Hecla Mining Company and Subsidiaries

Form 10-Q

For the Quarter Ended ~~June 30, 2020~~March 31, 2021

INDEX*

			Page
PART I - Financial Information

		Item 1 – Condensed Consolidated Financial Statements (Unaudited)	3

		~~Condensed Consolidated Balance Sheets - June 30, 2020 and December 31, 2019~~	3

		Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - Three Months Ended March 31, 2021 and ~~Six Months Ended – June 30,~~ 2020 ~~and 2019~~	43

		Condensed Consolidated Statements of Cash Flows ~~-Six~~- Three Months Ended ~~June 30,~~March 31, 2021 and 2020	4

Condensed Consolidated Balance Sheets - March 31, 2021 and ~~2019~~December 31, 2020	5

		Condensed Consolidated Statements of Changes in Stockholders' Equity - Three Months Ended March 31, 2021 and ~~Six Months Ended – June 30,~~ 2020 ~~and 2019~~	6

		Notes to Condensed Consolidated Financial Statements (Unaudited)	87

Forward-Looking Statements			21

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3322

		Item 3. Quantitative and Qualitative Disclosures About Market Risk	6855

		Item 4. Controls and Procedures	7156

PART II - Other Information

		Item 1 – Legal Proceedings	7256

		Item 1A – Risk Factors	7256

		Item 2 – Unregistered Sales of ~~Equity~~ Securities and Use of Proceeds	7256

		Item 4 – Mine Safety Disclosures	7256

		Item 6 – Exhibits	7357

		Signatures	74


*Items 3 and 5 of Part II are omitted as they are not applicable.			58

*Items 3 and 5 of Part II are omitted as they are not applicable.

Part I - Financial Information

Item 1. Financial Statements

Hecla Mining Company and Subsidiaries

Condensed Consolidated ~~Balance Sheets~~Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(InDollars and shares in thousands, except ~~shares)~~for per-share amounts)

June 30, 2020

December 31, 2019

ASSETS

Current assets:

Cash and cash equivalents
$ 75,923 $ 62,452
Accounts receivable:

Trade
26,003 11,952
Taxes
11,847 20,048
Other, net
3,851 6,421
Inventories:

Concentrates, doré, and stockpiled ore
46,676 30,364
Materials and supplies
35,866 35,849
Prepaid taxes
5,148 107
Other current assets
9,567 11,931
Total current assets
214,881 179,124
Non-current investments
12,162 6,207
Non-current restricted cash and investments
1,053 1,025
Properties, plants, equipment and mineral interests, net
2,354,883 2,423,698
Operating lease right-of-use assets
13,220 16,381
Non-current deferred income taxes
3,181 3,537
Other non-current assets and deferred charges
4,028 7,336
Total assets
$ 2,603,408 $ 2,637,308
LIABILITIES

Current liabilities:

Accounts payable and accrued liabilities
$ 40,789 $ 57,716
Accrued payroll and related benefits
24,561 26,916
Accrued taxes
8,451 4,776
Current portion of finance leases
5,745 5,429
Current portion of operating leases
4,162 5,580
Accrued interest
12,914 5,804
Current derivatives liabilities
13,779 6,170
Other current liabilities
126 2
Current portion of accrued reclamation and closure costs
5,109 4,581
Total current liabilities
115,636 116,974
Non-current finance leases
7,057 7,214
Non-current operating leases
9,079 10,818
Accrued reclamation and closure costs
99,449 103,793
Long-term debt - Senior Notes
468,252 504,729
Long-term debt - revolving credit facility
50,000 —
Non-current deferred tax liability
128,677 138,282
Non-current pension liability
58,848 56,219
Non-current derivatives liabilities
5,282 1,044
Other non-current liabilities
2,435 5,812
Total liabilities
944,715 944,885
Commitments and contingencies (Notes 2, 4, 7, 9, and 11)

STOCKHOLDERS' EQUITY

Preferred stock, 5,000,000 shares authorized:

Series B preferred stock, $0.25 par value, 157,816 shares issued and outstanding, liquidation preference — $7,891
39 39
Common stock, $0.25 par value, 750,000,000 authorized shares; issued June 30, 2020 — 534,660,072 shares and December 31, 2019 — 529,182,994 shares
133,699 132,292
Capital surplus
1,982,400 1,973,700
Accumulated deficit
(387,688 ) (353,331 )
Accumulated other comprehensive loss
(46,261 ) (37,310 )
Less treasury stock, at cost; June 30, 2020 — 6,821,044 shares and December 31, 2019 — 6,287,271 shares issued and held in treasury
(23,496 ) (22,967 )
Total stockholders’ equity
1,658,693 1,692,423
Total liabilities and stockholders’ equity
$ 2,603,408 $ 2,637,308

	Three Months Ended
	March 31, 2021			March 31, 2020
Sales of products	$	210,852		$	136,925
Cost of sales and other direct production costs		96,709			85,887
Depreciation, depletion and amortization		49,331			39,666
Total cost of sales		146,040			125,553
Gross profit		64,812			11,372
Other operating expenses:
General and administrative		8,007			8,939
Exploration		5,951			2,530
Pre-development		739			535
Other operating expense		3,639			920
Ramp-up and suspension costs		4,318			12,996
Provision for closed operations and environmental matters		3,709			516
Total other operating expense		26,363			26,436
Income (loss) from operations		38,449			(15,064	)
Other income (expense):
Gain on exchange of investments		1,158			0
Unrealized loss on investments		(3,506	)		(978	)
Gain on derivative contracts		473			7,893
Net foreign exchange (loss) gain		(2,064	)		6,636
Other non-operating expense		(161	)		(423	)
Interest expense		(10,744	)		(16,311	)
Total other expense		(14,844	)		(3,183	)
Income (loss) before income and mining taxes		23,605			(18,247	)
Income and mining tax (provision) benefit		(4,634	)		1,062
Net income (loss)		18,971			(17,185	)
Preferred stock dividends		(138	)		(138	)
Income (loss) applicable to common stockholders	$	18,833		$	(17,323	)
Comprehensive income (loss):
Net income (loss)	$	18,971		$	(17,185	)
Change in fair value of derivative contracts designated as hedge transactions		1,832			(19,335	)
Comprehensive income (loss)	$	20,803		$	(36,520	)
Basic income (loss) per common share after preferred dividends	$	0.04		$	(0.03	)
Diluted income (loss) per common share after preferred dividends	$	0.03		$	(0.03	)
Weighted average number of common shares outstanding - basic		534,101			523,215
Weighted average number of common shares outstanding - diluted		540,527			523,215
Cash dividends per common share	$	0.00875		$	0.0025

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of ~~Operations and Comprehensive (Loss) Income~~Cash Flows (Unaudited)

(~~Dollars and shares in thousands, except for per-share amounts)~~In thousands)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Sales of products
$ 166,355 $ 134,172 $ 303,280 $ 286,789
Cost of sales and other direct production costs
92,853 104,938 178,740 215,324
Depreciation, depletion and amortization
39,423 49,477 79,089 88,264
Total cost of sales
132,276 154,415 257,829 303,588
Gross profit (loss)
34,079 (20,243 ) 45,451 (16,799 )
Other operating expenses:

General and administrative
6,979 8,918 15,918 18,877
Exploration
1,962 4,346 4,492 8,748
Pre-development
563 798 1,098 1,654
Research and development
— 158 — 561
Other operating expense
1,439 657 2,354 1,244
Loss on disposition or impairment of properties, plants, equipment and mineral interests
677 4,642 573 4,642
Provision for closed operations and environmental matters
1,037 1,052 1,553 1,622
Ramp-up and suspension costs
9,572 2,266 22,568 5,044
Foundation grant
1,970 — 1,970 —
Acquisition costs
6 397 11 410
Total other operating expenses
24,205 23,234 50,537 42,802
Income (loss) from operations
9,874 (43,477 ) (5,086 ) (59,601 )
Other income (expense):

Unrealized gain (loss) on investments
6,409 (1,129 ) 5,431 (1,033 )
(Loss) gain on derivative contracts
(14,002 ) 3,798 (6,109 ) 1,999
Net foreign exchange (loss) gain
(3,205 ) (4,381 ) 3,431 (7,514 )
Other expense
(649 ) (1,187 ) (1,176 ) (2,311 )
Interest expense
(11,829 ) (11,335 ) (28,140 ) (22,000 )
Total other expense
(23,276 ) (14,234 ) (26,563 ) (30,859 )
Loss before income taxes
(13,402 ) (57,711 ) (31,649 ) (90,460 )
Income tax (provision) benefit
(626 ) 11,179 436 18,395
Net loss
(14,028 ) (46,532 ) (31,213 ) (72,065 )
Preferred stock dividends
(138 ) (138 ) (276 ) (276 )
Loss applicable to common shareholders
$ (14,166 ) $ (46,670 ) $ (31,489 ) $ (72,341 )
Comprehensive loss:

Net loss
$ (14,028 ) $ (46,532 ) $ (31,213 ) $ (72,065 )
Change in fair value of derivative contracts designated as hedge transactions
10,384 3,540 (8,951 ) 7,799
Comprehensive loss
$ (3,644 ) $ (42,992 ) $ (40,164 ) $ (64,266 )
Basic loss per common share after preferred dividends
$ (0.03 ) $ (0.10 ) $ (0.06 ) $ (0.15 )
Diluted loss per common share after preferred dividends
$ (0.03 ) $ (0.10 ) $ (0.06 ) $ (0.15 )
Weighted average number of common shares outstanding - basic
525,243 486,065 524,218 484,438
Weighted average number of common shares outstanding - diluted
525,243 486,065 524,218 484,438
Cash dividends declared per common share
$ 0.0025 $ 0.0025 $ 0.0050 $ 0.0050

	Three Months Ended
	March 31, 2021			March 31, 2020
Operating activities:
Net income (loss)	$	18,971		$	(17,185	)
Non-cash elements included in net income (loss):
Depreciation, depletion and amortization		49,546			41,630
Unrealized loss on investments		3,506			978
Gain on exchange of investments		(1,158	)		0
Provision for reclamation and closure costs		4,529			1,548
Stock compensation		500			1,219
Deferred taxes		32			(3,252	)
Amortization of loan origination fees and loss on extinguishment of debt		539			2,140
Gain on derivative contracts		(10,962	)		(10,437	)
Foreign exchange loss (gain)		1,755			(8,066	)
Other non-cash items, net		8			(104	)
Change in assets and liabilities:
Accounts receivable		(2,664	)		9,955
Inventories		2,120			(6,602	)
Other current and non-current assets		1,528			(2,642	)
Accounts payable and accrued liabilities		(24,545	)		(11,879	)
Accrued payroll and related benefits		(7,995	)		9,495
Accrued taxes		2,031			1,332
Accrued reclamation and closure costs and other non-current liabilities		195			(3,203	)
Cash provided by operating activities		37,936			4,927
Investing activities:
Additions to properties, plants, equipment and mineral interests		(21,413	)		(19,870	)
Proceeds from disposition of properties, plants and equipment		19			154
Net cash used in investing activities		(21,394	)		(19,716	)
Financing activities:
Dividends paid to common stockholders		(4,688	)		(1,304	)
Dividends paid to preferred stockholders		(138	)		(138	)
Credit facility fees paid		(82	)		(458	)
Borrowings on debt		0			679,500
Repayments of debt		0			(506,500	)
Repayments of finance leases		(1,881	)		(1,284	)
Net cash (used in) provided by financing activities		(6,789	)		169,816
Effect of exchange rates on cash		167			(1,736	)
Net increase in cash, cash equivalents and restricted cash and cash equivalents		9,920			153,291
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period		130,883			63,477
Cash, cash equivalents and restricted cash and cash equivalents at end of period	$	140,803		$	216,768
Supplemental disclosure of cash flow information:
Cash paid for interest	$	18,406		$	13,984
Significant non-cash investing and financing activities:
Addition of finance lease obligations and right-of-use assets	$	3,120		$	0
Accounts receivable for proceeds on exchange of investments	$	1,832		$	0

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Hecla Mining Company and Subsidiaries

Condensed Consolidated ~~Statements of Cash Flows~~Balance Sheets (Unaudited)

(In ~~thousands)~~thousands, except shares)

Six Months Ended

June 30, 2020

June 30, 2019

Operating activities:

Net loss
$ (31,213 ) $ (72,065 )
Non-cash elements included in net loss:

Depreciation, depletion and amortization
84,185 90,821
Adjustment of inventory to market value
— 1,399
Unrealized (gain) loss on investments
(5,431 ) 1,033
Loss on disposition of properties, plants, equipment, and mineral interests
573 4,642
Provision for reclamation and closure costs
3,093 3,209
Stock compensation
2,428 3,552
Deferred income taxes
(5,165 ) (22,585 )
Amortization of loan origination fees and loss on extinguishment of debt
2,624 1,252
Loss (gain) on derivative contracts
11,188 (6,101 )
Foreign exchange (gain) loss
(3,725 ) 12,220
Foundation grant
1,970 —
Change in assets and liabilities:

Accounts receivable
(6,050 ) (12,772 )
Inventories
(4,580 ) (147 )
Other current and non-current assets
(924 ) 16,784
Accounts payable and accrued liabilities
(15,415 ) (12,085 )
Accrued payroll and related benefits
5,418 1,660
Accrued taxes
3,912 (6,452 )
Accrued reclamation and closure costs and other non-current liabilities
(435 ) 4,348
Cash provided by operating activities
42,453 8,713
Investing activities:

Additions to properties, plants, equipment and mineral interests
(30,689 ) (71,245 )
Proceeds from disposition of properties, plants and equipment
200 25
Purchases of investments
(637 ) (107 )
Net cash used in investing activities
(31,126 ) (71,327 )
Financing activities:

Acquisition of treasury shares
(2,745 ) (1,644 )
Dividends paid to common stockholders
(2,622 ) (2,430 )
Dividends paid to preferred stockholders
(276 ) (276 )
Credit facility fees paid
(551 ) (46 )
Borrowings on debt
679,500 170,000
Repayments of debt
(666,500 ) (118,000 )
Repayments of finance leases
(2,840 ) (3,377 )
Net cash provided by financing activities
3,966 44,227
Effect of exchange rates on cash
(1,794 ) 432
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents
13,499 (17,955 )
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period
63,477 28,414
Cash, cash equivalents and restricted cash and cash equivalents at end of period
$ 76,976 $ 10,459
Supplemental disclosure of cash flow information:

Cash paid for interest
$ 15,837 $ 19,975
Significant non-cash investing and financing activities:

Addition of finance lease obligations and right-of-use assets
$ 3,100 $ 3,498
Recognition of operating lease liabilities and right-of-use assets
$ — $ 22,365
Payment of accrued compensation in stock
$ 5,095 $ 8,274

	March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	139,750		$	129,830
Accounts receivable:
Trade		35,274			27,864
Other, net		8,475			11,329
Inventories:
Concentrates, doré, and stockpiled ore		56,917			57,936
Materials and supplies		37,335			38,608
Derivatives assets		7,195			3,470
Other current assets		12,971			15,644
Total current assets		297,917			284,681
Investments		11,717			15,148
Restricted cash and investments		1,053			1,053
Properties, plants, equipment and mineral interests, net		2,320,547			2,345,219
Operating lease right-of-use assets		9,775			10,628
Deferred taxes		3,886			2,912
Derivatives assets		6,346			4,558
Other non-current assets		3,836			3,525
Total assets	$	2,655,077		$	2,667,724
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities	$	53,130		$	68,516
Accrued payroll and related benefits		22,800			31,807
Accrued taxes		7,854			8,349
Finance leases		6,706			6,491
Operating leases		2,832			3,008
Accrued reclamation and closure costs		6,592			5,582
Accrued interest		5,175			14,157
Derivatives liabilities		3,906			11,737
Other current liabilities		123			138
Total current liabilities		109,118			149,785
Finance leases		10,304			9,274
Operating leases		6,954			7,634
Accrued reclamation and closure costs		113,671			110,466
Long-term debt		507,992			507,242
Deferred tax liability		149,220			144,330
Pension liability		28,797			44,144
Other non-current liabilities		4,146			4,364
Total liabilities		930,202			977,239
Commitments and contingencies (Notes 4, 7, 8, and 10)
STOCKHOLDERS’ EQUITY
Preferred stock, 5,000,000 shares authorized:
Series B preferred stock, $0.25 par value, 157,816 shares issued and outstanding, liquidation preference — $7,891		39			39
Common stock, $0.25 par value, 750,000,000 authorized shares; issued March 31, 2021 — 542,154,997 shares and December 31, 2020 — 538,487,415 shares		135,546			134,629
Capital surplus		2,021,072			2,003,576
Accumulated deficit		(377,229	)		(391,374	)
Accumulated other comprehensive loss		(31,057	)		(32,889	)
Less treasury stock, at cost; March 31, 2021 and December 31, 2020 - 6,821,044 shares issued and held in treasury		(23,496	)		(23,496	)
Total stockholders’ equity		1,724,875			1,690,485
Total liabilities and stockholders’ equity	$	2,655,077		$	2,667,724

