American silver producer Hecla Mining (NYSE:HL) said on Friday it was mulling options for its San Sebastian silver-gold mine in Mexico, which is due to cease production in the third quarter of the year.
The Coeur d’Alene, Idaho-based miner brought the past-producing mine back to life in late 2015, initially planning a two-year mine operation at the Durango state asset.
Exploration at the property allowed Hecla Mining to move operations underground in 2018.
As San Sebastian runs out of ore, with milling slated to stop in the last quarter of the year, the company continues to study the possibility of mining sulfide ore.
“Mining of oxide material is expected to be completed in Q3 and milling in the fourth quarter of 2020,” Hecla said in a production update for the three months ended June 30.
San Sebastian production for the quarter was affected by lower grades and government-mandated shutdowns of four weeks to help slow down the spread of coronavirus, Hecla said.
The mine churned out 58,842 ounces of silver and 1,331 ounces of gold in the April-June period, down 66% and 63%, respectively, from 463,735 ounces and 3,547 ounces in the same quarter of 2019.
The company’s overall silver production rose 13% in Q2 to 3.4 million ounces, while gold output fell 1% to just shy of 60,000 ounces.
All of the company’s five mines were in operation during the quarter, although the Casa Berardi and San Sebastian had to halt operations to comply with covid-19-related government orders.
Silver was the commodity hardest hit by mine closures mandated by governments to stop the spread of the coronavirus.
Prices for the precious metal, however, are forecast to surpass the $21 per-ounce-mark later this year. The gold:silver ratio – the quantity of silver ounces needed to buy an ounce of gold – is expected to drop below 90, The Silver Institute said on Thursday.
Silver prices averaged $16.65 an ounce in the first half of the year, reaching $17.84 per ounce at the end of June. It has since broken through the $18 per ounce barrier.
Mexico, the world’s top producer of the metal, is facing in 2020 one of the deepest recessions in its history as an already weak economy can barely cope with the impact of the coronavirus outbreak.
The country’s economy is forecast to contract 6.7% this year, deeper than during the devastating Tequila Crisis of the mid-1990s, the latest Citibanamex analysts survey shows.
Mexico is responsible for nearly 23% of world production of silver, churning out more than 200 million ounces last year, up from 196.6 million ounces in 2018.
It also has major copper and zinc mines, operated by Grupo Mexico and Southern Copper, and produces a significant amount of gold, making the mining sector responsible for about 4% of the nation’s gross domestic product.