Hecla CEO seeks silver lining

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HEART OF ALENE – As Phillips S. Baker Jr. sits in his Hecla Mining Company office on Mineral Drive, he is relieved. He is also upset.

A three-year “bad actor” case against the CEO was recently dismissed. As for Baker, it was late.

“It was really politically motivated and I’m just kind of the guy standing in the middle,” he said.

“They took a law and I understand the rationale for the law, and I think it’s appropriate, but they took it and applied it poorly,” he said. “And they didn’t do it for the sake of the environment, not for the sake of corporate governance, but they did it for somebody’s political purpose, which is not the purpose. of this country, is not it? At least it shouldn’t be.

Even with the case behind him, Baker said it would never really be the case.

“For me and my family, to have this characterization of ‘This guy is a bad actor’, and you think about the way people think of that term, bad actor, it’s not a benign thing. I mean, You’re a criminal, basically, and so they did this without even having a conversation with me. How inconceivable is that? “

Baker first heard about the Montana Department of Environmental Quality “Bad Actor” case against him in 2018 via a press conference.

“So no due process. No attempt to ask me, “OK, what role did you play? “

“When you work for a large public company, you are just one of the many people who play a role. And my role was quite limited, ”he said.

Baker was initially convinced the case would be closed quickly.

“I was like ‘OK, they don’t have the facts. They never bothered to contact me. It will go away. In short. And here we are. It took, what, three years to get here, ”he said.

How we got here

Baker has been the head of Hecla Mining Company, which has operated mines in Idaho, Alaska and Quebec since 2001. The company is the largest silver producer in the United States, producing 40% of all silver mined. in the USA.

Almost a quarter of a century ago, Baker became Vice President of Finance and Chief Financial Officer of Pegasus Gold Inc.

He stayed for four years. His replacement was appointed in January 1998.

In March of the same year, Baker became vice president and chief financial officer of Battle Mountain Gold Company.

From there he joined Hecla.

Twenty years after Baker left Pegasus, the Montana Department of Environmental Quality sought to remove him from two silver and copper mining projects proposed by Hecla under the Cabinet Mountains near Libby and Noxon, reported the Associated Press.

Their argument was based on a state law that punishes companies and their managers who do not clean up mining pollution – hence, “bad actor.”

Pegasus Gold went bankrupt in 1998 before cleaning up pollution from three gold mines, including the Zortman-Landusky mine near the Fort Belknap Indian Reservation, the AP reported.

State and federal governments have spent more than $ 50 million on cleanup costs and water treatment will continue in perpetuity, officials said.

Hecla argued that his company had never been involved in the Pegasus mines and that Baker left Pegasus before losing his clean-up bond, which did not fully cover the costs, AP reported.

Baker’s job with Pegasus “was to ensure that the bonds required by the Montana DEQ were secured and placed with the state. He was not responsible for calculating the required bond amounts nor for managing the reclamation work ”, according to information provided by Hecla.

At the time of Baker’s replacement as CFO in January 1998, Pegasus was “in full compliance with state bond requirements”.

In January 1999, Pegasus filed for Chapter 7 bankruptcy.

Dismissal

In July of this year, Montana DEQ filed a motion to dismiss the court case that sought to prevent Baker from being involved in the proposed mines in northwest Montana.

The filing drew criticism from environmental groups, but DEQ defended it.

“In our role as a state environmental agency, we have to make tough decisions in order to make the best use of state resources while accomplishing our mission,” DEQ Director Chris Dorrington said in a statement. press release reported by the AP.

DEQ’s decision to drop its case “came as no surprise to opponents and supporters of the Rock Creek and Montanore projects following the election of Governor Greg Gianforte,” the Montana Free Press reported. “Last year Gianforte spoke favorably about the two projects in Lincoln and Sanders counties and hosted a campaign event at Hecla’s offices in Libby. In its motion to dismiss, lawyers representing DEQ said the election of Gianforte and the appointment of a new director prompted the agency to reassess the case, which was originally filed under the (Steve) Bullock administration. .

Montana DEQ noted that the mining projects at issue in this case – the Troy mining project, the Montanore mining project and the Rock Creek mining project – all comply with the Metal Mine Reclamation Act.

Political motivation?

Baker called it “an interesting situation in Montana where the locals absolutely want these projects to go ahead.” And then you basically have politicians and people outside of Montana who are really using that as a pawn for their purposes. Because from an environmental point of view, there will be no problem with these projects. And so it’s just more than that, a bit of smoke and mirrors where they use these things to advance their political goals without really caring about who is really affected by them.

Reflective

Baker, while happy that the case is finally over, said she should never have gotten to where she was and that now the damage cannot be repaired.

“You google my name and you are going to find a ‘bad actor’ associated with my name forever. Forever, “he repeats.” So it’s less than satisfactory, but at least it happened and it’s the right thing to do and we’ll move on. “

Baker called this an “unfair characterization” that could have cost him his job at Hecla, but the board believed in him.

“I have been in the business for 20 years. We are talking about an event that happened 25 years ago, so they were very supportive of us. They could have taken action and said, “We’re going to fire you for this. But they didn’t. They stayed with me. “

He said Hecla “will move these projects forward in Montana and other potential things in Montana.”

Look ahead

Baker thinks Hecla’s future is solid.

Hecla Mining Company had a good year in 2020. It produced 13.5 million ounces of silver, up 7%, and gold production of 208,962 ounces, down 23% from 2019, which was Hecla’s highest annual gold production.

It achieved sales of $ 691.9 million in 2020, the highest in company history.

In the second quarter of 2021, the 130-year-old company had revenue of $ 218 million, an increase of 31%, with the main source being cash.

It made gross profit of $ 59.3 million, an increase of $ 25.2 million in the second quarter. It had a silver production of 3.5 million ounces, a 4% increase over the previous year due to full production at Lucky Friday.

Baker noted that the money is important for the transformation to renewables, electric vehicles and 5G.

“Hecla has probably never been better placed than we are today,” he said.

Baker concluded his interview with the press with a statement:

“The importance for government organizations to be very careful in using the power they have to pass judgment on people – once they do, they can never take it away completely.”


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