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(Dollars are in thousands, except for share and per share amounts)

Three Months Ended June 30, 2020

Series B
Preferred
Stock

Common
Stock

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss, net

Treasury
Stock

Total

Balances, April 1, 2020
$ 39 $ 132,381 $ 1,976,033 $ (371,958 ) $ (56,645 ) $ (22,967 ) $ 1,656,883
Net loss
— — — (14,028 ) — — (14,028 )
Restricted stock units granted
— — 1,211 — — — 1,211
Restricted stock units distributed (1,702,000 shares)
— 426 (426 ) — — (1,479 ) (1,479 )
Common stock dividends declared ($0.0025 per common share)
— — — (1,318 ) — — (1,318 )
Series B Preferred Stock dividends declared ($0.875 per share)
— — — (138 ) — — (138 )
Common stock issued for 401(k) match (606,000 shares)
— 151 878 — — — 1,029
Common stock issued for employee incentive compensation (2,800,000 shares)
— 699 4,396 — — (1,266 ) 3,829
Common stock issued to pension plans (167,000 shares)
— 42 308 — — — 350
Treasury shares issued to charitable foundation (650,000 shares)
— — — (246 ) — 2,216 1,970
Other comprehensive income
— — — — 10,384 — 10,384
Balances, June 30, 2020
$ 39 $ 133,699 $ 1,982,400 $ (387,688 ) $ (46,261 ) $ (23,496 ) $ 1,658,693

	Three Months Ended March 31, 2021
	Series B Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss, net			Treasury Stock			Total
Balances, January 1, 2021	$	39	$	134,629	$	2,003,576	$	(391,374	)	$	(32,889	)	$	(23,496	)	$	1,690,485
Net income		0		0		0		18,971			0			0			18,971
Restricted stock units granted		0		0		483		0			0			0			483
Common stock dividends declared ($0.00875 per common share)		0		0		0		(4,688	)		0			0			(4,688	)
Series B Preferred Stock dividends declared ($0.875 per share)		0		0		0		(138	)		0			0			(138	)
Common stock issued for 401(k) match (165,000 shares)		0		42		1,088		0			0			0			1,130
Shares issued to pension plans (3,500,000 shares)		0		875		15,925		0			0			0			16,800
Other comprehensive income		0		0		0		0			1,832			0			1,832
Balances, March 31, 2021	$	39	$	135,546	$	2,021,072	$	(377,229	)	$	(31,057	)	$	(23,496	)	$	1,724,875

Three Months Ended June 30, 2019

Series B
Preferred
Stock

Common
Stock

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss, net

Treasury
Stock

Total

Balances, April 1, 2019
$ 39 $ 122,052 $ 1,882,613 $ (275,188 ) $ (38,210 ) $ (20,736 ) $ 1,670,570
Net loss
— — 0 (46,532 ) — — (46,532 )
Restricted stock units granted
— — 1,518 — — — 1,518
Common stock dividends declared ($0.0025 per common share)
— — — (1,221 ) — — (1,221 )
Series B Preferred Stock dividends declared ($0.875 per share)
— — — (138 ) — — (138 )
Common stock issued for 401(k) match (362,000 shares)
— 90 716 — — — 806
Common stock issued for employee incentive compensation (3,597,000 shares)
— 899 7,375 — — (1,644 ) 6,630
Common stock issued to pension plans (2,384,000 shares)
— 597 3,003 — — — 3,600
Common stock issued to directors (253,000 shares)
— 63 392 — — — 455
Other comprehensive income
— — — — 3,540 — 3,540
Balances, June 30, 2019
$ 39 $ 123,701 $ 1,895,617 $ (323,079 ) $ (34,670 ) $ (22,380 ) $ 1,639,228

Six Months Ended June 30, 2020

Series B
Preferred
Stock

Common
Stock

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss, net

Treasury
Stock

Total

Balances, January 1, 2020
$ 39 $ 132,292 $ 1,973,700 $ (353,331 ) $ (37,310 ) $ (22,967 ) $ 1,692,423
Net loss
— — — (31,213 ) — — (31,213 )
Restricted stock units granted
— — 2,430 — — — 2,430
Restricted stock units distributed (1,702,000 shares)
— 426 (426 ) — — (1,479 ) (1,479 )
Common stock dividends declared ($0.0025 per common share)
— — — (2,622 ) — — (2,622 )
Series B Preferred Stock dividends declared ($0.875 per share)
— — — (276 ) — — (276 )
Common stock issued for 401(k) match (957,000 shares)
— 240 1,992 — — — 2,232
Common stock issued for employee incentive compensation (2,800,000 shares)
— 699 4,396 — — (1,266 ) 3,829
Common stock issued to pension plans (167,000 shares)
— 42 308 — — — 350
Treasury shares issued to charitable foundation (650,000 shares)
— — — (246 ) — 2,216 1,970
Other comprehensive loss
— — — — (8,951 ) — (8,951 )
Balances, June 30, 2020
$ 39 $ 133,699 $ 1,982,400 $ (387,688 ) $ (46,261 ) $ (23,496 ) $ 1,658,693

Six Months Ended June 30, 2019

Series B
Preferred
Stock

Common
Stock

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss, net

Treasury
Stock

Total

Balances, January 1, 2019
$ 39 $ 121,956 $ 1,880,481 $ (248,308 ) $ (42,469 ) $ (20,736 ) $ 1,690,963
Net loss
— — — (72,065 ) — — (72,065 )
Restricted stock units granted
— — 3,097 — — — 3,097
Common stock dividends declared ($0.0025 per common share)
— — — (2,430 ) — — (2,430 )
Series B Preferred Stock dividends declared ($0.875 per share)
— — — (276 ) — — (276 )
Common stock issued for 401(k) match (745,000 shares)
— 186 1,594 — — — 1,780
Adjustment to fair value of warrants issued for purchase of another company
— — (325 ) — — — (325 )
Common stock issued for employee incentive compensation (3,597,380 shares)
— 899 7,375 — — (1,644 ) 6,630
Common stock issued to pension plans (2,384,000 shares)
— 597 3,003 — — — 3,600
Common stock issued to directors (253,000 shares)
— 63 392 — — — 455
Other comprehensive income
— — — — 7,799 — 7,799
Balances, June 30, 2019
$ 39 $ 123,701 $ 1,895,617 $ (323,079 ) $ (34,670 ) $ (22,380 ) $ 1,639,228

	Three Months Ended March 31, 2020
	Series B Preferred Stock		Common Stock		Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss, net			Treasury Stock			Total
Balances, January 1, 2020, as revised (see Note 1)		39		132,292		1,973,700		(365,186	)		(37,310	)		(22,967	)		1,680,568
Net loss		0		0		0		(17,185	)		0			0			(17,185	)
Restricted stock units granted		0		0		1,219		0			0			0			1,219
Common stock dividends declared ($0.0025 per common share)		0		0		0		(1,304	)		0			0			(1,304	)
Series B Preferred Stock dividends declared ($0.875 per share)		0		0		0		(138	)		0			0			(138	)
Common stock issued for 401(k) match (352,000 shares)		0		89		1,114		0			0			0			1,203
Other comprehensive loss		0		0		0		0			(19,335	)		0			(19,335	)
Balances, March 31, 2020	$	39	$	132,381	$	1,976,033	$	(383,813	)	$	(56,645	)	$	(22,967	)	$	1,645,028

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

Note 1.Basis of Preparation of Financial Statements

~~In the opinion of management, the~~The accompanying unaudited interim condensed consolidated financial statements and notes to the unaudited interim condensed consolidated financial statements contain all adjustments, consisting of normal recurring items and items which are nonrecurring, necessary to present fairly, in all material respects, the financial position of Hecla Mining Company and its ~~consolidated~~ subsidiaries ~~(in this report, "Hecla" or "the Company" or~~(collectively, “Hecla”, “the Company”, “we” or, “our” or “us” ~~refers to Hecla Mining Company and our subsidiaries, unless~~, except where the context requires otherwise) have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required annually by generally accepted accounting principles in the United States (“GAAP”). ~~These unaudited interim condensed consolidated financial statements~~Therefore, this information should be read in conjunction with ~~our audited~~Hecla Mining Company’s consolidated financial statements and ~~related footnotes as set forth~~notes contained in our annual report ~~filed~~ on Form 10-K for the year ended December 31, ~~2019,~~2020 ~~as it~~ (~~may~~ “2020~~be amended~~ Form 10-K”). The consolidated December 31,2020 balance sheet data was derived from ~~time to time.~~

our audited consolidated financial statements. The ~~results~~information furnished herein reflects all adjustments that are, in the opinion of ~~operations~~management, necessary for a fair statement of the results for the interim periods ~~presented~~reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the ~~may~~ three-month period ended March 31,2021 are not benecessarily indicative of ~~those which~~the results that may be expected for ~~a full year. The unaudited interim condensed consolidated financial statements have been prepared pursuant to~~ the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures are adequate for the informationyear ending ~~not~~December 31, ~~to be misleading.~~

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting period and the disclosures of contingent liabilities. Accordingly, ultimate results could differ materially from those estimates.2021.

The 2019 novel strain of coronavirus ("COVID-19") was characterized as a global pandemic by the World Health Organization on March 11, 2020, and COVID-19 ~~has~~ resulted in travel restrictions and business slowdowns or shutdowns in affected areas. In late March 2020, the Government of Quebec ordered the mining industry to reduce to minimum operations as part of the fight against COVID-19, causing us to suspend our Casa Berardi operations from ~~approximately~~ March 24, 2020 until April 15, 2020 when mining operations resumed. In early April 2020, the Government of Mexico issued a similar order causing us to suspend our San Sebastian operations tountil May ~~30.~~30, 2020. In addition, restrictions imposed by the State of Alaska in late March ~~have~~ caused us to revise the normal operating procedures for staffing operations at Greens Creek. These suspension orders impacted us in the first half of 2020 by curtailing our expected production of gold at Casa Berardi by approximately ~~5,200~~11,700 ounces, in ~~March 2020~~ ~~and approximately~~ ~~6,500~~ ~~ounces in~~ ~~April 2020,~~ which resulted in a reduction in related ~~revenue.~~revenue for that period. We continued to incur costs at Casa Berardi and San Sebastian while operations were suspended. At Casa Berardi and San Sebastian, suspension costs in ~~the~~ ~~first~~ ~~half of~~ 2020 totaled $1.6 million and ~~$1.0~~$1.8 million, respectively. In addition, we ~~have~~ incurred costs of approximately ~~$0.2~~$0.6 million ~~per week~~in the first quarter of 2021 and $2.3 million for the full year of 2020 related to quarantining employees at Greens Creek, which started in late March 2020. At Lucky Friday and Nevada Operations, COVID-19 procedures have been implemented without a significant impact on production or operating costs. It is possible that future restrictions at ~~Casa Berardi, San Sebastian or Greens Creek (or at~~ any ~~other operation)~~of our operations could have an adverse impact on operations or ~~2020~~financial results ~~including materially so,~~ beyond the ~~second~~first quarter of ~~2020.~~2021.

We have taken precautionary measures to mitigate the ~~impacts~~impact of COVID-19, including implementing operational plans and ~~practices and increasing our cash reserves through a draw-down of our revolving credit facility (see~~ ~~Note~~ 9 ~~for more information).~~practices. As long as they are required, the operational practices implemented could have an adverse impact on our operating results due to deferred production and revenues or additional costs. We continue to monitor the rapidly evolving situation and guidance from federal, state, local and foreign governments and public health authorities and may take additional actions based on their recommendations. The extent of the impact of COVID-19 on our business and financial results will also depend on future developments, including the duration and spread of the outbreak and the success of the current vaccination programs being rolled out within the markets in which we operate and the related impact on prices, demand, creditworthiness and other market conditions and governmental reactions, all of which are highly uncertain.

Correction of an Immaterial Error

During the first quarter of 2021 we reclassified certain state mining income taxes from Cost of sales and other direct production costs to Income and mining tax provision prospectively effective January 1, 2021. The reclassification required us to recognize previously unrecognized deferred taxes. The impact of this was an adjustment of $11.9 million to accumulated deficit at January 1, 2019 to recognize the deferred tax liability. This adjustment resulted in the January 1, 2020 accumulated deficit balance presented in this Form 10-Q to increase to $365.2 million.

Note 2. ~~Investments~~Business Segments and Sales of Products

At We discover, acquire and develop mines and other mineral interests and produce and market concentrates, carbon material and doré containing silver, gold, lead and zinc. We are currently organized and managed in five segments, which represent our operating units: the Greens Creek unit, the Lucky Friday unit, the Casa Berardi unit, the San Sebastian exploration unit, and the Nevada Operations unit.

~~June~~7

General corporate activities not associated with operating units and their various exploration activities, as well as discontinued operations and idle properties, are presented as “other.” Interest expense, interest income and income and mining taxes are considered general corporate items, and are not allocated to our segments.

The following tables present information about our reportable segments for the three months ended March ~~30,~~31, 2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021			2020
Net sales to unaffiliated customers:
Greens Creek	$	98,409		$	53,833
Lucky Friday		29,122			2,830
Casa Berardi		72,911			46,172
San Sebastian		173			9,927
Nevada Operations		10,237			24,163
	$	210,852		$	136,925
Income (loss) from operations:
Greens Creek	$	44,600		$	4,117
Lucky Friday		6,323			(8,120	)
Casa Berardi		9,117			(3,880	)
San Sebastian		(2,263	)		679
Nevada Operations		(3,140	)		2,889
Other		(16,188	)		(10,749	)
	$	38,449		$	(15,064	)

The following table presents identifiable assets by reportable segment as of March 31,2021 and December 31, ~~2019,~~ the fair value of our non-current investments was $12.2 million and $6.2 million, respectively. Our non-current investments consist of marketable equity securities which are carried at fair value. The cost basis of our non-current investments was approximately $10.1 million and $9.8 million at ~~June~~ ~~30,~~2020 ~~and~~ ~~December~~ ~~31,~~~~2019,~~ ~~respectively. During the~~ ~~six~~ ~~months ended~~ ~~June~~ ~~30,~~~~2020,~~ ~~we recognized $5.4 million in net unrealized gains in current earnings. During the~~ ~~six~~ ~~months ended~~ ~~June~~ ~~30,~~~~2019,~~ ~~we recognized $1.0 million in net unrealized losses in current earnings. During the~~ ~~six~~ ~~months ended~~ ~~June~~ ~~30,~~~~2020~~ ~~and~~ ~~2019,~~ ~~we acquired marketable equity securities having a cost basis of $0.6 million and $0.1 million, respectively.~~(in thousands):

	March 31, 2021		December 31, 2020
Identifiable assets:
Greens Creek	$	609,612	$	610,360
Lucky Friday		513,645		520,463
Casa Berardi		683,103		694,522
San Sebastian		41,238		42,617
Nevada Operations		510,514		513,309
Other		296,965		286,453
	$	2,655,077	$	2,667,724

Sales of products by metal for the three-month periods ended March 31,2021 and 2020 were as follows (in thousands):

	Three Months Ended March 31,
	2021			2020

Silver	$	77,760		$	37,572
Gold		101,408			90,694
Lead		15,893			6,420
Zinc		29,191			17,308
Less: Smelter and refining charges		(13,400	)		(15,069	)
Sales of products	$	210,852		$	136,925

Sales of products for the firstthree months of 2021 and 2020 included net gains of $2.8 million and $1.7 million, respectively, on financially-settled forward and put option contracts for silver, gold, lead and zinc contained in our sales. See Note 8 for more information.

