When "two roads diverged in a wood," poet Robert Frost took "the one less traveled by." Two roads are available to silver legend Hecla Mining (NYSE: HL  ) as the company charts its course into the future, and ultimately the company will walk them both.

In the wake of Pan American Silver's (Nasdaq: PAAS  ) recent $1.5 billion offer for Minefinders (AMEX: MFN  ) -- an announcement for which I found my Foolish self in the right place at the right time -- the acquisitive road to growth might seem the obvious course for Hecla to pursue. Before sitting down last week in Vancouver with CEO Phillips Baker Jr., I shared that presumption. After all, I reasoned, a class of budding young silver producers is gnawing at Hecla's heels and threatening to crowd the once-lonely ranks of mid-tier silver producers. With targeted output in 2012 of at least 8.9 million silver-equivalent ounces, First Majestic Silver (NYSE: AG  ) has already arrived. And thanks to another strong year ahead in its long-running growth spurt, Endeavour Silver (NYSE: EXK  ) continues to establish itself as an emerging mid-tier marvel with targeted output of 5.6 million SEOs for 2012.

But as you'll see in the following excerpts from our conversation, the landscape for potential silver acquisitions is relatively sparse, and Hecla's downtrodden shares present a further challenge. I was surprised to learn that Hecla is not limiting its search to silver alone (see below). Meanwhile, although the company has folks peering down that acquisitive road, Hecla is extremely fortunate to have a second road lined with multiple opportunities for organic growth.

Hecla's path of least resistance to long-term growth may traverse the company's vast and hugely prospective landholdings that are associated with some of most productive silver districts in the world. In the first two installments of this series on the 120-year-old miner, we examined the company's outlook for meaningful new silver discoveries not only within its pair of existing mines, but throughout the large and strategic land packages that surround them. In the present discussion, Mr. Baker will discuss his own thought process as it pertains to the two roads in front of his company, and we'll examine two additional assets at the heart of the company's strong organic growth potential.

Christopher Barker: Another bright spot in Hecla's long-term future comes into view when one flips on the light in the company's treasury. Hecla holds roughly $246 million in cash and another $100 million undrawn credit facility. It seems only logical for shareholders to presume that Hecla is actively weighing acquisition opportunities in order to build out its growth profile. Could you describe for my readers the sorts of qualities you're looking for in a potential acquisition target?

Phillips Baker Jr.: We are in the process of evaluating and continuing the evaluations that we've had ongoing. We have a team of people where that's all they do. One of the things you have to understand about the silver space is that, unlike gold -- where you've had continuous exploration since the early 1970s that has continued to grow in that time -- that hadn't been the case with silver. Silver has only started to see exploration dollars in the last seven years or so.

From a corporate development standpoint, that means that what things you have available to buy, are generally things that have been known for some time. Because often times, it takes five to 10 years to take a concept that a prospector has and see it come into fruition as a real deposit that is ready to go into production. And then it takes another five to 10 years to see it actually in production. But assets that are out there -- and have been there for some time -- in many cases, they've been there for some time because they're not the best-quality asset to begin with. That's not true of all of them, by any means. But we're in a new era for silver exploration, and out of that will come some opportunities, and we'll hope to get engaged on those.

Barker: How about geographies? Do you expect Hecla to maintain a U.S. production focus?

Baker: Hecla's a 120-year-old company. In the past, we've had operations outside the U.S. Even recently we had mines in Mexico. We were actually the largest gold producer in Venezuela until 2008 when we left and sold our interest there. We managed for almost a decade to navigate life in a Chavez-led country, which I think is a credit to our ability to operate in a developing country. But when we look geographically, we're looking at things in the Americas for silver. We contemplate things for gold that are in the U.S. and Canada and a few states in Mexico.

And why do we contemplate gold? Because there is not an inventory of attractive silver properties. And so if we can get a gold opportunity that plays on our skills as underground miners, then we think we can add value to those opportunities. We think the competitive landscape for those opportunities is less because they're generally too small for the bigger players on the gold side of things. It's not the primary focus, but it is a part of our program.

We've been a consistent gold producer for the last at least 30 years, and today we produce about 50,000 to 60,000 ounces of gold. Our property in Mexico, when it was producing, about half its value was in gold. Where we're drilling on the Andrea vein, it's something similar where there's a split between silver and gold. So we would expect to always produce some gold. And we think that's consistent with investors' interest in silver. We don't think they mind having that gold to go along with it.

Barker: I know I don't. How about operational scales or targeted phases of development?

Baker: You could probably create a curve that's bell-shaped. The sweet spots are going to be assets that are somewhere between a resource being identified and being in production. But you have outliers on either end of the curve. The reason is that if you look at our four properties and the exploration that we're doing on those, we had budgeted to spend $27 million in 2011, and that will be the most the company has spent in its history. And that is being spent on four properties that we already have. So it's not as though we are opportunity-poor for our exploration dollars. We have lots of those opportunities. And we're not spending it because we have nowhere else to spend it; it's because these are really good opportunities.

Barker: Speaking of those, would you say they express Hecla's signature characteristic as a company focused on these epic, multi-generational assets?

Baker: Well, I think it's an outcome of being a 100-year-old company that we have these remarkable land packages. For a newer company, just to have one of the four would be what the company would be built around. And for us to have all four of them ... I don't think it's well understood the nature and the quality of these things. Speaking earlier of how new the upward trend in silver exploration has been, well, that refers to our properties as well. These properties, despite how prolific they've been over the course of the last 10, 20, 50, or even 100 years, the amount of exploration associated with those properties is insignificant.

Barker: We've already discu
ssed your land packages around Greens Creek in Alaska and beyond Lucky Friday in Idaho's Silver Valley. Can you give my readers a quick overview of the other two assets you're referring to?

Baker: We have the San Juan silver property in Creede, Colo.; and this is one we did not previously own. The biggest player in this district was Homestake Mining Co., which operated the Bulldog mine until 1985. When they shut it down, it had almost 40 million ounces of reserves on their books. When we acquired our 70%, and now we've consolidated to 100% on the core of the district, we acquired a nearly 40-million-ounce resource that we think will convert to reserves quite quickly. So, we're establishing a portal to drive a drift that will allow us to access the orebody.

In addition to that, Homestake had another property that they called the Equity Ramp, and they had interesting drilling there. We followed up with drilling that was another 1,000 feet below what they had, and came in with grades of about 0.15 ounces per ton gold and about 15 to 20 ounces silver (per ton). Homestake put in 8,000 feet of ramp, and they never did any drilling. Homestake only had those two land packages, and they were quite small. We have another 25 square miles there, so we have the whole district. That's a huge, huge difference to have these big land packages.

And then you go down to Mexico, and at San Sebastian, we operated that property for about five years. It was a gold-silver deposit that had a gold-equivalent grade of one ounce per ton. When we stopped operating, we identified the Hugh zone, and it was economic, but it was small. So we needed something bigger. Well, we now have that something bigger in the Andrea vein, and we're now doing a scoping study to see how we take this forward.

These properties are our primary focus, and certainly from my perspective, it is very difficult for us to use our equity to do something until the market starts to realize the value associated with these things.

Stay tuned throughout this series on Hecla Mining for memorable excerpts from my interview with CEO Baker. Click back to the series intro for links to the entire series.

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