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.
Annual Shareholders Meeting (Updated June 14, 2017)
- I understand several representatives from the USW attended Hecla’s Annual Meeting of Shareholders in Vancouver during May. How did it go?
It went very well. There were approximately 60 people in attendance, including five representatives from the USW. Phil Baker, Hecla’s President and CEO, gave a presentation on innovations that are in place at, or coming to, the four mines. The presentation included information on ore sorting, battery powered vehicles, and autonomous vehicles. All questions were presented to and answered by Ted Crumley, Chairman of the Board, and Phil Baker. The meeting was very upbeat and optimistic (a video recording of the meeting is available on Hecla’s website). Following the meeting, refreshments were provided and several displays on innovation were manned by subject matter experts, giving guests, including representative of the USW, an opportunity to learn more about Hecla’s plans to make its mines safer and more efficient. Attendees were also provided an opportunity to ask technical questions of the subject matter experts. The meeting and the innovation session that followed were both informative and interesting.
- Was Hecla’s annual meeting of shareholders moved to Vancouver to avoid the presence of the USW?
No. Hecla has a corporate office in Vancouver and the city has a robust mining presence. Hecla has held its shareholders’ meeting in Vancouver in the past and will most likely do so in the future.
- In which cities has Hecla held its most recent annual meeting of shareholders?
2017 – Vancouver
2016 – Spokane
2015 – Montreal
2014 – Anchorage
2013 – Vancouver
- Was Hecla’s annual shareholder meeting disrupted by the presence of the USW?
No. The few Union members who attended were welcomed and visited with others in attendance, including the Company’s management, both before and after the annual meeting. The Union members asked a few questions during the meeting which were answered without issue. The meeting was conducted in the ordinary course of business and there were no disruptions. The link to a video recording of the meeting is available on Hecla’s website.
- Were the Hecla shareholders supportive of the Company’s proposals?
Yes. The shareholders overwhelmingly voted to, among other things, elect Phil Baker and George Johnson to another term on the board of directors, and approve executive compensation. Each such proposal was passed with over 96% of the vote.
Bid and Progression Systems
- Do the Lucky Friday miners have a history of choosing their partners based on safety performance?
No. The current Lucky Friday bid system allows the most senior qualified miner (a/k/a, the Sugar Daddy) to select his partners. The Sugar Daddy often chooses his partners on a family-and-friends basis – or “who you know”, rather than on merit or an individual’s safety record.
- Under the Lucky Friday bid system, are mine department employees able to develop new skills and advance as their ambition and skills allow?
Under the current bid system at the Lucky Friday Mine, mine department employees are very isolated, and get stuck, within the current bid system. The system places them into a job and that is all they perform. If an employee wishes to improve and expand his or her skills, or perform another task, that employee needs to wait for a bid to be posted and then hope to be awarded the new position. The current system does not allow an employee to cycle through different work areas and gain new skills and additional compensation. The system tends to pigeonhole employees into the individual jobs they are awarded. The system limits the operation in that employees cannot be moved to work areas where new skills could be learned and put to use by the mine, and it limits the employees by restricting the skills and additional compensation they could otherwise acquire.
- Does the Lucky Friday have trouble attracting new talent as a result of the bid system?
Yes. Multiple qualified miners over the years have declined the opportunity to work at the Lucky Friday Mine because of the bid system. These miners have cited their reasons for declining the job offer as a system of “who you know”, rather than a system of “what you know”. Other miners have accepted employment offers, hoping to navigate the political nature of the bid system, but end up quitting because of the bid system.
- Are mine operations safer with the current bid system?
Hecla management has no evidence of mining operations being safer due to the current bid system. Hecla management is unaware of any world-class safety systems that promote job bidding as a means to achieving a strong safety performance and a zero-harm safety system. The Lucky Friday has faced grievances in the past for seeking to remove unsafe employees from their job bids or for denying bids to employees when management determined that the employees were unable to complete the job safely. In certain of those cases, employees have come to management and expressed a safety concern regarding a fellow employee in a safety-sensitive position. During the course of the grievance and/or arbitration procedures, the Union cited the bid system as the reason the fellow employee should be allowed to continue working in the safety-sensitive position, notwithstanding the concerns expressed by the other employees or management.
