Ore grades in both the Galena and Coeur mills will continue to improve as development of new ore zones and exploration successes provide access to higher- grade ores, according to the company. Low grade development ore currently included in the mill feed will be replaced by higher grade production ore as the year progresses. Ore grades are expected to continue to improve in both mills throughout the year with grades returning to historical averages later this year.

Throughputs of silver-copper ore at the Galena Mill have been reduced over the past 18 months because management focused on infrastructure repair, development activities, and the start up of silver-lead production. Plans are for silver-copper production to be ramped up from current levels of approximately 350 t/d to approximately 600 t/d by the third quarter. Total combined throughput of both mills is anticipated to exceed 1,000 t/d by the third quarter.

In mid-2007, the company initiated repairs to the Galena shaft between the 2400 and 3200 levels, where a timber failure occurred approximately 10 years ago. After nearly five months of preparatory work, the company started pouring a new concrete lining in the shaft at the 2400 level in early November. When repairs are completed, the shaft will be concrete lined from the 2400 level to the 3200 level. It is expected to be operational by the fourth quarter of 2008 and will add several hundred tons per day of hoisting capacity. As well, this will add considerably to the operational flexibility of the Galena mine since the Galena shaft provides access to all production levels.

While the repair of this shaft is important to the long-term optimum operation of the Galena mine, the company is confident that the target of 1,000 t/d can be achieved without the Galena shaft repair being completed. The addition of the Galena shaft adds significantly to the hoisting capacity of the mine but, more importantly, it provides considerably more flexibility and access to many more levels of the mine with high-grade ore reserves. The total capital budget for this shaft repair is approximately $3.5 million.

In light of recent and sustained high lead prices, management decided in early 2007 to temporarily redeploy a portion of the company’s work force from mining silver-copper ore to preparations for the start-up of lead-silver production. Production of lead-silver ore started late in the summer and the Coeur mill was activated in September. Concentrate shipments to Teck Cominco’s Trail smelter began in October 2007 under a smelter contract.

As a result of these initiatives, the company was able to capitalize on historically high lead prices and sold forward approximately 6 million lb of lead at prices above $1.55/lb for 2008. These forward sales cover approximately 40% of the expected lead production in 2008.