Note 3.Income and MiningTaxes

Major components of our income and mining tax (provision) benefit ~~(provision)~~ for the three ~~and~~ ~~six~~months ended ~~June 30, 2020~~March 31, 2021 and ~~2019~~2020 are as follows (in thousands):

	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2020			2019			2020			2019			2021			2020
Current:
Domestic	$	(253	)	$	(2	)	$	(985	)	$	(2	)	$	(2,277	)	$	(732	)
Foreign		(1,650	)		(1,716	)		(3,719	)		(2,793	)		(2,286	)		(2,069	)
Total current income tax benefit (provision)		(1,903	)		(1,718	)		(4,704	)		(2,795	)
Total current income and mining tax provision														(4,563	)		(2,801	)

Deferred:
Domestic		1,866			5,456			3,116			7,933			319			1,250
Foreign		(589	)		7,441			2,024			13,257			(390	)		2,613
Total deferred income tax benefit (provision)		1,277			12,897			5,140			21,190
Total income tax benefit (provision)	$	(626	)	$	11,179		$	436		$	18,395
Total deferred income and mining tax (provision) benefit														(71	)		3,863
Total income and mining tax (provision) benefit													$	(4,634	)	$	1,062

The ~~current~~ income and mining tax ~~benefits (provisions)~~(provision) benefit for the three ~~and~~ ~~six~~months ended ~~June~~March ~~30,~~31,2021 and 2020 ~~and~~ ~~2019~~ ~~vary~~varies from the amounts that would have resulted from applying the statutory ~~income~~ tax ~~rate~~rates to pre-tax income due primarily to the impact of taxation in foreign jurisdictions and areversal of the valuation allowance portion related to net operating loss utilization.

Effective January 1, 2021, we prospectively reclassified certain income based state and provincial taxes from Cost of Sales and other direct production costs to Income and mining tax (provision) benefit. The income and mining tax provision for the three months ended March 31,2021 increased by $3.1 million due to the reclassification.

Note 4.Employee Benefit Plans

We sponsor defined benefit pension plans covering substantially all U.S. employees. Net periodic pension cost for the plans consisted of the following for the three months ended March 31,2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021			2020
Service cost	$	1,455		$	1,334
Interest cost		1,248			1,404
Expected return on plan assets		(2,313	)		(1,872	)
Amortization of prior service cost		99			29
Amortization of net loss		1,125			1,163
Net periodic pension cost	$	1,614		$	2,058

The service cost component of net periodic pension cost is included in the same line items of our condensed consolidated financial statements as other employee compensation costs, and the net expense for the three months ended March 31,2021 and 2020 of $0.2 million and $0.7 million, respectively, related to all other components of net periodic pension cost is included in other (expense) income on ~~the majority~~our condensed consolidated statements of ~~U.S. deferred tax assets.~~operations and comprehensive income (loss).

In ~~2018,~~January 2021, we contributed $16.8 million in shares of our common stock to our supplemental executive retirement plan, and expect to contribute approximately $0.8 million during the remainder of 2021. ~~we acquired through the acquisition of Klondex Mines Ltd. a U.S. consolidated tax group ("Nevada U.S. Group") that did~~We do not ~~join the existing consolidated U.S. tax group of Hecla Mining Company and subsidiaries (“Hecla U.S.”). For Hecla U.S., we recorded a full valuation allowance~~expect to be required to contribute to our defined benefit pension plans in ~~the U.S. in~~ ~~December 2017~~ ~~as a result of U.S. tax reform. Our circumstances at~~ ~~June~~ ~~30,~~2021, ~~2020~~ ~~continued to support a full valuation allowance in the U.S. for the Hecla U.S. group.~~

~~As of~~ ~~June~~ ~~30,~~~~2020,~~ we had a net deferred tax liability in the U.S. of $35.1 million, a net deferred tax liability in Canada of $93.6 million, and a net deferred tax asset in Mexico of $3.2 million, for a consolidated worldwide net deferred tax liability of $125.5 million.

On ~~March 27, 2020,~~ the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act has ~~not~~ ~~had a material impact on the Company as of~~ ~~June~~ ~~30,~~~~2020;~~ ~~however we will continue to examine the impacts the CARES Act~~but may ~~have on our business.~~do so.

Note 4.5.Income (Loss) Per Common Share

We calculate basic income (loss) per common share on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated using the weighted average number of shares of common stock outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock and if-converted methods.

Potential dilutive shares of common stock include outstanding unvested restricted stock awards, performance-based share awards, stock units, warrants and convertible preferred stock for periods in which we have reported net income. For periods in which we report net losses, potential dilutive shares of common stock are excluded, as their conversion and exercise would be anti-dilutive.

The following table represents net income (loss) per common share – basic and diluted (in thousands, except income (loss) per share):

	Three Months Ended March 31,
	2021			2020
Numerator
Net income (loss)	$	18,971		$	(17,185	)
Preferred stock dividends		(138	)		(138	)
Net income (loss) applicable to common shares	$	18,833		$	(17,323	)

Denominator
Basic weighted average common shares		534,101			523,215
Dilutive restricted stock units, warrants and deferred shares		6,426			0
Diluted weighted average common shares		540,527			523,215

Basic income (loss) per common share	$	0.04		$	(0.03	)
Diluted income (loss) per common share	$	0.03		$	(0.03	)

Diluted income (loss) per share for the three months ended March 31,2021 and 2020 excludes the potential effects of outstanding shares of our convertible preferred stock, as their conversion would have no effect on the calculation of dilutive shares.

For the three months ended March 31,2021, the calculation of diluted income per common share included (i) 2,863,038 restricted stock units that were unvested during the period, (ii) 1,536,615 warrants to purchase one share of common stock and (iii) 2,026,440 deferred shares that were dilutive. For the three months ended March 31,2020, all outstanding restricted stock units, warrants and deferred shares were excluded from the computation of diluted loss per share, as our reported net losses for those periods would cause their conversion and exercise to have no effect on the calculation of loss per share.

Note 6.Stockholders’ Equity

Stock-based Compensation Plans

Stock-based compensation expense for restricted stock unit and performance-based grants to employees and shares issued to non-employee directors totaled $0.5 million and $1.2 million for the firstthree months of 2021 and 2020, respectively.

Common Stock Dividends

On February 18, 2021, our Board of Directors declared a quarterly cash dividend of $0.00875 per share of common stock, consisting of $0.00375 per share for the minimum dividend component of our common stock dividend policy and $0.005 per share for the silver-linked dividend component of the policy, for a total dividend of $4.7 million paid in March 2021. The realized silver price of $25.16 in the fourth quarter of 2020 satisfied the criterion for the silver-linked dividend component of our common stock dividend policy.

Quarterly Average Realized Silver Price per Ounce	Quarterly Silver-Linked Dividend per Share	Annualized Silver-Linked Dividend per Share	Annualized Minimum Dividend	Annualized Dividends per Share: Silver-Linked and Minimum
$25	$0.0075	$0.03	$0.015	$0.045
$30	$0.0125	$0.05	$0.015	$0.065
$35	$0.0225	$0.09	$0.015	$0.105
$40	$0.0325	$0.13	$0.015	$0.145
$45	$0.0425	$0.17	$0.015	$0.185
$50	$0.0525	$0.21	$0.015	$0.225

At-The-Market Equity Distribution Agreement

Pursuant to an equity distribution agreement dated February 18, 2021, we may offer and sell up to 60 million shares of our common stock from time to time to or through sales agents. Sales of the shares, if any, will be made by means of ordinary brokers transactions or as otherwise agreed between the Company and the agents as principals. Whether or not we engage in sales from time to time may depend on a variety of factors, including share price, our cash resources, customary black-out restrictions, and whether we have any material inside information. The agreement can be terminated by us at any time. Any shares issued under the equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form S-3. NaN shares have been sold under the agreement as of March 31,2021.

Note 7.Debt, Credit Facility and Leases

Our debt as of March 31,2021 and December 31,2020 consisted of our 7.25% Senior Notes due February 15, 2028 ("Senior Notes") and our Series 2020-A Senior Notes due July 9, 2025 (the “IQ Notes”). The following tables summarize our long-term debt balances, excluding interest, as of March 31,2021 and December 31,2020 (in thousands):

	March 31, 2021
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	38,359	$	513,359
Unamortized discount/premium and issuance costs		(6,234	)		867		(5,367	)
Long-term debt balance	$	468,766		$	39,226	$	507,992

	December 31, 2020
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	37,886	$	512,886
Unamortized discount/premium and issuance costs		(6,462	)		818		(5,644	)
Long-term debt balance	$	468,538		$	38,704	$	507,242

The following table summarizes the scheduled annual future payments, including interest, for our Senior Notes, IQ Notes, and finance and operating leases as of March 31,2021 (in thousands). The amounts for the IQ Notes are stated in U.S. dollars ("USD") based on the USD/Canadian dollar ("CAD") exchange rate as of March 31,2021.

Twelve-month period ending March 31,	Senior Notes		IQ Notes		Finance Leases		Operating Leases
2022	$	34,438	$	2,499	$	7,329	$	3,696
2023		34,438		2,499		5,132		2,706
2024		34,438		2,499		3,643		2,002
2025		34,438		2,499		2,076		549
2026		34,438		39,045		0		525
Thereafter		539,568		0		0		2,213
Total	$	711,758	$	49,041	$	18,180	$	11,691

Credit Facility

In July 2018, we entered into a $250 million senior secured revolving credit facility which has a term ending on February 7, 2023. As of March 31,2021 and December 31,2020, 0 amounts were outstanding under the facility.

We are also able to obtain letters of credit under the facility, and for any such letters we are required to pay a participation fee of between 2.25% and 4.00% of the amount of the letters of credit based on our total leverage ratio, as well as a fronting fee to each issuing bank of 0.20% annually on the average daily dollar amount of any outstanding letters of credit. There were $20.3 million in letters of credit outstanding as of March 31,2021.

We believe we were in compliance with all covenants under the credit agreement as of March 31,2021.

Note 8.Derivative Instruments

General

Our current risk management policy provides that up to 75% of:

•

our future foreign currency-related operating cost exposure for five years into the future may be hedged and for potential additional programs to manage other foreign currency-related exposure areas; and

•

our planned lead and zinc metals price exposure for five years into the future, with certain other limitations, to be covered under derivatives programs that would establish a ceiling for prices to be realized on future metals sales.

These instruments do, however, expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of the hedged commodity or foreign currency and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production and/or forecasted costs covered under contract positions.

Foreign Currency

Our wholly-owned subsidiaries owning the Casa Berardi and San Sebastian operations are USD-functional entities which routinely incur expenses denominated in CAD and Mexican pesos ("MXN"), respectively. Such expenses expose us to exchange rate fluctuations between the USD and CAD and MXN. We have a program to manage our exposure to fluctuations in the exchange rate between the USD and CAD and MXN for these subsidiaries' future operating costs denominated in CAD and MXN. The programs utilize forward contracts to buy CAD and MXN, and each contract is designated as a cash flow hedge. As of March 31,2021, we have 133 forward contracts outstanding to buy a total of CAD$256.8 million having a notional amount of USD$194.8 million. The CAD contracts are related to forecasted cash operating costs at Casa Berardi to be incurred from 2021 through 2024 and have CAD-to-USD exchange rates ranging between 1.2702 and 1.3785. There were 0 outstanding contracts for MXN as of March 31,2021.

As of March 31,2021 and December 31,2020, we recorded the following balances for the fair value of the contracts (in millions):

	March 31,		December 31,
Balance sheet line item:	2021		2020
Current derivatives assets	$	5.0	$	3.5
Non-current derivatives assets		4.2		4.2

Net unrealized gains of approximately $9.5 million related to the effective portion of the hedges were included in accumulated other comprehensive loss as of March 31,2021. Unrealized gains and losses will be transferred from accumulated other comprehensive loss to current earnings as the underlying operating expenses are recognized. We estimate approximately $4.8 million in net unrealized gains included in accumulated other comprehensive loss as of March 31,2021 will be reclassified to current earnings in the next twelve months. Net realized gains of approximately $0.6 million on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive loss and included in cost of sales and other direct production costs for the three months ended March 31,2021. NaN net unrealized gains or losses related to ineffectiveness of the hedges were included in current earnings for the three months ended March 31,2021.

Metals Prices

We are currently using financially-settled forward contracts to manage the exposure to:

•

changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement; and

•

changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments.

The following tables summarize the quantities of metals committed under forward sales contracts at March 31,2021 and December 31,2020:

March 31, 2021	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2021 settlements		1,492		5		12,070		1,587	$	25.48	$	1,736	$	1.26	$	0.89
Contracts on forecasted sales
2021 settlements		—		—		33,841		30,479		N/A		N/A	$	1.20	$	0.89
2022 settlements		—		—		53,407		42,715		N/A		N/A	$	1.26	$	0.96
2023 settlements		—		—		41,171		—		N/A		N/A	$	1.27		N/A

December 31, 2020	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2021 settlements		1,282		4		23,314		4,905	$	25.00	$	1,858	$	1.19	$	0.90
Contracts on forecasted sales
2021 settlements		—		—		41,577		30,876		N/A		N/A	$	1.17	$	0.88
2022 settlements		—		—		18,519		—		N/A		N/A	$	1.28		N/A

In June 2019, we began utilizing financially-settled put option contracts to manage the exposure of our forecasted future gold and silver sales to potential declines in market prices for those metals. These put contracts gave us the option, but not the obligation, to realize established prices on quantities of silver and gold to be sold in the future. As of December 31,2020, we had put contracts that provided average floor prices of $16.50 per ounce for silver and $1,650 per ounce for gold for a total of 1.1 million silver ounces and 12,992 gold ounces. We had 0 put option contracts outstanding as of March 31,2021.

These forward and put option contracts are not designated as hedges for accounting purposes and are marked-to-market through earnings each period.

We recorded the following balances for the fair value of the forward contracts as of March 31,2021 and forward and put option contracts as of December 31,2020 (in millions):

	March 31, 2021								December 31, 2020
Balance sheet line item:	Contracts in an asset position		Contracts in a liability position			Net asset (liability)			Contracts in an asset position		Contracts in a liability position			Net asset (liability)
Current derivatives assets	$	3.3	$	(1.1	)	$	2.2		$	0.2	$	(0.2	)	$	0
Non-current derivatives assets		2.3		(0.2	)		2.1			0.5		(0.1	)		0.4
Current derivatives liability		0		(3.9	)		(3.9	)		0.1		(11.8	)		(11.7	)
Other non-current liabilities		0.4		(1.2	)		(0.8	)		0		0			0

We recognized $2.8 million and $1.7 million net gains during the first quarters of 2021 and 2020, respectively, on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales of products. The net gains recognized on the contracts offsets losses related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement.

We recognized $0.5 million and $7.9 million net gains during the first quarters of 2021 and 2020, respectively, on the contracts utilized to manage exposure to prices for forecasted future sales. The net gains on these contracts are included as a separate line item under other income (expense), as they relate to forecasted future sales, as opposed to sales that have already taken place but are subject to final pricing as discussed in the preceding paragraph. The net gain for the first quarter of 2021 is the result of a decrease in zinc and lead prices.

Credit-risk-related Contingent Features

Certain of our derivative contracts contain cross default provisions which provide that a default under our revolving credit agreement would cause a default under the derivative contract. As of March 31,2021, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was $6.4 million as of March 31,2021, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at March 31,2021, we could have been required to settle our obligations under the agreements at their termination value of $6.4 million.

