Lucky Friday Operations
- How much cash did the Lucky Friday produce for Hecla in 2016?
The Lucky Friday consumed over $20 million during 2016, primarily related to the funding of capital projects intended to increase efficiency, productivity and safety in the future at the Lucky Friday.
- Has the Lucky Friday Mine repeatedly broken production records?
The Lucky Friday has not broken any production records in recent years. In 2000, the Lucky Friday produced 5 million ounces of silver. In 2016, the mine produced 3.6 million ounces. In 2010, the Lucky Friday produced a record 351,000 tons of ore, and in 2016 the mine produced 294,000 tons of ore.
Bid and Progression Systems
- Are bid systems common in the mining industry?
Bid systems are practically extinct. Every mine in the United States where members of the Hecla staff have previously worked, including three mines represented by the United Steelworkers, have progression policies in place. As the negotiating committees spoke at the bargaining table, neither side could name a single mine in the United States that uses the outdated job bid system used at the Lucky Friday mine. The mining industry has moved to a progression system that rewards miners financially for the skills they acquire.
- Doesn’t the bid system make the mine safer?
The safety of our employees is our top priority and we expect all our employees to demonstrate safe work habits each and every day. Four years ago we adopted the National Mining Association’s CORESafety program, which is a risk-based management system approach which has resulted in the Lucky Friday’s safety performance substantially improving. Implementing these types of systematic tools in combination with a culture of continuous safety improvement is what makes mines safer.
- Will elimination of the bid system result in decreased production?
Elimination of the archaic bid system will not reduce production. The high-quality miners at the Lucky Friday will continue to work together to increase production levels. These same miners will utilize the current investments into the #4 Shaft, the Centralized Refrigeration Plant, and the Bulk Air Coolers, along with future investments such as Battery Powered and Remotely Operated Equipment to increase production, improve safety, and reduce costs. The combination of the Progression System with Lucky Friday’s skilled miners, improved infrastructure, and new technology will support the Lucky Friday to be feasible for decades.
- Can you explain how the job progression system works?
Under the job progression system offered by the Company, an employee will have the capability to choose a career path (e.g. mechanic, electrician, miner, support, mill, construction, etc.). Within that career path, as employees increase their skill levels, they will earn a higher wage by progressing to a higher Technician (Tech) level. Each career path has defined tasks and skills necessary to learn to progress to each technician level. The system is designed to broaden expertise in employees and crews and reward the increase in skill level with a higher base wage.
The mill is currently working in a progression system, and the mechanics and electricians, for the most part, follow a progression type of system. Employees on support crews (trucks, loaders, nippers, cagers, graders) will develop skills in many areas but most will find a niche and spend most of their time performing that task. However, if necessary, their acquired skills will allow them to perform other tasks to improve efficiency of their crew. Miners would be placed in locations to work and would remain in that area unless there was a business need to change, such as the work in that area is reduced or stopped altogether or another area of higher priority is identified. Having consistency with employees and work areas can improve quality and conditions and can be a valuable benefit. However, there must be the ability to place employees where necessary when the need arises.
- Can management demote employees’ paygrades at will?
No. Tech levels cannot be downgraded at will. There is a policy outlining a regression procedure that would be followed if an employee is not performing to expectations for their Tech level. The first step is to perform an evaluation. After the evaluation is performed, the following section of the Progression Policy would be applicable:
“If the employee has any ratings below “Meets Expectation”, the supervisor will formulate a plan for improvement with the employee, and the employee will be provided an opportunity to demonstrate sustained improvement. If the employee was not able to correct the performance deficiencies within the timeframe formulated by the action plan, the case will be evaluated with the employee’s supervisor, the Department Foreman, and the Human Resources Manager. The group will discuss the possibility for regression. If the group’s consensus is to regress the individual, the recommendation for regression will be signed and sent to the Department Superintendent for final approval or further discussion. Upon final review of the Department Superintendent, the employee may be regressed to the appropriate technician level with the associated reduction in pay.”
- Do all of the hourly employees at the Lucky Friday Mine work under the bid system?
No. Many of the employees at the Lucky Friday mine do not work under the bid system. For example, the mill department works under a progression system, and the maintenance department works under a modified progression system.
- Is changing the bid system all about the continuous mining machine?
No. The continuous mining machine is a way of increasing the safety of the mine and possibly make it more productive. Changing from the bid system is an evolution that has happened in the mining industry over the years. The progression system allows the mine to have the right skills in the right place at the right time.
- Under the Company’s proposal, will the miner contract pay (“gypo” pay) be eliminated?
The Company proposal does not include any language to change the existing “gypo” pay system.
- Will the profit share plan remain in place under the Company’s proposal?
Yes, the method for calculating the financial pool for the profit sharing will be the same under both the 2010 Agreement and Company’s 2017 proposal.
- Why was the 2010 CBA Silver Price Premium (SPP) trigger point changed?
The 2010 SPP trigger point was increased from the trigger point in the 2006 contract in an effort to align the payment point with the mine’s costs. However, the $7.50 trigger price which was chosen did not fully account for rising costs, which often left Lucky Friday paying the full premium even though costs were higher than revenues. The 2010 CBA Silver Price Premium paid employees $0.01 for every $0.01 that the silver market price exceeded $7.50 up to a maximum market price of $13.50. At recent silver market prices this premium amounted to $6.00 per hour worked each month to hourly employees. The program was no longer serving the intended purpose of rewarding employees when the Company was cash flow positive.