- 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.
The Company asked the Union to cite to other mines that have bid systems like the Lucky Friday Mine. To date, after well over a year of negotiations, the Union has still failed to name any other mines with a Lucky Friday style bid system. The mining industry has moved to a progression system that rewards miners financially for the skills they acquire. Due to the archaic bid system at the Lucky Friday Mine, its employees are unable to progress based on their ambition and ability to acquire new skills.
- 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.
- Does the average annual employee pay of over $84,000 per year include the value of Hecla provided benefits?
No. The average pay of over $84,000 per year only includes W-2 eligible earnings (such as wages, 11 paid holidays, up to 5 ½ weeks of paid vacation, and bonus pay). The value of the non W-2 eligible benefits are in addition to the $84,000 average annual pay.
- Were all hourly employees provided full benefits?
All full-time employees were provided benefits including Company-funded retirement, 401(k) with Company match; life insurance; medical, dental, and vision insurance (which covers both the employee and his or her dependents); and short-term disability benefits. These benefits are in addition to the W-2 eligible benefits such as vacation, holidays and bonus.
- 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.
- Will employees see a decrease in base wages under the Company's proposal?
Over 95% of employees will see an increase in base wages under the Company’s proposal. The increases range from $0.17 per hour to $6.17 per hour based on position and level of experience, with an average increase of approximately $3.00 per hour.
- Why was the pay structure changed?
The pay structure was adjusted to be more competitive with the market, and to provide more bandwidth between entry level and experienced employees. Under the 2010 labor agreement, an employee with 19 years’ experience was only making $0.38 per hour more than an employee with 4 months’ experience. The Company does not believe that style of compensation structure recognizes the difference in skill level and experience that the proposed Tech Level pay structure offers.
Health Care Benefits
- 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, not hours worked in a pay period; and continues to allow 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 in 2018, during which time the Company will advance 40 hours of the 2018 accrual to employees in July, with the remainder granted in January 2019. From January 2019 forward, employees will be granted full-year vacation allotments in January of each year.
- Will the miners stop accruing vacation hours during 2017?
No. Throughout 2017, miners can continue accruing vacation under the same formula that existed under the 2010 contract. This form of vacation accrual would continue until the end of this year. Beginning on January 1, 2018, miners will no longer accrue vacation based on regular hours worked in a pay period. Instead, miners will be granted a full allotment of vacation hours on January 1 of the following year. For example, an employee with 2 years of service will be granted 80 hours of vacation on January 1, 2019. During the transition year of 2018, the Company will advance every employee with one or more years of service, 40 hours of vacation on July 1, 2018.
- Is the proposed vacation plan a reduction in the bargaining unit’s vacation benefit?
No. The Company expects to pay more in vacation benefits for two reasons.
1. An employee will no longer have his or her vacation accrual reduced for missing a shift. Under the 2010 vacation system, employees did not earn vacation time when they missed a shift. The Company’s proposal eliminates that deduction, and grants full-time employees with at least one year of service, a full vacation allotment each year.
2. 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 contract terms, vacation was paid at the hourly at which the vacation time was accrued.
- 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.
CBA Process (Updated June 22, 2017)
- It was stated in the newspaper that Hecla and the Union were scheduling a meeting in early to mid-July. Why is it taking so long to meet? Why can't they meet earlier?
Representatives of the Company and the Union spoke on June 12th and agreed to meet with full committees from both sides. The Company was ready, willing, and able to meet on any date agreeable to the Union. The Union was unable to meet until June 22nd, and therefore June 22nd was chosen. Later on June 12th, the Union representative called and stated the Union was unavailable to meet until after the Independence Day holiday, so the meeting was postponed until July 6th. The Company has been, and continues to be, available to meet on any day up to and including July 6th.