Note 9.Fair Value Measurement

Accounting guidance has established a hierarchy for inputs used to measure assets and liabilities at fair value on a recurring basis. The three levels included in the hierarchy are:

Level 1: quoted prices in active markets for identical assets or liabilities;

Level 2: significant other observable inputs; and

Level 3: significant unobservable inputs.

The table below sets forth our assets and liabilities that were accounted for at fair value on a recurring basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category (in thousands).

Description	Balance at March 31, 2021		Balance at December 31, 2020		Input Hierarchy Level
Assets:
Cash and cash equivalents:
Money market funds and other bank deposits	$	139,750	$	129,830	Level 1
Current and non-current investments:
Equity securities – mining industry		11,717		19,389	Level 1
Trade accounts receivable:
Receivables from provisional concentrate sales		35,274		27,864	Level 2
Restricted cash balances:
Certificates of deposit and other bank deposits		1,053		1,053	Level 1
Derivative contracts - current and non-current derivatives assets:
Metal forward and put option contracts		4,349		381	Level 2
Foreign exchange contracts		9,192		7,647	Level 2
Total assets	$	201,335	$	186,164

Liabilities:
Derivative contracts - current derivatives liabilities and other non-current liabilities:
Metal forward and put option contracts	$	4,742	$	11,737	Level 2
Foreign exchange contracts		0		19	Level 2
Total Liabilities	$	4,742	$	11,756

Cash and cash equivalents consist primarily of money market funds and are valued at cost, which approximates fair value, and a small portion consists of municipal bonds having maturities of less than 90 days, which are recorded at fair value.

Current and non-current restricted cash balances consist primarily of certificates of deposit, U.S. Treasury securities, and other deposits and are valued at cost, which approximates fair value.

Our non-current available for sale securities consist of marketable equity securities of companies in the mining industry which are valued using quoted market prices for each security.

Trade accounts receivable from provisional concentrate sales are subject to final pricing and valued using quoted prices based on forward curves for the particular metal. The embedded derivative contained in our concentrate sales is adjusted to fair market value through earnings each period prior to final settlement.

We use financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments that have not reached final settlement. We also use financially-settled forward and put option contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our forecasted future sales (see Note 8 for more information). The fair value of each forward contract represents the present value of the difference between the forward metal price for the contract settlement period as of the measurement date and the contract settlement metal price. The fair value of each put option contract is measured using the Black-Scholes pricing model, with inputs for the period-end metal price and assumed metal price volatility and discount rate.

Our Senior Notes, which were recorded at their carrying value of $468.8 million, net of unamortized initial purchaser discount and issuance costs, had a fair value of $509.7 million at March 31,2021. Quoted market prices, which we consider to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. See Note 7 for more information.

Note 10.Commitments, Contingencies and Obligations

General

We follow GAAP guidance in determining our accruals and disclosures with respect to loss contingencies, and evaluate such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Lucky Friday Water Permit Matters

In December 2013, the Environmental Protection Agency ("EPA") issued to Hecla Limited a request for information under Section 308 of the Clean Water Act directing Hecla Limited to undertake a comprehensive groundwater investigation of Lucky Friday’s tailings pond no. 3 to evaluate whether the pond is causing the discharge of pollutants via seepage to groundwater that is discharging to surface water. We completed the investigation mandated by the EPA and submitted a draft report to the agency in December 2015. We are waiting for the EPA’s response and we cannot predict what further action, if any, the agency may take.

Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico

In May 2011, the EPA made a formal request to Hecla Mining Company for information regarding the Johnny M Mine Area near San Mateo, McKinley County, New Mexico, and asserted that Hecla Mining Company may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") for environmental remediation and past costs the EPA has incurred at the site. Mining at the Johnny M Mine was conducted for a limited period of time by a predecessor of our subsidiary, Hecla Limited. In August 2012, Hecla Limited and the EPA entered into a Settlement Agreement and Administrative Order on Consent for Removal Action (“Consent Order”), pursuant to which Hecla Limited agreed to pay (i) $1.1 million to the EPA for its past response costs at the site and (ii) any future response costs at the site under the Consent Order, in exchange for a covenant not to sue by the EPA. Hecla Limited paid the $1.1 million to the EPA for its past response costs and in December 2014 submitted to EPA the Engineering Evaluation and Cost Analysis (“EE/CA”) for the ~~site. The EE/CA evaluates~~ ~~three~~ ~~alternative response actions:~~ 1) no ~~action,~~ 2~~) off-site disposal, and~~ 3~~) on-site disposal. The range in estimated costs of these alternatives is $0 to $221 million. In the EE/CA, Hecla Limited~~site which recommended ~~that EPA approve~~ on-site disposal ~~which is currently estimated to cost $6.1 million, on the basis that it is the most appropriate response action under CERCLA.~~of mine-related material. In ~~October 2019,~~January 2021, the EPA ~~published~~contacted Hecla Limited to begin negotiations on a new consent order to design and implement the ~~EE/CA for a~~ 30~~-day public notice comment period, and the agency is expected to make a final decision on the appropriate~~on-site disposal response action ~~after~~recommended in the ~~comment process is complete. It is anticipated that Hecla Limited will implement the response action selected by the EPA pursuant to an amendment to the Consent Order or a new order.~~EE/CA. Based on the foregoing, we believe it is probable that Hecla Limited will incur a liability for ~~remediation at~~ the ~~site. In~~CERCLA removal action and we have increased our accrual to $9.0 million in the ~~fourth~~first quarter of ~~2014,~~2021 ~~we accrued $5.6~~($6.1 million ~~and in~~at ~~October 2019~~December 31, 2020) ~~we increased that amount to $6.1 million, with the increase~~primarily representing estimated costs to begin design and implementation of the ~~remedy in~~ ~~2020.~~remedy. It is possible that Hecla Limited’s liability will be more than ~~$6.1~~$9.0 million, and any increase in liability could have a material adverse effect on Hecla Limited’s or our results of operations or financial position.

The Johnny M Mine is in an area known as the San Mateo Creek Basin (“SMCB”), which is an approximately 321 square mile area in New Mexico that contains numerous legacy uranium mines and mills. In addition to Johnny M, Hecla Limited's predecessor was involved at other mining sites within the SMCB. The EPA appears to have deferred consideration of listing the SMCB site on CERCLA’s National Priorities List ~~(Superfund)~~("Superfund") by removing the site from its emphasis list, and is working with various potentially responsible parties ("PRPs") at the site in order to study and potentially address perceived groundwater issues within the SMCB. The EE/CA discussed above relates primarily to contaminated rock and soil at the Johnny M site, not groundwater and not elsewhere within the ~~SMCM~~SMCB site. It is possible that Hecla Limited’s liability at the Johnny M Site, and for any other mine site within the SMCB at which Hecla Limited's predecessor may have operated, will be greater than our current accrual of $~~6.1~~9.0 million due to the increased scope of required remediation.

In July 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the SMCB site or for costs incurred by the EPA in cleaning up the site. The EPA stated it has incurred approximately $9.6 million in response costs to date. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by the various PRPs.

Carpenter Snow Creek and Barker-Hughesville Sites in Montana

In July 2010, the EPA made a formal request to Hecla Mining Company for information regarding the Carpenter Snow Creek Superfund site located in Cascade County, Montana. The Carpenter Snow Creek site is located in a historic mining district, and in the early 1980s Hecla Limited leased 6 mining claims and performed limited exploration activities at the site. Hecla Limited terminated the mining lease in 1988.

In June 2011, the EPA informed Hecla Limited that it believes Hecla Limited, and several other PRPs, may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA stated in the letter that it has incurred approximately $4.5 million in response costs and estimated that total remediation costs may exceed $100 million. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by various other PRPs.

In February 2017, the EPA made a formal request to Hecla Mining Company for information regarding the Barker-Hughesville Mining District Superfund site located in Judith Basin and Cascade Counties, Montana. Hecla Limited submitted a response in April 2017. The Barker-Hughesville site is located in a historic mining district, and between approximately June and December 1983, Hecla Limited was party to an agreement with another mining company under which limited exploration activities occurred at or near the site.

In August 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA did not include an amount of its alleged response costs to date. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning past or anticipated future costs at the site and the relative contributions of contamination by various other PRPs.

Claim for Indemnification Against CoCa Mines, Inc.

In 1991, Hecla Limited acquired CoCa Mines, Inc. (“CoCa”) and its subsidiary Creede Resources, Inc. (“CRI”). CoCa and CRI previously operated in the State of Colorado, but presently have limited assets and operations. Between 2014 and 2019, a PRP alleged that CoCa and CRI are required by a 1989 agreement to indemnify it for certain environmental costs and liabilities it may incur with respect to the Nelson Tunnel/Commodore Waste Rock Pile Superfund site in Creede, Colorado. In 2016, without admitting any liability, Hecla Limited, CoCa and CRI entered into a Consent Decree with the United States and the State of Colorado settling any regulatory liability they may have had at the site. On October 30, 2019, the PRP filed a lawsuit in Mineral County, Colorado alleging, among other things, that CoCa and CRI are in breach of contract for failure to indemnify the PRP for its liability to the U.S. under CERCLA with respect to the site. In addition, the lawsuit names Hecla Limited as a defendant in its role as the shareholder of CoCa. The PRP seeks in excess of $5 million in damages, including attorneys’ fees and costs. The lawsuit will be vigorously defended and we believe strong defenses exist against all claims made therein and, as noted above, both CoCa and CRI have limited assets with which to satisfy any claim.

~~Litigation Related to Klondex Acquisition~~Employee Benefit Plans

OnWe sponsor defined benefit pension plans covering substantially all U.S. employees. Net periodic pension cost for the plans consisted of the following for the ~~September 11, 2018,~~ three~~a lawsuit was filed~~ months ended March 31,2021 and 2020 (in thousands):

	Three Months Ended March 31,
	2021			2020
Service cost	$	1,455		$	1,334
Interest cost		1,248			1,404
Expected return on plan assets		(2,313	)		(1,872	)
Amortization of prior service cost		99			29
Amortization of net loss		1,125			1,163
Net periodic pension cost	$	1,614		$	2,058

The service cost component of net periodic pension cost is included in the ~~Ontario (Canada) Superior Court~~same line items of ~~Justice by Waterton Nevada Splitter LLC against Hecla Mining Company,~~ our ~~subsidiary Klondex Mines Unlimited Liability Company~~condensed consolidated financial statements as other employee compensation costs, and ~~Havilah Mining Corporation, an entity that was formed~~the net expense for the three months ended March 31,2021 and 2020 of $0.2 million and $0.7 million, respectively, related to ~~own~~all other components of net periodic pension cost is included in other (expense) income on our condensed consolidated statements of operations and comprehensive income (loss).

In January 2021, we contributed $16.8 million in shares of our common stock to our supplemental executive retirement plan, and expect to contribute approximately $0.8 million during the ~~Canadian assets~~remainder of ~~Klondex that we did~~2021. We do not ~~acquire as part of the Klondex acquisition, and of which we own approximately 13%. The lawsuit alleges that Hecla and Havilah are in breach of contract in connection with the issuance~~expect to ~~Waterton of warrants~~be required to ~~purchase Hecla common stock and Havilah common shares~~contribute to ~~replace warrants to purchase Klondex common shares that Waterton owned prior to the~~ ~~July 2018~~ acquisition. The lawsuit claims Hecla and Havilah issued warrants to Waterton valued at $3.7 million but that Waterton was entitled to warrants valued at $8.9 million. We believe the lawsuit is without merit and will vigorously defend it.

On ~~May 24, 2019,~~ ~~a purported Hecla stockholder filed a putative class action lawsuit in U.S. District Court for the Southern District of New York against Hecla and certain of~~ our ~~executive officers,~~ ~~one~~ ~~of whom is also a director. The complaint, purportedly brought on behalf of all purchasers of Hecla common stock from~~ ~~March 19, 2018~~ ~~through and including~~ ~~May 8, 2019,~~ ~~asserts claims under Sections~~ 10~~(b) and~~ 20~~(a) of the Securities Exchange Act of~~ ~~1934~~ ~~and Rule~~ ~~10b~~-5 promulgated thereunder and seeks, among other things, damages and costs and expenses. Specifically, the complaint alleges that Hecla, under the authority and control of the individual defendants, made certain material false and misleading statements and omitted certain material information regarding Hecla’s Nevada Operations unit. The complaint alleges that these misstatements and omissions artificially inflated the market price of Hecla common stock during the class period, thus purportedly harming investors. A ~~second~~ ~~suit was filed on~~ ~~June 19, 2019,~~ alleging virtually identical claims. We cannot predict the outcome of these lawsuits or estimate damages if plaintiffs were to prevail. We believe that these claims are without merit and intend to defend them vigorously.

Related to the above described class action lawsuits, Hecla has been named as a nominal defendant in a shareholder derivative lawsuit which names as defendants members of Hecla’s board of directors and certain officers. The case was filed on ~~July 12, 2019~~ ~~in the U.S. District Court for the District of Delaware. In general terms, the suit alleges (i) violations of Sections~~ 10~~(b) and~~ 14~~(a) of the Securities Exchange Act of~~ ~~1934~~ ~~and Rule~~ ~~10b~~-5 ~~promulgated thereunder and (ii) breaches of fiduciary duties by the individual defendants and seeks damages, purportedly on behalf of Hecla.~~

~~Debt~~

~~As discussed in~~ ~~Note~~ 9~~, on~~ ~~February 19, 2020,~~ ~~we completed an offering of $475 million aggregate principal amount of 7.25% Senior Notes due~~ ~~2028.~~ ~~The net proceeds from the offering of the Senior Notes were used, together with cash on hand, to redeem all of our previously-outstanding 6.875% Senior Notes that were due~~defined benefit pension plans in 2021, ~~and had a principal balance of $506.5 million. Interest~~but may do so.

Note 5.Income (Loss) Per Common Share

We calculate basic income (loss) per common share on the ~~Senior Notes~~basis of the weighted average number of shares of common stock outstanding during the period. Diluted income per share is ~~payable on~~ ~~February 15~~ calculated using the weighted average number of shares of common stock outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock and ~~August 15~~ if-converted methods.

Potential dilutive shares of ~~each year, commencing~~ ~~August 15, 2020.~~common stock include outstanding unvested restricted stock awards, performance-based share awards, stock units, warrants and convertible preferred stock for periods in which we have reported net income. For periods in which we report net losses, potential dilutive shares of common stock are excluded, as their conversion and exercise would be anti-dilutive.

1110

~~As discussed in~~ ~~Note~~ 9~~, on~~ ~~July 9, 2020,~~ ~~we entered into a note purchase agreement pursuant to which we will issue~~ ~~CAD$50~~ ~~million (approximately~~ ~~USD$36.8~~ ~~million at the time of the transaction) in aggregate principal amount of our Series~~ ~~2020~~~~-A Senior Notes due~~ ~~July 9, 2025 (~~~~the “IQ Notes”) to Investissment Québec, a financing arm of the Québec government.~~ The following table represents net proceeds from the IQ Notes will be available for general corporate purposes, including open market purchases of a portion of the Senior Notes and to pay for capital expenditures at our Casa Berardi unit. The IQ Notes will be issued in 4 equal installments of ~~CAD$12.5~~ ~~million on~~ ~~July 9,~~ ~~August 9,~~ ~~September 9~~ ~~and~~ ~~October 9, 2020,~~ ~~with the~~ ~~first~~ ~~installment issued net of~~ ~~CAD$0.6~~ ~~million in fees. The IQ Notes bear interest on amounts outstanding at a rate of 6.515% per year, payable on~~ ~~January 9~~ ~~and~~ ~~July 9~~ ~~of each year, commencing~~ ~~January 9, 2021.~~

~~Other Commitments~~

~~Our contractual obligations as of~~ ~~June~~ ~~30,~~~~2020~~ ~~included approximately~~ ~~$1.3~~ ~~million for various costs. In addition, our open purchase orders at~~ ~~June~~ ~~30,~~~~2020~~ ~~included approximately~~ ~~$2.1~~ ~~million,~~ ~~$0.3~~ ~~million,~~ ~~$5.6~~ ~~million and~~ ~~$2.8~~ ~~million for various capital and non-capital items at the Lucky Friday, Casa Berardi, Greens Creek and Nevada Operations units, respectively. We also have total commitments of approximately~~ ~~$13.7~~ million relating to scheduled payments on finance leases, including interest, primarily for equipment at our Greens Creek, Lucky Friday, Casa Berardi and Nevada Operations units and total commitments of approximately $14.6 million relating to payments on operating leases (see ~~Note~~ 9 for more information). As part of our ongoing business and operations, we are required to provide surety bonds, bank letters of credit, and restricted deposits for various purposes, including financial support for environmental reclamation obligations and workers compensation programs. As of ~~June~~ ~~30,~~~~2020,~~ we had surety bonds totaling $182.6 million and letters of credit totaling $20.4 million in place as financial support for future reclamation and closure costs, self-insurance, and employee benefit plans. The obligations associated with these instruments are generally related to performance requirements that we address through ongoing operations. As the requirements are met, the beneficiary of the associated instruments cancels or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure of the sites. We believe we are in compliance with all applicable bonding requirements and will be able to satisfy future bonding requirements as they arise.

