Saturday, December 6, 2003

Idaho

Lucky Friday mine to be expanded
`Nobody knew what the verdict would be'

Becky Kramer
Staff writer

photo
Jesse Tinsley - The Spokesman-Review
The second-shift miners wait Friday afternoon to be taken down into the Lucky Friday silver mine. It was announced Friday that the operation will undergo a major expansion.

Two years ago, the Lucky Friday mine appeared headed for closure.

The underground mine near Mullan, Idaho, was losing nearly $1 on every ounce of silver mined. Easy-to-reach ore was running out. And with metals prices so low, owner Hecla Mining Co. was reluctant to spend millions of dollars developing the Lucky Friday's next level.

"Nobody knew what the verdict would be," said shift boss Jim Angle. "I've seen people from the community coming up to the mine every day, just checking in."

On Friday, Hecla delivered the news Silver Valley residents most wanted to hear: The mine will expand.

That means 94 workers will keep their jobs. Production will double in the future. By 2005, the mine even expects to hire 45 new workers.

"It's definitely, without a doubt, the best news we've had in several years," said Robin Stanley, superintendent of Mullan School District.

The Lucky Friday is the school district's largest taxpayer, and the district was hard hit
in 2001 when the mine cut back production and laid off workers. It lost 15 students when families moved away, along with tax revenue.

"We're a single industry community. ... It's been a very difficult two years for us. Maybe this is an indication that we're through the worst," Stanley said.

Others echoed his remarks.

"Anything that can create more jobs is good news for Shoshone County," said Jon Cantamessa, chairman of the county board of commissioners.

With 10 percent unemployment, Shoshone County has one of the highest unemployment rates in the state.

But the news was most heartening to Lucky Friday employees.

"They were all anticipating and hoping that it would get the go-ahead," said Angle, the shift boss. "A lot of the guys have 20, 25 and even 30 years at the mine, and they want to retire there."

Higher silver prices and worker productivity prompted Hecla to move forward with the expansion, said company spokeswoman Vicki Veltkamp.

Silver traded at $5.40 per ounce this week, up more than a $1 over prices two years ago.

"We think the potential for silver prices is good," Veltkamp said. "But what really drives this is that our guys have cut costs and developed a plan that makes sense even at current prices."

Miners phased out work in the least productive areas of the Lucky Friday, increasing output per worker. Costs are also down.

"For approximately $8 million of initial capital, we'll be nearly doubling our annual production from this mine through 2011," Hecla CEO Phil Baker Jr. said in a statement.

Construction at the mine will begin in January. The work will create a 5,500-foot long tunnel, or "drift," to a new area of the mine, located more than a mile below the earth's surface.

Hecla officials estimate that the new area contains 28 million ounces of silver, based on exploratory drilling. Mining should begin there in late 2005.

The Lucky Friday expects to eventually mine 4 million ounces of silver annually, at costs of $4.50 per ounce.

"It's going to be a richer grade," Angle said, "and it's going to be cheaper to mine it."

Friday's announcement was contingent on a new contract with the mine's union. This week, United Steelworkers Local 5114 approved a 51/2-year contract at the Lucky Friday.

Veltkamp didn't know when the mine would begin hiring. The personnel department will start reviewing job applications in January, and workers will be added gradually as the work increases.

"It's great that one of our major industries -- the one that brought us to the dance -- has the opportunity to expand and employ more people," said Vince Rinaldi, executive director of the Silver Valley Economic Development Corp.

The mining industry has been depressed for the last several years, due to low prices. The Sunshine Mine near Kellogg closed in 2001, and the Galena Mine recently had layoffs. Mining is one of the highest-paid jobs in North Idaho, with an average annual wage of $46,000.

But Hecla's announcement wasn't the only good economic news in the Silver Valley on Friday, Rinaldi said.

A financial firm from the San Francisco area has leased a vacant call center in Smelterville, and plans to begin operations there in January. North Point Financial Group will initially employ a small number of workers to provide customer relations for its clients. Few details were available.

"We've got some diversification," Rinaldi said. "The primary industry of mining is making a move, and here another industry is getting established."

•Becky Kramer can be reached at (208) 765-7122 or by e-mail at beckyk@spokesman.com.


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