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Hecla Mining is aiming for a seamless transition to underground operations when open pit mining ends at its San Sebastián mine in Mexico.
The company expects pit operations at the Durango state silver-gold mine to continue until end-2017, when it intends go underground, investor relations VP Mike Westerlund told the Bank of America Merrill Lynch Leveraged Finance Conference in Boca Raton, Florida.
Hecla has extended the lease of a mill for three years from the original one year, he added. Production at the mine, which Hecla previously operated from 2001 to 2005, restarted last December.
"The objective is that the mill does not sit idle," he told the event. "We want to be running pit material and then phase into underground [material] seamlessly."
Silver production in 2016 is expected to be 4.35Moz and gold output 35,000oz, according to the company's website.
Idaho-based Hecla plans to develop a series of high-grade pods of underground material one by one, as long as they remain economic, Westerlund said.
The move underground will be made easier by mine workings dating back to Hecla's previous operations, and existing permits.
The company is currently dewatering the workings and plans to assess rehabilitation requirements. Hecla has doubled its exploration budget for San Sebastián, Westerlund added.
Hecla plans to invest surplus cash in high-return organic growth opportunities. If no suitable project is identified, the company will look at M&As, and finally at debt buy-backs and dividends, the latter of which is a less efficient use of cash, according to Westerlund.
The company plans to maintain a US$100mn cash cushion, he added. Hecla, which had US$192mn of cash and equivalents at end-Q3, also has mines in the US and Canada.