~~Other Contingencies~~

We also have certain other contingencies resulting from litigation, claims, EPA investigations, and other commitments and are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. We currently have no ~~basis to conclude that any or all of such contingencies will materially affect our financial position, results of operations or cash flows. However, in the future, there~~ ~~may~~ ~~be changes to these contingencies, or additional contingencies~~ ~~may~~ ~~occur, any of which might result in an accrual or a change in current accruals recorded by us, and there can be~~ no ~~assurance that their ultimate disposition will~~ ~~not~~ ~~have a material adverse effect on our financial position, results of operations or cash flows.~~

~~Note~~ 5. ~~Loss Per Common Share~~

~~We are authorized to issue 750,000,000 shares of common stock, $0.25 par value per share. At~~ ~~June~~ ~~30,~~~~2020,~~ ~~there were 534,660,072 shares of our common stock issued with 6,821,044 of these shares held in treasury, for a net of 527,839,028 shares outstanding. Basic and diluted loss~~income (loss) per common share ~~after preferred dividends, was $(0.03) and $(0.10) for the~~ ~~three~~~~-month periods ended~~ ~~June~~ ~~30,~~~~2020~~ ~~and~~ ~~2019,~~ ~~respectively. Basic~~– basic and diluted ~~loss~~(in thousands, except income (loss) per ~~common share, after preferred dividends, was $(0.06) and $(0.15) for the~~ ~~six~~~~-month periods ended~~ ~~June~~ ~~30,~~~~2020~~ ~~and~~ ~~2019,~~ ~~respectively.~~share):

	Three Months Ended March 31,
	2021			2020
Numerator
Net income (loss)	$	18,971		$	(17,185	)
Preferred stock dividends		(138	)		(138	)
Net income (loss) applicable to common shares	$	18,833		$	(17,323	)

Denominator
Basic weighted average common shares		534,101			523,215
Dilutive restricted stock units, warrants and deferred shares		6,426			0
Diluted weighted average common shares		540,527			523,215

Basic income (loss) per common share	$	0.04		$	(0.03	)
Diluted income (loss) per common share	$	0.03		$	(0.03	)

Diluted ~~loss~~income (loss) per share for the three ~~and~~ ~~six~~months ended ~~June~~March ~~30,~~31, ~~2020~~2021 and ~~2019~~2020 excludes the potential effects of outstanding shares of our convertible preferred stock, as their conversion would have no effect on the calculation of dilutive shares.

For the three~~-month~~ months ended March 31,2021, the calculation of diluted income per common share included (i) 2,863,038 restricted stock units that were unvested during the period, (ii) 1,536,615 warrants to purchase one share of common stock and (iii) 2,026,440 deferred shares that were dilutive. For the ~~six~~three~~-month periods~~ months ended ~~June~~March ~~30,~~31, 2020, ~~and~~ ~~2019,~~all outstanding restricted ~~share~~stock units, warrants and deferred shares ~~and warrants~~ were excluded from the computation of diluted loss per share, as our reported ~~loss~~net losses for those periods would cause their conversion and exercise to have no effect on the calculation of loss per share.

Note 6.Stockholders’ Equity

Stock-based Compensation Plans

Common Stock Dividends

Quarterly Average Realized Silver Price per Ounce	Quarterly Silver-Linked Dividend per Share	Annualized Silver-Linked Dividend per Share	Annualized Minimum Dividend	Annualized Dividends per Share: Silver-Linked and Minimum
$25	$0.0075	$0.03	$0.015	$0.045
$30	$0.0125	$0.05	$0.015	$0.065
$35	$0.0225	$0.09	$0.015	$0.105
$40	$0.0325	$0.13	$0.015	$0.145
$45	$0.0425	$0.17	$0.015	$0.185
$50	$0.0525	$0.21	$0.015	$0.225

At-The-Market Equity Distribution Agreement

Note 7.Debt, Credit Facility and Leases

	March 31, 2021
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	38,359	$	513,359
Unamortized discount/premium and issuance costs		(6,234	)		867		(5,367	)
Long-term debt balance	$	468,766		$	39,226	$	507,992

	December 31, 2020
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	37,886	$	512,886
Unamortized discount/premium and issuance costs		(6,462	)		818		(5,644	)
Long-term debt balance	$	468,538		$	38,704	$	507,242

Twelve-month period ending March 31,	Senior Notes		IQ Notes		Finance Leases		Operating Leases
2022	$	34,438	$	2,499	$	7,329	$	3,696
2023		34,438		2,499		5,132		2,706
2024		34,438		2,499		3,643		2,002
2025		34,438		2,499		2,076		549
2026		34,438		39,045		0		525
Thereafter		539,568		0		0		2,213
Total	$	711,758	$	49,041	$	18,180	$	11,691

Credit Facility

We believe we were in compliance with all covenants under the credit agreement as of March 31,2021.

Note 6.8. ~~Business Segments and Sales of Products~~Derivative Instruments

~~We discover, acquire~~General

Our current risk management policy provides that up to 75% of:

•

These instruments do, however, expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of the hedged commodity or foreign currency and ~~develop mines and other mineral interests and produce and market concentrates, carbon material and doré containing silver, gold, lead and zinc. We are currently organized and managed in~~ ~~five~~ ~~segments, which represent~~(ii) price risk to the extent that the spot price exceeds the contract price for quantities of our ~~operating units: the Greens Creek unit, the Lucky Friday unit,~~production and/or forecasted costs covered under contract positions.

Foreign Currency

Our wholly-owned subsidiaries owning the Casa Berardi ~~unit, the~~and San Sebastian ~~unit,~~operations are USD-functional entities which routinely incur expenses denominated in CAD and Mexican pesos ("MXN"), respectively. Such expenses expose us to exchange rate fluctuations between the ~~Nevada Operations unit.~~USD and CAD and MXN. We have a program to manage our exposure to fluctuations in the exchange rate between the USD and CAD and MXN for these subsidiaries' future operating costs denominated in CAD and MXN. The programs utilize forward contracts to buy CAD and MXN, and each contract is designated as a cash flow hedge. As of March 31,2021, we have 133 forward contracts outstanding to buy a total of CAD$256.8 million having a notional amount of USD$194.8 million. The CAD contracts are related to forecasted cash operating costs at Casa Berardi to be incurred from 2021 through 2024 and have CAD-to-USD exchange rates ranging between 1.2702 and 1.3785. There were 0 outstanding contracts for MXN as of March 31,2021.

~~General corporate activities~~As of ~~not~~ associated with operating units and their various exploration activities, as well as discontinued operations and idle properties, are presented as “other.” Interest expense, interest income and income taxes are considered general corporate items, and are ~~not~~ ~~allocated to our segments.~~

~~The following tables present information about our reportable segments for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June~~March ~~30,~~31, ~~2020~~ ~~and~~ ~~2019~~ ~~(in thousands):~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Net sales to unaffiliated customers:

Greens Creek
$ 84,890 $ 55,398 $ 138,724 $ 135,527
Lucky Friday
11,455 4,951 14,285 7,133
Casa Berardi
50,005 45,500 96,177 85,562
San Sebastian
4,934 10,993 14,860 23,593
Nevada Operations
15,071 17,330 39,234 34,974
$ 166,355 $ 134,172 $ 303,280 $ 286,789
Income (loss) from operations:

Greens Creek
$ 26,751 $ 9,141 $ 30,867 $ 34,574
Lucky Friday
(5,218 ) (2,271 ) (13,338 ) (5,052 )
Casa Berardi
3,204 (15,363 ) (676 ) (25,882 )
San Sebastian
(859 ) (1,923 ) (180 ) (3,435 )
Nevada Operations
(2,266 ) (21,475 ) 623 (35,466 )
Other
(11,738 ) (11,586 ) (22,382 ) (24,340 )
$ 9,874 $ (43,477 ) $ (5,086 ) $ (59,601 )

~~The following table presents identifiable assets by reportable segment as of~~ ~~June~~ ~~30,~~~~2020~~2021 and December 31, ~~2019~~2020, we recorded the following balances for the fair value of the contracts (in ~~thousands)~~millions):

June 30, 2020

December 31, 2019

Identifiable assets:

Greens Creek
$ 618,726 $ 639,047
Lucky Friday
501,690 440,615
Casa Berardi
693,259 703,511
San Sebastian
32,915 48,294
Nevada Operations
522,822 528,466
Other
233,996 277,375
$ 2,603,408 $ 2,637,308

	March 31,		December 31,
Balance sheet line item:	2021		2020
Current derivatives assets	$	5.0	$	3.5
Non-current derivatives assets		4.2		4.2

~~Our products consist~~Net unrealized gains of ~~metal concentrates and carbon material which we sell~~approximately $9.5 million related to ~~custom smelters, brokers and~~ ~~third~~~~-party processors and unrefined bullion bars (doré), which~~ ~~may~~ ~~be sold as doré or further refined before sale to precious metals traders. Revenue is recognized upon~~ the ~~completion~~effective portion of the ~~performance obligations~~hedges were included in accumulated other comprehensive loss as of March 31,2021. Unrealized gains and ~~transfer~~losses will be transferred from accumulated other comprehensive loss to current earnings as the underlying operating expenses are recognized. We estimate approximately $4.8 million in net unrealized gains included in accumulated other comprehensive loss as of ~~control~~March 31,2021 will be reclassified to current earnings in the next twelve months. Net realized gains of ~~the product to the customer.~~

For sales of metals from refined doré, which we currently have at our Casa Berardi, San Sebastian and Nevada Operations units, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. For sales of unrefined doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of title and control of the doré containing the agreed-upon metal quantities to the customer. Refining, selling and shipping costsapproximately $0.6 million on contracts related to ~~sales of doré~~underlying expenses which have been recognized were transferred from accumulated other comprehensive loss and ~~metals from doré are recorded to~~included in cost of sales ~~as incurred.~~and other direct production costs for the three months ended March 31,2021. NaN net unrealized gains or losses related to ineffectiveness of the hedges were included in current earnings for the three months ended March 31,2021.

~~For sales of carbon material, the performance obligation is met, the transaction price is known, and revenue is recognized generally at the time of arrival at the customer's facility.~~Metals Prices

~~For concentrate sales, which we~~We are currently have at our Greens Creek and Lucky Friday units, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment. Concentrates sold at our Lucky Friday unit typically leave the mine and are received by the customer within the same day. However, there is a period of time between shipment of concentrates from our Greens Creek unit and their physical receipt by the customer, and judgment is required in determining when control has been transferred to the customer for those shipments. We have determined the performance obligation is met upon shipment of concentrate parcels from Greens Creek because, at that time, 1~~) legal title is transferred to the customer,~~ 2~~) the customer has accepted the parcel and obtained the ability to realize all of the benefits from the product,~~ 3~~) the concentrate content specifications are known, have been communicated to the customer, and the customer has the significant risks and rewards of ownership of it,~~ 4~~) it is very unlikely a concentrate parcel from Greens Creek will be rejected by a customer upon physical receipt, and~~ 5~~) we have the right to payment for the parcel.~~

Judgment is also required in identifying what the performance obligations for our concentrate sales are. Most of our concentrate sales involve “frame contracts” with smelters that can cover multiple years and specify certain terms under which individual parcels of concentrates are sold. However, some terms are ~~not~~ specified in the frame contracts and/or can be renegotiated as part of annual amendments to the frame contract. We have determined parcel shipments represent individual performance obligations satisfied at a point in time when control of the shipment is transferred to the customer.

The consideration we receive for our concentrate sales fluctuates due to changes in metals prices between the time of shipment and final settlement with the customer. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement with the customer. Also, it is unlikely a significant reversal of revenue for any ~~one~~ ~~concentrate parcel will occur. As such, we use the expected value method to price the parcels until the final settlement date occurs, at which time the final transaction price is known. At~~ ~~June~~ ~~30,~~~~2020,~~ metals contained in concentrate sales and exposed to future price changes totaled 2.6 million ounces of silver, 7,969 ounces of gold, 9,983 tons of zinc, and 7,405 tons of lead. However, as discussed in ~~Note~~ 11~~, we seek to mitigate the risk of price adjustments by~~ using financially-settled forward contracts ~~for some~~to manage the exposure to:

•

changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement; and

•

changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments.

The following tables summarize the quantities of metals committed under forward sales contracts at March 31,2021 and December 31,2020:

March 31, 2021	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2021 settlements		1,492		5		12,070		1,587	$	25.48	$	1,736	$	1.26	$	0.89
Contracts on forecasted sales
2021 settlements		—		—		33,841		30,479		N/A		N/A	$	1.20	$	0.89
2022 settlements		—		—		53,407		42,715		N/A		N/A	$	1.26	$	0.96
2023 settlements		—		—		41,171		—		N/A		N/A	$	1.27		N/A

December 31, 2020	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2021 settlements		1,282		4		23,314		4,905	$	25.00	$	1,858	$	1.19	$	0.90
Contracts on forecasted sales
2021 settlements		—		—		41,577		30,876		N/A		N/A	$	1.17	$	0.88
2022 settlements		—		—		18,519		—		N/A		N/A	$	1.28		N/A

In June 2019, we began utilizing financially-settled put option contracts to manage the exposure of our ~~sales.~~forecasted future gold and silver sales to potential declines in market prices for those metals. These put contracts gave us the option, but not the obligation, to realize established prices on quantities of silver and gold to be sold in the future. As of December 31,2020, we had put contracts that provided average floor prices of $16.50 per ounce for silver and $1,650 per ounce for gold for a total of 1.1 million silver ounces and 12,992 gold ounces. We had 0 put option contracts outstanding as of March 31,2021.

~~Sales~~These forward and ~~accounts receivable for concentrate shipments~~put option contracts are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated by us with the customers, which represent components of the transaction price. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges typically do not ~~vary materially from our estimates. Costs charged by customers include fixed treatment~~designated as hedges for accounting purposes and ~~refining costs per ton of concentrate and~~ ~~may~~ ~~include price escalators which allow the customers to participate in the increase of lead and zinc prices above a negotiated baseline. Costs for shipping concentrates to customers~~ are ~~recorded to cost of sales as incurred.~~

~~Sales of metal concentrates and metal products are made principally to custom smelters, brokers,~~ ~~third~~~~-party processors and metals traders. The percentage of sales contributed by~~marked-to-market through earnings each ~~segment is reflected in the following table:~~period.

