, spawned record financial highs during the early 1980s, at a time when Hecla Mining was responsible for producing 15 percent of the newly mined silver in the United States.
A greater infusion of stature followed the Day Mines acquisition, one that provided much of the might that characterized the company during the 1990s. In 1984, Hecla Mining acquired Ranchers Exploration and Development Corporation, a New Mexico mining company involved in copper, gold, silver, clay, and volcanic rock production. The effect of the acquisition was large. It doubled Hecla Mining’s size, diversified it, and gave it a silver mine, the Escalante, that produced more than two million ounces a year at the lowest production cost of any large-scale silver mine in the nation. Gold and copper were added to Hecla Mining’s portfolio. Clay, provided by Ranchers’ subsidiary, Kentucky-Tennessee Clay Company, joined the fold, adding ceramic manufacturers to Hecla Mining’s roster of customers. Through another Ranchers’ subsidiary, Colorado Aggregate Company, the company absorbed volcanic rock quarry operations. Following the incorporation of Ranchers into Hecla Mining, the company relocated to a more populous community, moving from Wallace to Coeur d’Aleñe in 1986, and enjoyed years of steady growth, as it realized the surge of vibrancy added by the two acquisitions completed early in the decade.
Though meaningful growth occurred following the early 1980s acquisitions, the remainder of the 1980s were not without their problems. The Lucky Friday mine was closed in 1986, its operation deemed to be too costly, but opened again in 1987. On the brighter side, the company delved into gold production in earnest, acquiring properties in the United States and Mexico that provided a substantial percentage of revenue during the 1990s. Further, the addition of the industrial minerals businesses gained through the purchase of Ranchers proved to be a boon, developing into a nearly 50 percent contributor to the company’s total revenue volume and recording annual leaps in sales for more than a decade. By the late 1990s, after a 10-year stretch that saw the company’s financial totals fluctuate widely, Hecla Mining’s management was intent on increasing the company’s gold and silver production and altering the composition of its business so that precious metals would account for 70 percent of total revenues. With this as its goal at the dawn of its second century of business, Hecla Mining rallied forward, a far cry from the $150 hillside claim that gave birth to one of the country’s preeminent mining companies.
Kentucky-Tennessee Clay; Mountain West Colorado Aggregate (MWCA); Industrial Minerals Exploration.
Bradley, Hassell, “Hecla Gets New Canada Base,” American Metal Market, August 27, 1990, p. 5.
Fahey, John, Hecla: A Century of Western Mining, Seattle: University of Washington Press, 1990.
Knights, Mikell, “Hecla Mine Halts Operations; Cause of Mine Shaft Accident Is Under Investigation,” American Metal Market,” September 1, 1994, p. 12.
LaRue, Gloria T., “Hecla to Up Gold, Silver Output,” American Metal Market, March 7, 1997, p. 4.
Munford, Christopher, “Hecla’s Largest Silver Mine Down on Luck; Firm Shuts Stopes, Lays Off Workers,” American Metal Market, December 6, 1990, p. 2.
Schiffer, Craig, “Hecla Workers Return to Lucky Friday Mine,” American Metal Market, December 8, 1994, p. 6.
Stavro, Barry, “Long Shot,” Forbes, October 20. 1986, p. 127.
Stovall, Robert H., “Tarnished Trophies,” Financial World, August 8, 1989, p. 96.
—Jeffrey L. Covell