Opinion ID: 2633548
Heading Depth: 1
Heading Rank: 3

Heading: Mining Gold Hunter

Text: After some exploratory drilling in the 1970s, little occurred in the way of serious development of Gold Hunter until the 1990s, at which time interest in developing Gold Hunter was rekindled. In May 1997, Hecla's managers presented a feasibility study summary report to Hecla's board of directors in support of a request for development of Gold Hunter. The report was based on proven and probable reserve (reliable quantity and quality of minerals) and anticipated resource (less reliable, possibly speculative, quantity and quality of minerals) estimates over the twelve-year life of the mine. The report identified 3.5 million tons of ore in Gold Hunter, 668,770 of which were deemed reserves and 2.68 million tons of which were the less reliable resources. The anticipated 36% return on the investment was calculated using projected metal prices of $5.46 per ounce for silver, $0.33 per pound for lead, and $0.61 per pound for zinc throughout the life of the mine. Based on management's projections of mineral prices and the extent of the deposit, the board of directors decided to proceed with the project and approved $16 million to put Gold Hunter into production. By June 1998, Hecla was engaged in full production at the 4900-foot level of Gold Hunter. While the grade and quality of the Gold Hunter deposit was good, during the first five years of the project the price of silver averaged $5.00 per ounce and lead $0.22 per pound, rather than the projected metals prices of $5.46 and $0.33, respectively. Realizing the price projections set forth in the study were wrong, Hecla began occasionally reducing production but did not shut down the mine for various reasons. By October 2003, the unrecouped costs of the project were over $33 million. Eventually, Hecla had mined out the 4900-foot level of the deposit and was pursuing plans to develop Gold Hunter at the 5900-foot level.