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Greens Creek
51
%
41
%
45
%
48
%
Lucky Friday
7
%
4
%
5
%
2
%
Casa Berardi
30
%
34
%
32
%
30
%
San Sebastian
3
%
8
%
5
%
8
%
Nevada Operations
9
%
13
%
13
%
12
%
100
%
100
%
100
%
100
%

~~Sales of products by metal~~We recorded the following balances for the fair value of the forward contracts as of ~~three~~March -31,2021 and forward and put option contracts as of ~~six~~~~-month periods ended~~ ~~June~~December ~~30,~~31, 2020 ~~and~~ ~~2019~~ ~~were as follows~~ (in ~~thousands)~~millions):

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Silver
$ 61,756 $ 36,298 $ 99,328 $ 81,804
Gold
89,212 78,166 179,906 157,845
Lead
12,454 6,670 18,874 15,695
Zinc
21,455 22,948 38,762 47,703
Less: Smelter and refining charges
(18,522 ) (9,910 ) (33,590 ) (16,258 )
$ 166,355 $ 134,172 $ 303,280 $ 286,789

	March 31, 2021								December 31, 2020
Balance sheet line item:	Contracts in an asset position		Contracts in a liability position			Net asset (liability)			Contracts in an asset position		Contracts in a liability position			Net asset (liability)
Current derivatives assets	$	3.3	$	(1.1	)	$	2.2		$	0.2	$	(0.2	)	$	0
Non-current derivatives assets		2.3		(0.2	)		2.1			0.5		(0.1	)		0.4
Current derivatives liability		0		(3.9	)		(3.9	)		0.1		(11.8	)		(11.7	)
Other non-current liabilities		0.4		(1.2	)		(0.8	)		0		0			0

~~The following is sales information by geographic area based on~~We recognized $2.8 million and $1.7 million net gains during the ~~location~~first quarters of ~~smelters and brokers (for concentrate shipments) and location of parent companies (for doré sales to metals traders) for the~~ ~~three~~~~- and~~ ~~six~~~~-month periods ended~~ ~~June~~ ~~30,~~~~2020~~2021 and ~~2019~~ ~~(in thousands):~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Canada
$ 80,311 $ 78,158 $ 62,152 $ 171,030
Korea
25,180 26,202 51,787 75,501
Japan
11,613 9,236 17,734 17,585
Netherlands
(2 ) 16,055 (923 ) 16,055
China
25,087 — 39,008 —
United States
29,048 3,228 136,785 7,801
Other
116 — 55 —
Total, excluding gains/losses on forward contracts
$ 171,353 $ 132,879 $ 306,598 $ 287,972

~~Sales by significant product type for the~~ ~~three~~~~- and~~ ~~six~~~~-month periods ended~~ ~~June~~ ~~30,~~2020, ~~and~~ ~~2019~~ ~~were as follows (in thousands):~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Doré and metals from doré
$ 59,445 $ 73,312 $ 143,780 $ 144,167
Carbon
16,903 4,284 19,264 9,330
Lead concentrate
72,514 35,742 106,667 85,042
Zinc concentrate
16,585 15,738 27,405 39,530
Bulk concentrate
5,906 3,803 9,482 9,903
Total, excluding gains/losses on forward contracts
$ 171,353 $ 132,879 $ 306,598 $ 287,972

~~Sales~~respectively, on the contracts utilized to manage exposure to prices of ~~products~~metals in our concentrate shipments, which is included in sales of products. The net gains recognized on the contracts offsets losses ~~of $5.0 million and $3.3 million, respectively, for the~~ ~~second~~ ~~quarter and~~ ~~first~~ ~~half of~~ ~~2020~~related to price adjustments on ~~financially-settled forward contracts for~~our provisional concentrate sales due to changes to silver, gold, lead and zinc ~~contained in our sales. Sales~~prices between the time of ~~products included~~sale and final settlement.

We recognized $0.5 million and $7.9 million net gains ~~of $1.3 million for~~during the ~~second~~first ~~quarter~~quarters of ~~2019~~2021 and 2020, respectively, on the contracts utilized to manage exposure to prices for forecasted future sales. The net ~~losses of $1.2 million~~gains on these contracts are included as a separate line item under other income (expense), as they relate to forecasted future sales, as opposed to sales that have already taken place but are subject to final pricing as discussed in the preceding paragraph. The net gain for the first ~~half~~quarter of ~~2019~~2021 ~~on forward~~is the result of a decrease in zinc and lead prices.

Credit-risk-related Contingent Features

Certain of our derivative contracts contain cross default provisions which provide that a default under our revolving credit agreement would cause a default under the derivative contract. As of March 31,2021, we have not posted any collateral related to these contracts. ~~See~~ The fair value of derivatives in a net liability position related to these agreements was $6.4 million as of March 31,2021, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at March 31,2021, we could have been required to settle our obligations under the agreements at their termination value of $6.4 million.

Note 119.Fair Value Measurement

Accounting guidance has established a hierarchy for ~~more information.~~inputs used to measure assets and liabilities at fair value on a recurring basis. The three levels included in the hierarchy are:

Level 1: quoted prices in active markets for identical assets or liabilities;

Level 2: significant other observable inputs; and

Level 3: significant unobservable inputs.

~~Sales of products~~The table below sets forth our assets and liabilities that were accounted for at fair value on a recurring basis and the fair value calculation input hierarchy level that we have determined applies to ~~significant customers as a percentage of total sales were as follows for the~~ ~~three~~-each asset and ~~six~~~~-month periods ended~~ ~~June~~ ~~30,~~~~2020~~ ~~and~~ ~~2019:~~liability category (in thousands).

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

CIBC
31
%
24
%
31
%
19
%
Teck Metals Ltd.
20
%
3
%
12
%
9
%
Korea Zinc
15
%
20
%
17
%
20
%
Ocean Partners
13
%
12
%
7
%
6
%
SIPI
10
%
3
%
5
%
3
%
Scotia
—
%
28
%
7
%
28
%

Description	Balance at March 31, 2021		Balance at December 31, 2020		Input Hierarchy Level
Assets:
Cash and cash equivalents:
Money market funds and other bank deposits	$	139,750	$	129,830	Level 1
Current and non-current investments:
Equity securities – mining industry		11,717		19,389	Level 1
Trade accounts receivable:
Receivables from provisional concentrate sales		35,274		27,864	Level 2
Restricted cash balances:
Certificates of deposit and other bank deposits		1,053		1,053	Level 1
Derivative contracts - current and non-current derivatives assets:
Metal forward and put option contracts		4,349		381	Level 2
Foreign exchange contracts		9,192		7,647	Level 2
Total assets	$	201,335	$	186,164

Liabilities:
Derivative contracts - current derivatives liabilities and other non-current liabilities:
Metal forward and put option contracts	$	4,742	$	11,737	Level 2
Foreign exchange contracts		0		19	Level 2
Total Liabilities	$	4,742	$	11,756

Current and non-current restricted cash balances consist primarily of certificates of deposit, U.S. Treasury securities, and other deposits and are valued at cost, which approximates fair value.

Our ~~trade~~non-current available for sale securities consist of marketable equity securities of companies in the mining industry which are valued using quoted market prices for each security.

Trade accounts receivable ~~balance related~~from provisional concentrate sales are subject to ~~contracts with customers was $26.0 million at~~ ~~June~~ ~~30,~~~~2020~~final pricing and ~~$12.0 million at~~ ~~December~~ ~~31,~~~~2019,~~ ~~and included~~ no ~~allowance~~valued using quoted prices based on forward curves for ~~doubtful accounts.~~the particular metal. The embedded derivative contained in our concentrate sales is adjusted to fair market value through earnings each period prior to final settlement.

We ~~have determined~~use financially-settled forward contracts to manage exposure to changes in the exchange rate between USD and CAD and MXN, and the impact on CAD- and MXN-denominated operating costs incurred at our ~~contracts do~~Casa Berardi and San Sebastian units (see Note ~~not~~8 ~~include a significant financing component. For doré sales and sales~~ for more information). The fair value of ~~metal from doré, payment is received at~~each contract represents the time the performance obligation is satisfied. Payment for carbon sales is received within a relatively short period of time after the performance obligation is satisfied. The amount of consideration for concentrate sales is variable, and we receive payment for a significant portionpresent value of the ~~estimated value~~difference between the forward exchange rate for the contract settlement period as of ~~concentrate parcels within a relatively short period of time after~~ the ~~performance obligation is satisfied.~~measurement date and the contract settlement exchange rate.

We do ~~not~~ ~~incur significant costs~~use financially-settled forward contracts to ~~obtain contracts, nor costs~~manage the exposure to ~~fulfill contracts which are~~ ~~not~~ ~~addressed by other accounting standards. Therefore, we~~changes in prices of silver, gold, zinc and lead contained in our concentrate shipments that have not ~~recognized an asset~~reached final settlement. We also use financially-settled forward and put option contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our forecasted future sales (see Note 8 for ~~such costs~~more information). The fair value of each forward contract represents the present value of the difference between the forward metal price for the contract settlement period as of the measurement date and the contract settlement metal price. The fair value of each put option contract is measured using the Black-Scholes pricing model, with inputs for the period-end metal price and assumed metal price volatility and discount rate.

~~June~~ 16

Our Senior Notes, which were recorded at their carrying value of $468.8 million, net of unamortized initial purchaser discount and issuance costs, had a fair value of $509.7 million at ~~30,~~~~2020~~ or ~~December~~March 31, ~~2019.~~2021. Quoted market prices, which we consider to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. See Note 7 for more information.

Note 7.10. Commitments, Contingencies and Obligations

General

Lucky Friday Water Permit Matters

In December 2013, the Environmental Protection Agency ("EPA") issued to Hecla Limited a request for information under Section 308 of the Clean Water Act directing Hecla Limited to undertake a comprehensive groundwater investigation of Lucky Friday’s tailings pond no.3 to evaluate whether the pond is causing the discharge of pollutants via seepage to groundwater that is discharging to surface water. We completed the investigation mandated by the EPA and submitted a draft report to the agency in December 2015. We are waiting for the EPA’s response and we cannot predict what further action, if any, the agency may take.

Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico

The Johnny M Mine is in an area known as the San Mateo Creek Basin (“SMCB”), which is an approximately 321 square mile area in New Mexico that contains numerous legacy uranium mines and mills. In addition to Johnny M, Hecla Limited's predecessor was involved at other mining sites within the SMCB. The EPA appears to have deferred consideration of listing the SMCB site on CERCLA’s National Priorities List ("Superfund") by removing the site from its emphasis list, and is working with various potentially responsible parties ("PRPs") at the site in order to study and potentially address perceived groundwater issues within the SMCB. The EE/CA discussed above relates primarily to contaminated rock and soil at the Johnny M site, not groundwater and not elsewhere within the SMCB site. It is possible that Hecla Limited’s liability at the Johnny M Site, and for any other mine site within the SMCB at which Hecla Limited's predecessor may have operated, will be greater than our current accrual of $9.0 million due to the increased scope of required remediation.

Carpenter Snow Creek and Barker-Hughesville Sites in Montana

Claim for Indemnification Against CoCa Mines, Inc.

Employee Benefit Plans

We sponsor defined benefit pension plans covering substantially all U.S. employees. Net periodic pension cost for the plans consisted of the following for the three ~~and~~ ~~six~~months ended ~~June~~March ~~30,~~31, ~~2020~~2021 and ~~2019~~2020 (in thousands):

	Three Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Service cost	$	1,334		$	1,100		$	1,455		$	1,334
Interest cost		1,404			1,620			1,248			1,404
Expected return on plan assets		(1,872	)		(1,496	)		(2,313	)		(1,872	)
Amortization of prior service cost		29			15			99			29
Amortization of net loss		1,163			1,097			1,125			1,163
Net periodic pension cost	$	2,058		$	2,336		$	1,614		$	2,058

Six Months Ended
June 30,

2020

2019

Service cost
$ 2,668 $ 2,200
Interest cost
2,808 3,240
Expected return on plan assets
(3,744 ) (2,992 )
Amortization of prior service cost
58 30
Amortization of net (gain) loss
2,326 2,194
Net periodic pension cost
$ 4,116 $ 4,672

~~For the~~ ~~three~~~~- and~~ ~~six~~~~-month periods ended~~ ~~June~~ ~~30,~~~~2020~~ ~~and~~ ~~2019,~~ ~~the~~The service cost component of net periodic pension cost is included in the same line items of our condensed consolidated financial statements as other employee compensation ~~costs. The~~costs, and the net expense for the three months ended March 31,2021 and 2020 of $0.2 million and $0.7 million, respectively, related to all other components of net periodic pension cost ~~of $0.7 million and $1.4 million, respectively, for the~~ ~~three~~~~- and~~ ~~six~~~~-month periods ended~~ ~~June~~ ~~30,~~~~2020,~~ ~~and $1.2 million and $2.5 million for the~~ ~~three~~~~- and~~ ~~six~~~~-month periods ended~~ ~~June~~ ~~30,~~~~2019,~~ ~~respectively,~~ is included in other (expense) income on our condensed consolidated statements of operations and comprehensive income (loss) ~~income.~~.

In ~~April 2020,~~January 2021, we contributed ~~$0.4~~$16.8 million in shares of our common stock to our ~~defined benefit plans,~~supplemental executive retirement plan, and ~~we expect to contribute an additional approximately $10.0 million in cash or shares of our common stock to the plans in~~ ~~2020,~~ ~~including $4.8 million to satisfy the remaining minimum funding requirement for the year. We~~ expect to contribute approximately ~~$0.6~~$0.8 million during the remainder of 2021. We do not expect to be required to contribute to our ~~unfunded supplemental executive retirement plan~~defined benefit pension plans in 2021, but may do so.

Note 5.Income (Loss) Per Common Share

We calculate basic income (loss) per common share on the basis of the weighted average number of shares of common stock outstanding during ~~2020.~~the period. Diluted income per share is calculated using the weighted average number of shares of common stock outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock and if-converted methods.

1610

The following table represents net income (loss) per common share – basic and diluted (in thousands, except income (loss) per share):

	Three Months Ended March 31,
	2021			2020
Numerator
Net income (loss)	$	18,971		$	(17,185	)
Preferred stock dividends		(138	)		(138	)
Net income (loss) applicable to common shares	$	18,833		$	(17,323	)

Denominator
Basic weighted average common shares		534,101			523,215
Dilutive restricted stock units, warrants and deferred shares		6,426			0
Diluted weighted average common shares		540,527			523,215

Basic income (loss) per common share	$	0.04		$	(0.03	)
Diluted income (loss) per common share	$	0.03		$	(0.03	)

Note 8.6. ~~Stockholders’~~Stockholders’ Equity

Stock-based Compensation Plans

We periodically grant restricted stock unit awards, performance-based shares and shares of common stock to our employees and directors. We measure compensation cost for restricted stock units and stock grants at the closing price of our stock at the time of grant. We measure compensation cost for performance-based share grants using a Monte Carlo simulation to estimate their value at grant date. Restricted stock unit and performance-based share grants vest after a specified period with compensation cost amortized over that period. Although we have no ~~current plans to issue stock options, we~~ ~~may~~ ~~do so in the future.~~

In ~~March 2020,~~ ~~the board of directors granted 2,800,062 shares of common stock to employees for payment of long-term incentive compensation for the period ended~~ ~~December 31, 2019.~~ ~~The shares were distributed in~~ ~~April 2020,~~ ~~and $5.1 million in expense related to the stock awards was recognized in the periods prior to~~ ~~March~~ ~~31,~~~~2020.~~

In ~~June 2020,~~ ~~the board of directors granted the following restricted stock unit awards to employees, which will result in a total expense of $4.0 million:~~

•

~~1,176,894 restricted stock units, with~~ ~~one~~~~third~~ ~~of those vesting in~~ ~~June 2021,~~ ~~one~~~~third~~ ~~vesting in~~ ~~June 2022,~~ ~~and~~ ~~one~~~~third~~ ~~vesting in~~ ~~June 2023;~~

•

~~90,760 restricted stock units, with~~ ~~one~~ ~~half of those vesting in~~ ~~June 2021~~ ~~and~~ ~~one-half vesting in~~ ~~June 2022;~~ ~~and~~

•

~~37,620 restricted stock units that vest in~~ ~~June 2021.~~

~~Expense of $1.4 million related to the unit awards discussed above scheduled to vest in~~ ~~2021~~ ~~will be recognized on a straight-line basis over the~~ ~~twelve~~ ~~months following the date of the award. Expense of $1.3 million related to the unit awards discussed above scheduled to vest in~~ ~~2022~~ ~~will be recognized on a straight-line basis over the~~ ~~twenty-four~~ ~~months following the date of the award. Expense of $1.2 million related to the unit awards discussed above scheduled to vest in~~ ~~2023~~ ~~will be recognized on a straight-line basis over the~~ ~~thirty-six-month period following the date of the award.~~

In ~~June 2020,~~ the board of directors granted performance-based share awards to certain executive employees. The value of the awards (if any) will be based on the ranking of the market performance of our common stock relative to the performance of the common stock of a group of peer companies over the ~~three~~~~-year measurement period ending~~ ~~December 31, 2022.~~ The number of shares to be issued will be based on the value of the awards divided by the share price at grant date. The expense related to the performance-based awards will be recognized on a straight-line base over the ~~thirty~~ ~~months following the date of the award.~~

Stock-based compensation expense for restricted stock unit and performance-based grants to employees and shares issued to ~~nonemployee~~non-employee directors ~~recorded in~~totaled $0.5 million and $1.2 million for the first ~~six~~three months of 2021 and 2020, ~~totaled $2.4 million, compared to $3.6 million in the same period last year.~~respectively.

