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Past-producing Mexican silver mine to come online by year-end

Exploration at the San Sebastian mine. Photo courtesy of Hecla Mining.

The San Sebastian mine in Mexico will be producing silver again by the end of 2015, the mine’s owner, Hecla Mining Company (NYSE:HL) announced last Wednesday.

The U.S.-based gold and silver producer said it expects to mine the near-surface material of the property, which it operated between 2001 and 2005, during which it dug half a million tons of ore containing 177,541 ounces of gold and 11.6 million ounces of silver. According to Hecla, the mine at the time was one of the highest-grade Mexican producers at the time, with an average grade of 0.32 ounces per ton of gold and 22.5 oz/ton silver from the Francine Vein.

“San Sebastian’s high-grade near-surface material is projected to provide significant production, more than 8 million silver equivalent ounces, and cash flow over the next two years,” said Phillips S. Baker, Jr., Hecla’s president and CEO. “Our approach at San Sebastian has been to minimize capital expenditures by using a mining contractor and renting a nearby mill, allowing Hecla to quickly generate exceptional returns in this low-price environment.”

Ore from San Sebastian will be processed near Velardeña in the State of Durango at a mill that Hecla is renting for 18 months, and an additional year under terms of a toll treatment arrangement. The mill was previously used by Hecla to process ore when it mined on the property from 2001 to 2005.

According to a preliminary economic assessment (PEA), San Sebastian has silver-equivalent production of 8,138,740 ounces, with cash costs pegged at $5.49 per silver ounce after byproduct credits.

Hecla currently produces silver from two mines in the United States, Greens Creek in Alaska and the Lucky Friday mine in Idaho. It also operates the Casa Berardi gold mine in Quebec, Canada.

In August Hecla reported a second-quarter net loss of $26.8 million or $0.07 per share. The company said at the time it could weather lower precious metals prices due in particular to improvements in recovery at Greens Creek, and looked forward to a deepening of the Lucky Friday mine in three years and the addition of San Sebastian to the production pool.