On the morning of January 11, 2012, there was a repeat of twin lessons for long investors in gold and silver miners. First it pays to understand the condition of mines. And second that the money is often made on the short side.
Established in 1891, Hecla Mining /quotes/zigman/229110/quotes/nls/hl HL +2.82% is the largest silver producer in the U.S. Hecla produces silver from Lucky Friday mine in Idaho and Greens Creek mine in Alaska.
The news was that the Mine Safety and Health Administration (“MSHA”) ordered the silver shaft at the Lucky Friday mine closed for removal of built-up material in the shaft. The silver shaft is a one-mile deep shaft from the surface and the primary access to the Lucky Friday mine. This order was pursuant to the investigation following the December 14, 2011 rock burst.
Compliance with the order is expected to take through year-end. Hecla’s 2012 silver production is now estimated to be approximately 7 million ounces. Previous estimate of the production was 9.5 million ounces.
The stock of Hecla was crushed ending the day down 21% at $4.61 after trading as low as $4.25.
“While we are disappointed with this order and are considering what action we might take, work has already begun to resume production as quickly as possible,” Phil Baker, Hecla’s President and Chief Executive Officer said in a statement . “The Lucky Friday mine is a world-class mine that we see producing silver for decades to come. Hecla and the Lucky Friday mine have faced challenges in the past and we will once again overcome them.”…Read More on MarketWatch