In connection with the vesting of restricted stock units and other stock grants, employees have in the past, at their election and when permitted by us, chosen to satisfy their minimum tax withholding obligations through net share settlement, pursuant to which the Company withholds the number of shares necessary to satisfy such withholding obligations and pays the obligations in cash. As a result, in the ~~first~~~~six~~ ~~months of~~ ~~2020~~ ~~we withheld 1,183,773 shares valued at approximately $2.7 million, or approximately $2.32 per share. In the~~ ~~first~~~~six~~ ~~months of~~ ~~2019~~ ~~we withheld 714,645 shares valued at approximately $1.6 million, or approximately $2.30 per share.~~

Table of ~~our common stock to holders of warrants to purchase Klondex common stock under the terms of the Klondex acquisition, and all of the warrants were outstanding as of~~ ~~June~~ ~~30,~~~~2020.~~ ~~Warrants to purchase 2,068,000 shares of common stock have an exercise price of $8.02 and expire in~~ ~~April 2032.~~ ~~Warrants to purchase 2,068,000 shares of common stock have an exercise price of $1.57 and expire in~~ ~~February 2029.~~

Common Stock Dividends

In ~~September 2011~~ ~~and~~On February ~~2012,~~18, 2021, our ~~board~~Board of ~~directors adopted~~Directors declared a ~~common stock dividend policy that has~~ ~~two~~ ~~components: (~~1~~) a dividend that links the amount of dividends on our common stock to our average~~ quarterly ~~realized silver price in the preceding quarter, and (~~2~~) a minimum annual~~cash dividend of ~~$0.01~~$0.00875 per share of common stock, ~~in each case, payable quarterly, if and when declared. For illustrative purposes only, the table below summarizes potential~~consisting of $0.00375 per share ~~dividend amounts at different quarterly average realized price levels according to~~for the ~~first~~minimum dividend component of ~~the policy:~~

Quarterly average realized silver price
per ounce

Quarterly dividend per
share

Annualized dividend
per share
$30

$0.01

$0.04
$35

$0.02

$0.08
$40

$0.03

$0.12
$45

$0.04

$0.16
$50

$0.05

$0.20

On ~~May 6, 2020,~~ our ~~board of directors declared a~~ common stock dividend ~~pursuant to~~policy and $0.005 per share for the ~~minimum annual~~silver-linked dividend component of the policy, ~~described above, of $0.0025 per share,~~ for a total dividend of ~~approximately $1.3~~$4.7 million ~~payable~~paid in ~~June 2020.~~March 2021. ~~Because the average~~The realized silver price of $25.16 in the fourth quarter of 2020 satisfied the criterion for the silver-linked dividend component of our common stock dividend policy.

During May 2021, our Board of Directors approved an increase in our silver-linked dividend by $0.01 per year and approved a quarterly silver-linked dividend of $0.075 based on the first quarter of ~~2020~~2021 ~~was $14.48 per ounce,~~realized silver price of $25.66. The table below provides an overview of the augmented silver-linked dividend policy and the increased minimum ~~threshold of $30 according to the policy,~~ no ~~silver-price-linked component was declared or paid. The declaration and payment of common stock dividends is at the sole discretion of our board of directors.~~dividends.

Quarterly Average Realized Silver Price per Ounce	Quarterly Silver-Linked Dividend per Share	Annualized Silver-Linked Dividend per Share	Annualized Minimum Dividend	Annualized Dividends per Share: Silver-Linked and Minimum
$25	$0.0075	$0.03	$0.015	$0.045
$30	$0.0125	$0.05	$0.015	$0.065
$35	$0.0225	$0.09	$0.015	$0.105
$40	$0.0325	$0.13	$0.015	$0.145
$45	$0.0425	$0.17	$0.015	$0.185
$50	$0.0525	$0.21	$0.015	$0.225

At-The-Market Equity Distribution Agreement

~~Common Stock Repurchase Program~~

OnPursuant to an equity distribution agreement dated ~~May 8, 2012,~~February 18, 2021, we ~~announced that our board of directors approved a stock repurchase program. Under the program, we are authorized to repurchase~~may offer and sell up to 2060 million shares of our ~~outstanding~~ common stock from time to time ~~in open market~~to or ~~privately negotiated~~through sales agents. Sales of the shares, if any, will be made by means of ordinary brokers transactions ~~depending on prevailing market conditions~~or as otherwise agreed between the Company and ~~other factors. The repurchase program~~ ~~may~~ ~~be modified, suspended or discontinued by us at any time.~~the agents as principals. Whether or not we engage in ~~repurchases~~sales from time to time may depend on a variety of factors, including ~~not~~ ~~only~~share price, ~~and~~our cash resources, ~~but~~ customary black-out restrictions, and whether we have any material inside ~~information, limitations~~information. The agreement can be terminated by us at any time. Any shares issued under the equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on ~~share repurchases or cash usage that~~ Form S-~~may~~ ~~be imposed by our credit agreement or in connection with issuances of securities, alternative uses for cash, applicable law, and other investment opportunities from time to time. As of~~ ~~June~~ ~~30,~~3. ~~2020,~~ ~~934,100~~NaN shares have been ~~purchased at an average price of $3.99 per share, leaving approximately 19.1 million shares that~~ ~~may~~ ~~yet be purchased~~sold under the ~~program. The closing price~~agreement as of ~~our common stock at~~ ~~August~~March 4,31, ~~2020,~~ ~~was $6.05 per share. NaN shares were purchased under the program during the~~ ~~first~~~~six~~ ~~months of~~ ~~2020.~~2021.

~~Warrants~~

~~We issued 4,136,000 warrants to purchase 1 share~~

~~Common stock contributed to the Hecla Charitable Foundation~~

In ~~June 2020,~~ ~~we gifted 650,000 shares of our common stock, valued at $2.0 million at the time of the gift, to the Hecla Charitable Foundation (the "Foundation"), and recognized expense for that amount in the~~ ~~second~~ ~~quarter of~~ ~~2020.~~ ~~The common stock was gifted from treasury shares held having a weighted average cost basis of $3.41 per share, for a total cost basis of $2.2 million for the shares contributed. The Foundation is a~~ ~~501~~~~(c)(~~3~~) entity and was established in~~ ~~2007~~ to provide grants and disburse funds for educational and charitable purposes to qualifying organizations in order to promote the social, environmental and economic sustainability and development of the communities where we have operations and activities.

Note 9.7.Debt, Credit Facility and Leases

~~Senior Notes~~

OnOur debt as of ~~February 19,~~ March 31,2021 and December 31,2020~~we completed an offering of $475 million in aggregate principal amount~~ consisted of our 7.25% Senior Notes due February 15, 2028 ("Senior Notes") ~~under our shelf registration statement previously filed with the SEC. The Senior Notes are governed by the Indenture, dated as of~~ ~~February 19, 2020,~~ ~~among Hecla Mining Company ("Hecla")~~ and ~~certain of our subsidiaries and The Bank of New York Mellon Trust Company, N.A., as trustee. On~~ ~~March 19, 2020,~~ ~~the net proceeds from the offering of the Senior Notes ($469.5 million) were used, together with cash on hand, to redeem all of our previously-outstanding 6.875% Senior Notes that were due in~~ ~~2021~~ ~~and had a principal balance of $506.5 million (~~~~"2021~~ ~~Notes").~~

~~The Senior Notes are recorded net of a 1.16% initial purchaser discount totaling $5.5 million at the time of the~~ ~~February 2020~~ ~~issuance. The discount and issuance costs had an unamortized balance of $6.7 million as of~~ ~~June~~ ~~30,~~~~2020.~~ The Senior Notes bear interest at a rate of 7.25% per year from the date of issuance or from the most recent payment date on which interest has been paid or provided for. Interest on the Senior Notes is payable on ~~February 15~~ ~~and~~ ~~August 15~~ ~~of each year, commencing~~ ~~August 15, 2020.~~ ~~During each of the~~ ~~six~~ ~~month periods ended~~ ~~June~~ ~~30,~~~~2020~~ ~~and~~ ~~2019,~~ ~~interest expense on the statement of operations and comprehensive loss related to the Senior Notes and~~ ~~2021~~ ~~Notes and amortization of the initial purchaser discount and fees related to the issuance of the Senior Notes and~~ ~~2021~~ ~~Notes totaled $22.6 million and $18.1 million, respectively. Interest expense for the~~ ~~six~~ ~~month period ended~~ ~~June~~ ~~30,~~~~2020~~ ~~included amounts recorded for (i) interest recognized on both the Senior Notes and~~ ~~2021~~ ~~Notes for an overlapping period of approximately~~ ~~one~~ ~~month, as the Senior Notes were issued on~~ ~~February 19, 2020~~ ~~and the~~ ~~2021~~ ~~Notes were redeemed on~~ ~~March 19, 2020,~~ ~~and (ii) $1.7 million in unamortized initial purchaser discount on the~~ ~~2021~~ ~~Notes upon redemption. As of~~ ~~June~~ ~~30,~~~~2020,~~ ~~the long-term debt balance on the Senior Notes was $468.3 million, consisting of the principal amount of $475.0 million less $6.7 million in amortized discount and issuance costs. As of~~ ~~December~~ ~~31,~~~~2019,~~ ~~the long-term debt balance on the~~ ~~2021~~ ~~Notes was $504.7 million, consisting of the total principal amount of $506.5 million less $1.8 million in amortized discount.~~

The Senior Notes are guaranteed on a senior unsecured basis by certain of our subsidiaries (the "Guarantors"). The Senior Notes and the guarantees are, respectively, Hecla's and the Guarantors' general senior unsecured obligations and are subordinated to all of Hecla's and the Guarantors' existing and future secured debt to the extent of the assets securing that secured debt. In addition, the Senior Notes are effectively subordinated to all of the liabilities of Hecla's subsidiaries that are ~~not~~ ~~guaranteeing the Senior Notes, to the extent of the assets of those subsidiaries.~~

~~The Senior Notes will be redeemable in whole or in part, at any time and from time to time on or after~~ ~~February 15, 2023,~~ ~~on the redemption dates and at the redemption prices specified in the Indenture, plus accrued and unpaid interest, if any, to the date of redemption. Prior to~~ ~~February 15, 2023,~~ we ~~may~~ ~~redeem some or all of the Senior Notes at a redemption price of 100% of the principal amount, plus accrued interest, if any, to the redemption date, plus a "make whole" premium. We~~ ~~may~~ ~~redeem up to 35% of the Senior Notes before~~ ~~February 15, 2023~~ ~~with the net cash proceeds of certain equity offerings.~~

Upon the occurrence of a change of control (as defined in the Indenture), each holder of Senior Notes will have the right to require us to purchase all or a portion of such holder's Senior Notes pursuant to a change of control offer (as defined in the Indenture), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, subject to the rights of holders of the Senior Notes on the relevant record date to receive interest due on the relevant interest payment date.

~~Investissment Québec Notes~~

On ~~July 9, 2020,~~ ~~we entered into a note purchase agreement pursuant to which we will issue~~ ~~CAD$50~~ ~~million (approximately~~ ~~USD$36.8~~ ~~million at the time of the transaction) in aggregate principal amount of~~ our Series 2020-A Senior Notes due July 9, 2025 (the “IQ Notes”) ~~to Investissment Québec, a financing arm~~. The following tables summarize our long-term debt balances, excluding interest, as of March 31,2021 and December 31,2020 (in thousands):

	March 31, 2021
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	38,359	$	513,359
Unamortized discount/premium and issuance costs		(6,234	)		867		(5,367	)
Long-term debt balance	$	468,766		$	39,226	$	507,992

	December 31, 2020
	Senior Notes			IQ Notes		Total
Principal	$	475,000		$	37,886	$	512,886
Unamortized discount/premium and issuance costs		(6,462	)		818		(5,644	)
Long-term debt balance	$	468,538		$	38,704	$	507,242

The following table summarizes the ~~Québec government. Because the IQ notes are denominated in CAD, the reported USD-equivalent principal balance will change with movements in the exchange rate. The~~scheduled annual future payments, including interest, for our Senior Notes, IQ Notes, ~~will be issued at a premium~~and finance and operating leases as of ~~103.65%, or~~ ~~CAD$1.8~~ ~~million, implying an effective annual yield of 5.74% and an aggregate principal amount to be repaid of~~ ~~CAD$48.2~~ ~~million. The IQ Notes will be issued in 4 equal installments of~~ ~~CAD$12.5~~ ~~million on~~ ~~July 9,~~March ~~August 9,~~ 31,~~September 9~~ ~~and~~ ~~October 9, 2020,~~ ~~with the~~ ~~first~~ ~~installment issued net of~~ ~~CAD$0.6~~ ~~million in fees. The IQ Notes bear interest on amounts outstanding at a rate of 6.515% per year, payable on~~ ~~January 9~~ ~~and~~ ~~July 9~~ ~~of each year, commencing~~ ~~January 9, 2021.~~ ~~The IQ Notes are senior and unsecured and are pari passu in all material respects with the~~ 2021 ~~Notes, including with respect to guarantees of the IQ Notes by certain of our subsidiaries.~~(in thousands). The net proceeds from the IQ Notes will be available for general corporate purposes, including open market purchases of a portion of the Senior Notes and to pay for capital expenditures at our Casa Berardi unit. Under the note purchase agreementamounts for the IQ Notes ~~and subject to a force majeure event, we~~ are ~~required to invest~~stated in U.S. dollars ("USD") based on the ~~aggregate~~ ~~CAD$100~~ ~~million at the Casa Berardi unit and other exploration and development projects in Quebec over the~~USD/Canadian dollar ("CAD") exchange rate as of ~~four~~March ~~-year period commencing on~~ ~~July 9, 2020.~~31,2021.

