Hecla Mining wins dispute over silver deposit

COEUR d’ALENE — Hecla Mining Co. emerged the victor this week in a bitter legal battle over a silver deposit at the Lucky Friday Mine.

Hecla operates the mine near Mullan, Idaho. In 1997, the company began producing silver from the mine’s Gold Hunter deposit. The deposit is partially owned by Independence Lead Mines, which signed a 50-year lease allowing Hecla to explore and develop its share of the Gold Hunter.

Hecla sank about $30 million into the project. The Gold Hunter was never profitable enough to generate royalties for Independence, though the company has received about $400,000 in lease payments.

Two years ago, Independence sued Hecla. In the lawsuit, Independence’s shareholders accused Hecla of squandering the deposit by mining it during periods of low silver prices.

Hecla’s actions amounted to a “calculated looting of Independence’s claims for the short-sighted purpose of propping up Hecla’s stock price and protecting its local standing,” the suit said.

Independence accused Hecla’s managers of using overly optimistic silver prices as the basis for developing the Gold Hunter, and pushing the project through despite misgiving from staff, according to the suit. At the time, Hecla’s management needed a quick recovery from a failed gold venture in central Idaho that sucked $100 million from the company’s coffers, the suit said.

In a 34-page ruling, however, First District Court Judge John Luster said Hecla met the terms of the 50-year lease negotiated by attorneys from both companies.

The contract gave Hecla the right to control production at the Gold Hunter, Luster wrote. Continued operations, despite the Gold Hunter’s losses, are not a breach of contract, he said.

“The outcome is what we expected,” said Vicki Veltkamp, Hecla spokeswoman. “Just because you don’t like a contract doesn’t mean you can have a judge rewrite it.”

Independence will appeal the ruling, said Bernard Lannen, the company’s president and major shareholder.

“The judge’s ruling said that Hecla had the right to destroy the ore body, and through their action, destroy the company’s shareholders,” he said.