SPOKANE, Wash. - The Mine Safety and Health Administration has ordered Hecla's Lucky Friday Mine to close down after federal safety inspectors determined that material must be removed from the main silver shaft.
Hecla estimates the mine will be shut down for a year.
The news of Lucky Friday's shutdown caused Hecla's stock price to tumble on the New York Stock Exchange Wednesday, losing a quarter of its value to fall to around $4.40 a share.
In a media release Wednesday morning, Hecla Mining Company said that the removal of the material built up in the shaft comes in the wake of the December 14 rock burst. Seven miners were injured in that incident.
MSHA inspected the mine after the rock burst and issued a citation regarding the Silver Shaft buildups. Hecla removed what it thought was the lose material. MSHA then reinspected the mined and ordered a cleanup from the top to the bottom of the Silver Shaft.
?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,? said Phil Baker, Hecla?s President and Chief Executive Officer.
The Silver Shaft, commissioned in 1983, is one mile deep and is the primary access for the Lucky Friday Mine, Hecla reported. The materials built up in the mine, a combination of sand and concrete, will be removed from the mine by power washing. As a result of the closure to conduct maintenance on the mine, all work on the mine, including construction on the #4 Shaft, has been put on hold.
Baker estimates it will take at least $20 Million to clean up the Silver Shaft.
Hecla says that production in the Lucky Friday isn't expected to resume until 2013. The shutdown represents a major blow to Hecla, as the Lucky Friday produces 25-percent of its total annual silver output.
During an investor call Wednesday morning Baker fielded questions about whether the tumbling stock price made the company vulnerable to a buyout. Baker told investors that the company was solvent enough to weather the Lucky Friday shutdown.
Mike Maehl, a Spokane financial advisor for Seattle-based Opus 111 Group, said that he wasn't surprised by the sudden drop in Hecla's stock price on the New York Stock Exchange, but estimated that the stock won't likely tumble any further since Hecla has other operating units that are continuing production.
Maehl added that the shutdown of the Lucky Friday won't impact silver prices overall because the closure, while having an impact on Hecla's output, isn't a significant factor on the world market.
Silver was trading Wednesday at $30 an ounce.
Baker confirmed the shutdown would result in a workforce reduction of 185 Hecla personnel and 50 to 100 contract personnel. Earlier reports indicated that a total of 200 personnel would be laid off. Baker added that after the cleanup of the Silver Shaft he hoped that all personnel being laid off by the closure could return to work at the mine.
Baker added during the investor call that after a string of incidents over the last year at Lucky Friday, including two fatal incidents that resulted in the deaths of two miners, Hecla would be adding more safety personnel to the mine.
KXLY.com's Rob Kauder contributed to this report