Under the Company proposal, approximately half of the SPP paid out in 2016 ($3 of the $6) was allocated to base wage increases and the remaining half ($3.00) was used for the Tier 1 SPP. The new SPP is paid when the Lucky Friday’s quarterly per ounce revenue covers its quarterly per ounce costs, it’s margin. When the margin is positive employees will be paid $0.01 for each $0.01 of margin on the first $3.00 of margin.
Overall, this change allows Lucky Friday to increase base wages (which increases overtime, holiday and vacation pay) and maintain a Silver Price Premium payout when costs are below quarterly revenues, which was the original intent of this incentive pay. The increased base wages provide a more secure source of employee income, as they are paid even when the mine is not producing silver.
- Isn’t the premium at risk by the company investing in projects that will raise the cost per ounce?
Yes. But the company wants the Lucky Friday and all its mines to be cash flow positive. Under the proposal if the mine has positive margin then employees immediately receive a penny of premium on the first penny of margin. The proposal doesn’t require a recoupment of previous capital or a return on investment before employees receive a premium.
- Is the value of the lead and zinc produced at the Lucky Friday included in Hecla’s proposed Silver Price Premium Plan?
Yes, the value of the lead and the zinc are included in Hecla’s Silver Price Premium calculation.
- What are the changes to the health insurance plans?
The Company has offered three health care plans – group medical, dental, and vision plans. Within the medical plan, employees can choose from three plan options, which cover themselves as well as their family members. The Bronze Plan, in conjunction with a Health Savings Account, requires no premium, the Silver Plan requires a 5% premium cost sharing, and the Gold Plan requires a 15% premium cost sharing. The health care plans are very competitive across the industry for both low premiums and quality of coverage. The offered medical plan provides certain benefits unavailable under the current hourly medical plan, such as child wellness visits. The Company’s offer provides the hourly employees with coverage under the very same plans that the salaried employees enjoy, and at the same low premium percentages.
The Company has proposed medical plan premiums, which is a change from the current practice, but the premiums are very reasonable, and in many cases low when compared to similar employer-provided plans. The dental and vision premiums contained in the Company’s offer are significantly lower than what the hourly employees are currently paying under the “enhanced” hourly dental and vision plans (a majority of the hourly employees are enrolled in the “enhanced” plans).
Linked below is a PDF that illustrates the reduction in monthly premium cost sharing by moving from the current enhanced dental and vision plans to the offered plans.
Linked below is a PDF that illustrates the difference in monthly premium by adding the medical plan cost sharing, and reducing the dental and vision premium cost sharing.
- What are the changes to the vacation plan?
The Company’s offer includes a full year’s allotment of vacation each January, grants vacation based on years of service, and allows employees to bank vacation. Under the 2010 CBA, hourly employees accrued vacation based on eligible hours worked each pay period. Under the new plan, vacation will be granted in one allotment each January after the end of the year in which it is accrued. There is a transition year during which time the company will advance 40 hours of the 2018 accrual to employees in July, with the remainder granted in January 2019. An employee will no longer have his or her vacation accrual reduced for missing a shift, and all vacation time an employee has banked will immediately be valued at the higher rate of pay the Company is offering in its wage rate section. Under the 2010 CBA terms, vacation is paid at an average hourly rate based on when the vacation was accrued, not paid. The Company expects to pay more in vacation benefits under the new system, but also recognizes the efficiencies gained by simplifying today’s complicated system will be worth the additional costs.
- Why does the company want to make holidays scheduled days of work?
To make the Lucky Friday productive we need it operational on every possible day. There are very few mines that don’t work every available day. However, most mines, and Lucky Friday will be no different, will, as the situation allows, consider modifying the schedule for certain holidays.
- Why did the Company shorten the Non-Occupational Disability (NOD) period from 12 months to 6 months?
The Company offered a fixed 26-week time limit for which an employee can be on short-term disability, which the Company believes was the intent of the existing program. The Company believes the intent of the NOD program is to help those employees who are off work due to an illness or injury for up to 26 weeks (6 months), which is a standard period for short term disability programs. This program was not intended to be an endless leave situation. Under the 2010 CBA, employees may be paid for up to 26 weeks, and the Company is not looking to change this aspect. The Company offered language in Article 12 – Seniority, that allowed any employee rehired within 6 months of the exhaustion of NOD benefits to recapture his or her seniority.
- Has the Company refused to meet and bargain with the Union?
The Company has willingly met and bargained over the past 12 months, including 27 meetings before the strike and one meeting subsequent to the strike. The Company has never refused to meet with the Union and continues to be willing to meet with the Union if it has new proposals.
- Isn’t the proposal just asking a huge concession from the workforce?
No, in fact many employees will make more money, and employees can increase their pay by advancing through the progression system. With higher base wages there is more certainty of pay regardless of what the price of silver is or when mine production is temporarily halted. While health benefits are reduced, they are the same as salaried employees, and the Company expects to pay more vacation pay under the proposed system than the current system.
The biggest issue is really the elimination of the bid system which benefits only a few and prevents employees from being rewarded in their jobs and compensation based upon their merit.
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