- Will Hecla provide a new proposal?
The Company has some new ideas to share on issues that were jointly determined to be “key issues” when working with the federal mediator in 2016. The Company would like to share the ideas, and if the two sides believe the ideas have the potential to gain traction, the parties can continue talking at the table and develop the concepts at that time, or the parties can go back to their offices, study the ideas, and then reconvene shortly thereafter to try and find common ground. The Company would also be interested in hearing from the Union in the event it has any new ideas.
- Is the Company trying to “bust” the Union with its Final Offer?
No. As the Company has stated since negotiations began last year, the Company’s Final Offer contains changes necessary to modernize the operation of the Lucky Friday Mine, to make it safer, more efficient, and to extend the life of the mine. The Company is not attempting to “bust” a union that has been part of the Lucky Friday Mine for many decades.
- What Union rights would still be in a new collective bargaining agreement if the Company is not trying to “bust” the Union?
A new collective bargaining agreement, like the agreement from 2010 to 2016, would still include many rights such as the following: 1) the Union is recognized as the representative of the employees; 2) The Company will continue to deduct Union dues from employee paychecks in an amount as provided by the Local 5114 leadership, and send the dues to Pittsburgh; 3) The grievance procedure is unchanged, as it has been for decades; 4) The arbitration provision is unchanged, as it has been for decades; and 5) Despite what the Union has been declaring, seniority rights will still be in a new collective bargaining agreement. The Company, however, has proposed to change where and how seniority applies.
Furthermore, the Union proposed an additional Union right during these negotiations. It proposed that it be given the opportunity to speak with newly-hired employees about the Union during their initial training period. And, during the negotiations, the Company agreed to give the Union this new right.
- Has there been any violence or other unlawful action by the Union or the employees since the strike began?
To date, there has been no violence on the picket line. However, since the strike began, picketing employees have shined bright lights into the windshields of salaried employees traveling to the mine. This act was especially dangerous when it occurred in the early morning hours when salaried employees were arriving for day shift before sunrise. The Union as well as local law enforcement were notified, and these actions stopped.
The Company respects the right of the Union to peacefully picket and to advertise its position in this labor dispute. The Company expects that the strike will continue to be peaceful, particularly in light of the fact the Union’s current campaign focuses on employee safety.
However, during the week of June 5th, a manager for the Company was warned by a striking employee that matters will soon be “escalating”. The Company has taken this threat seriously and has notified local law enforcement. The Company intends to do all it can to continue to protect its employees, its property, and the public.
- Has the Company refused to meet with the Union during the strike?
No. The Company has not refused to meet. Since the commencement of negotiations in April 2016, the Company has willingly agreed to meet or talk whenever the Union has asked. The Union has not asked to meet or talk since March 14th. Had the Union asked to meet or talk, the Company would have agreed.
- Why hasn't the Company offered to meet or talk during the strike?
The Company has offered to meet and talk during the strike. A Company representative called the Union leadership in the first half of May, explained that the Company had some new and good ideas, and asked if the Union representatives would like to sit down and talk. The Union representative said the Union negotiating committee would discuss the idea. As the end of the month nears, the Company has not heard back and no talks have been held, no solutions developed, and no progress made.
- Has the Company failed to negotiate with the Union?
No. The Company has negotiated significantly with the Union since April 2016. As compared to the Company’s initial proposal in April 2016, the Company has made meaningful changes in its position by, among other things, greatly increasing base wages, materially reducing health insurance premiums, and substantially reducing the silver price premium trigger points.
- Isn’t the proposal just asking a huge concession from the workforce?
No, in fact many employees will make more money, and employees who are currently limited in their opportunities for growth due to the bid system can increase their skills and pay by advancing through the progression system. With higher base wages there is more certainty of pay, as the higher base wages will be paid even when the mine production is temporarily halted. While health benefits are reduced, they are the same as the 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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