~~Ressources Québec Notes~~

Twelve-month period ending March 31,	Senior Notes		IQ Notes		Finance Leases		Operating Leases
2022	$	34,438	$	2,499	$	7,329	$	3,696
2023		34,438		2,499		5,132		2,706
2024		34,438		2,499		3,643		2,002
2025		34,438		2,499		2,076		549
2026		34,438		39,045		0		525
Thereafter		539,568		0		0		2,213
Total	$	711,758	$	49,041	$	18,180	$	11,691

On ~~March 5, 2018,~~ ~~we entered into a note purchase agreement pursuant to which we issued~~ ~~CAD$40~~ ~~million (approximately~~ ~~USD$30.8~~ ~~million at the time of the transaction) in aggregate principal amount of our Series~~ ~~2018~~~~-A Senior Notes due~~ ~~May 1, 2021 (~~the “RQ Notes”) to Ressources Québec, a subsidiary of Investissment Québec. Because the RQ notes were denominated in CAD, the reported USD-equivalent principal balance changed with movements in the exchange rate. The RQ Notes were issued at a discount of 0.58%, or ~~CAD$0.2~~ ~~million, and bore interest at a rate of 4.68% per year, payable on~~ ~~May 1~~ ~~and~~ ~~November 1~~ ~~of each year, commencing~~ ~~May 1, 2018.~~ ~~The RQ Notes were senior and unsecured and were pari passu in all material respects with the~~ ~~2021~~ Notes, including with respect to guarantees of the RQ Notes by certain of our subsidiaries. The net proceeds from the RQ Notes were required to be used for development and expansion of our Casa Berardi mine. In ~~December 2019,~~ ~~we prepaid the obligation related to the RQ Notes through issuance of approximately 10.7 million shares of our common stock having a total value of approximately~~ ~~CAD$43.8~~ ~~million (approximately~~ ~~USD$33.5~~ ~~million). During the~~ ~~six~~ ~~months ended~~ ~~June 30, 2019,~~ ~~interest expense related to the RQ Notes, including discount and origination fees, totaled $0.4 million.~~

Credit Facility

In July 2018, we entered into a $250 million senior secured revolving credit facility which ~~replaced our previous $100 million credit facility. The facility~~ has a term ending on February 7, 2023. ~~The credit facility is collateralized by~~As of March 31,2021 and December 31,2020, 0 amounts were outstanding under the ~~assets of or shares of common stock held in our material subsidiaries, including those owning the Casa Berardi mine and our Nevada operations, and by our joint venture interests holding~~ ~~100%~~ ownership of the Greens Creek mine, all of our rights and interests in the joint venture agreement, and all of our rights and interests in the assets of the joint venture. Below is information on the interest rates, standby fee, and financial covenant terms under our current credit facility in place as of ~~June~~ ~~30,~~~~2020:~~facility.

Interest rates:

Spread over the London Interbank Offered Rate
2.25 - 4.00%
Spread over alternative base rate
1.25 - 3.00%
Standby fee per annum on undrawn amounts
0.5625 - 1.00%
Covenant financial ratios:

Senior leverage ratio (debt secured by liens/EBITDA)

not more than 2.50:1
Leverage ratio (total debt less unencumbered cash/EBITDA)⁽¹⁾

not more than 4.25:1
Interest coverage ratio (EBITDA/interest expense)

not less than 3.00:1

⁽

112) ~~The leverage ratio changed to~~ ~~4.00:1~~ ~~effective~~ ~~July 1, 2020.~~

We are also able to obtain letters of credit under the facility, and for any such letters we are required to pay a participation fee of between 2.25% and 4.00% of the amount of the letters of credit based on our total leverage ratio, as well as a fronting fee to each issuing bank of 0.20% annually on the average daily dollar amount of any outstanding letters of credit. There were ~~$20.4~~$20.3 million in letters of credit outstanding as of ~~June~~March ~~30,~~31, ~~2020.~~2021.

We believe we were in compliance with all covenants under the credit agreement as of ~~June~~ ~~30,~~~~2020.~~ ~~We drew $210.0 million on the facility during the~~ ~~first~~~~six~~ ~~months of~~ ~~2020~~ ~~and repaid $160.0 million of that amount during the same period, with the remaining $50.0 million outstanding as of~~ ~~June~~ ~~30,~~~~2020.~~

~~Finance Leases~~

~~We have entered into various lease agreements, primarily for equipment at our Greens Creek, Lucky Friday, Casa Berardi and Nevada Operations units, which we have determined to be finance leases. At~~ ~~June~~ ~~30,~~~~2020,~~ the total liability balance associated with finance leases, including certain purchase option amounts, was $12.8 million, with $5.7 million of the liability classified as current and the remaining $7.1 million classified as non-current. At ~~December~~March 31, ~~2019,~~2021. the total liability balance associated with finance leases was $12.6 million, with $5.4 million of the liability classified as current and $7.2 million classified as non-current. The right-of-use assets for our finance leases are recorded in properties, plants, equipment and mineral interests, net, on our condensed consolidated balance sheets and totaled ~~$20.4~~ ~~million as of~~ ~~June~~ ~~30,~~~~2020~~ ~~and $20.6 million as of~~ ~~December~~ ~~31,~~~~2019,~~ ~~net of accumulated depreciation. Expense related to finance leases during the~~ ~~first~~ ~~half of~~ ~~2020~~ ~~and~~ ~~2019~~ ~~included~~ ~~$3.3~~ ~~million and $3.4 million, respectively, for amortization of the right-of-use assets and~~ ~~$0.3~~ ~~million and $0.4 million, respectively, for interest expense. The total obligation for future minimum payments on finance leases was $13.7 million at~~ ~~June~~ ~~30,~~~~2020,~~ ~~with~~ ~~$0.9~~ ~~million attributed to interest. Our finance leases had a weighted average remaining lease term of approximately~~ ~~1.8~~ ~~years and a weighted average discount rate of approximately 6.8%.~~

At ~~June~~ ~~30,~~~~2020,~~ ~~the annual maturities of finance lease commitments, including interest, were (in thousands):~~

Twelve-month period ending June 30,

2021
$ 6,123
2022
4,441
2023
2,151
2024
960
Total
13,675
Less: imputed interest
(873 )
Finance lease liability
$ 12,802

~~Operating Leases~~

We have entered into various lease agreements, primarily for equipment, buildings and other facilities, and land at our operating units and corporate offices, which we have determined to be operating leases. Some of the operating leases allow for extension of the lease beyond the current term at our option. We have considered the likelihood and estimated duration of the extension options in determining the lease term for measurement of the liability and right-of-use asset. For our operating leases as of ~~June~~ ~~30,~~~~2020,~~ ~~we have assumed discount rates of between 5% and 6.5%, and the weighted average discount rate was 6.5%. At~~ ~~June~~ ~~30,~~~~2020,~~ the total liability balance associated with the operating leases was $13.2 million, with $4.2 million of the liability classified as current and the remaining $9.1 million classified as non-current. At ~~December~~ ~~31,~~~~2019,~~ the total liability balance associated with the operating leases was $16.4 million, with $5.6 million of the liability classified as current and the remaining $10.8 million classified as non-current. The right-of-use assets for our operating leases are recorded as a non-current asset on our condensed consolidated balance sheets and totaled $13.2 million as of ~~June~~ ~~30,~~~~2020~~ ~~and $16.4 million as of~~ ~~December~~ ~~31,~~~~2019.~~ ~~Lease expense on operating leases during the~~ ~~first~~ ~~half of~~ ~~2020~~ ~~and~~ ~~2019~~ ~~totaled $3.7 million and $4.0 million, respectively. The total obligation for future minimum operating lease payments, including assumed extensions beyond the current lease terms, was $14.6 million at~~ ~~June~~ ~~30,~~~~2020.~~ ~~The weighted-average remaining lease term for our operating leases as of~~ ~~June~~ ~~30,~~~~2020~~ ~~was approximately 5.3 years.~~

At ~~June~~ ~~30,~~~~2020,~~ ~~the annual maturities of undiscounted operating lease payments, including assumed extensions beyond the current lease terms, were (in thousands):~~

Twelve-month period ending June 30,

2021
$ 3,946
2022
3,384
2023
2,617
2024
1,512
2025
539
More than 5 years
2,601
Total
14,599
Effect of discounting
(1,358 )
Operating lease liability
$ 13,241

~~Note~~ ~~10.~~ ~~Developments in Accounting Pronouncements~~

~~Accounting Standards Updates Adopted~~

In ~~June 2016,~~ ~~the FASB issued ASU~~ ~~No.~~~~2016~~-13 ~~Financial Instruments - Credit Losses (Topic~~ ~~326~~): Measurement of Credit Losses on Financial Instruments. The update changes how entities will record credit losses from an "incurred loss" approach to an "expected loss" approach. The update was adopted as of ~~January 1, 2020,~~ ~~and its adoption did~~ ~~not~~ ~~have a material impact on our consolidated financial statements.~~

In ~~August 2018,~~ ~~the FASB issued ASU~~ ~~No.~~~~2018~~-13 ~~Fair Value Measurement (Topic~~ ~~820~~): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update removes, modifies and makes additions to certain disclosure requirements with respect to fair value measurements. The update was adopted as of ~~January 1, 2020,~~ ~~and its adoption did~~ ~~not~~ ~~have a material impact on our consolidated financial statements.~~

~~Accounting Standards Updates to Become Effective in Future Periods~~

In ~~August 2018,~~ ~~the FASB issued ASU~~ ~~No.~~~~2018~~-14 ~~Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic~~ ~~715~~-20~~): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The update removes several disclosure requirements, adds~~ ~~two~~ new disclosure requirements, and clarifies other disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The update is effective for fiscal years ending after ~~December 15, 2020,~~ ~~with early adoption permitted. We are evaluating the impact of this update on our disclosures involving our defined benefit pension plans.~~

In ~~December 2019,~~ ~~the FASB issued ASU~~ ~~No.~~~~2019~~-12 ~~Income Taxes (Topic~~ ~~740~~): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. The update is effective for fiscal years beginning after ~~December 15, 2020,~~ ~~with early adoption permitted. We are evaluating the impact of this update on our consolidated financial statements.~~

In ~~March 2020,~~ ~~the FASB issued ASU~~ ~~No.~~~~2020~~-04 ~~Reference Rate Reform (Topic~~ ~~848~~): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The update is effective as of ~~March 12, 2020~~ ~~through~~ ~~December 31, 2022.~~ ~~We are evaluating the impact of this update on our consolidated financial statements.~~

Note ~~11.~~8.Derivative Instruments

General

Our current risk management policy provides that up to 75% of:

•

These instruments do, however, expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of the hedged commodity or foreign currency and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production and/or forecasted costs covered under contract positions.

Foreign Currency

Our wholly-owned subsidiaries owning the Casa Berardi and San Sebastian ~~mines~~operations are ~~U.S. dollar ("USD")-functional~~USD-functional entities which routinely incur expenses denominated in ~~Canadian dollars ("CAD")~~CAD and Mexican pesos ("MXN"), ~~respectively, and such~~respectively. Such expenses expose us to exchange rate fluctuations between the USD and CAD and MXN. In ~~April 2016,~~ ~~we initiated~~We have a program to manage our exposure to fluctuations in the exchange rate between the USD and CAD and ~~the impact on our~~MXN for these subsidiaries' future operating costs denominated in ~~CAD. In~~ ~~October 2016,~~ ~~we also initiated a similar program with respect to MXN, which was~~ ~~not~~ ~~in use as of~~ ~~June~~ ~~30,~~~~2020.~~ ~~When in use, the~~CAD and MXN. The programs utilize forward contracts to buy CAD and MXN, and each contract is designated as a cash flow hedge. As of ~~June~~March ~~30,~~31, ~~2020,~~2021, we ~~had 140~~have 133 forward contracts outstanding to buy a total of CAD$~~315.1~~256.8 million having a notional amount of ~~US$239.9~~USD$194.8 million. The CAD contracts are related to forecasted cash operating costs at Casa Berardi ~~forecasted~~ to be incurred from ~~2020~~2021 through ~~2023~~2024 and have CAD-to-USD exchange rates ranging between 1.2702 and 1.3785. There were 0 outstanding contracts for MXN ~~contracts~~ as of ~~June~~March ~~30,~~31, ~~2020.~~2021. ~~Our risk management policy allows for up to 75% of our planned cost exposure for~~ ~~five~~ ~~years into the future to be hedged under such programs, and for potential additional programs to manage other foreign currency-related exposure areas.~~

As of ~~June~~March ~~30,~~31,2021 and December 31, 2020, we recorded the following balances for the fair value of the ~~contracts:~~contracts (in millions):

•

~~a current asset of $0.1 million, which is included in other current assets;~~

•

~~a non-current asset of $0.2 million, which is included in other non-current assets;~~

•

~~a current liability of $3.9 million, which is included in current derivatives liabilities; and~~

•

~~a non-current liability of $5.3 million, which is included in non-current derivatives liabilities.~~

	March 31,		December 31,
Balance sheet line item:	2021		2020
Current derivatives assets	$	5.0	$	3.5
Non-current derivatives assets		4.2		4.2

Net unrealized ~~losses~~gains of approximately ~~$9.3~~$9.5 million related to the effective portion of the hedges were included in accumulated other comprehensive loss as of ~~June~~March ~~30,~~31, ~~2020.~~2021. Unrealized gains and losses will be transferred from accumulated other comprehensive loss to current earnings as the underlying operating expenses are recognized. We estimate approximately ~~$4.0~~$4.8 million in net unrealized ~~losses~~gains included in accumulated other comprehensive loss as of ~~June~~March ~~30,~~31, ~~2020~~2021 ~~would~~will be reclassified to current earnings in the next twelve months. Net realized ~~losses~~gains of approximately ~~$1.9~~$0.6 million on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive loss and included in cost of sales and other direct production costs for the ~~six~~three months ended ~~June~~March ~~30,~~31, ~~2020.~~2021. NaN net unrealized gains or losses related to ineffectiveness of the hedges were included in current earnings for the ~~six~~three months ended ~~June~~March ~~30,~~31, ~~2020.~~2021.

2213

Metals Prices

We ~~may~~ at times use commodity forward sales commitments, commodity swap contracts and commodity put and call option contracts to manage our exposure to fluctuation in the prices of certain metals we produce. Contract positions are designed to ensure that we will receive a defined minimum price for certain quantities of our production, thereby partially offsetting our exposure to fluctuations in market prices. Our risk management policy allows for up to 75% of our planned metals price exposure for ~~five~~ years into the future, with certain other limitations, to be covered under such programs that would establish a ceiling for prices to be realized on future metals sales. These instruments do, however, expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of a commodity and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production covered under contract positions.

We are currently using financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement. In addition, we use financially-settled forward contracts to manage the exposure to changes in prices of zinc and lead (but ~~not~~ ~~silver and gold) contained in our forecasted future concentrate shipments.~~ to:

•

changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement; and

•

changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments.

The following tables summarize the quantities of metals committed under forward sales contracts at ~~June~~March ~~30,~~31, ~~2020~~2021 and December 31, ~~2019:~~2020:

June 30, 2020	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
March 31, 2021																	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2020 settlements		2,303		7		17,086		11,409	$	16.97	$	1,728	$	0.89	$	0.75
2021 settlements																		1,492		5		12,070		1,587	$	25.48	$	1,736	$	1.26	$	0.89
Contracts on forecasted sales
2020 settlements		—		—		26,731		8,322		N/A		N/A	$	0.88	$	0.78
2021 settlements		—		—		4,134		1,102		N/A		N/A	$	0.91	$	0.77		—		—		33,841		30,479		N/A		N/A	$	1.20	$	0.89
2022 settlements																		—		—		53,407		42,715		N/A		N/A	$	1.26	$	0.96
2023 settlements																		—		—		41,171		—		N/A		N/A	$	1.27		N/A

December 31, 2019

Ounces/pounds under contract (in 000's)

Average price per ounce/pound

Silver

Gold

Zinc

Lead

Silver

Gold

Zinc

Lead

(ounces)

(ounces)

(pounds)

(pounds)

(ounces)

(ounces)

(pounds)

(pounds)

Contracts on provisional sales

2020 settlements
2,556 10 21,550 5,159 $ 17.20 $ 1,481 $ 1.04 $ 0.88
Contracts on forecasted sales

2020 settlements
— — 441 11,740 N/A N/A $ 1.13 $ 0.98

December 31, 2020	Ounces/pounds under contract (in 000's)								Average price per ounce/pound
	Silver		Gold		Zinc		Lead		Silver		Gold		Zinc		Lead
	(ounces)		(ounces)		(pounds)		(pounds)		(ounces)		(ounces)		(pounds)		(pounds)
Contracts on provisional sales
2021 settlements		1,282		4		23,314		4,905	$	25.00	$	1,858	$	1.19	$	0.90
Contracts on forecasted sales
2021 settlements		—		—		41,577		30,876		N/A		N/A	$	1.17	$	0.88
2022 settlements		—		—		18,519		—		N/A		N/A	$	1.28		N/A

In June 2019, we began ~~using~~utilizing financially-settled put option contracts to manage the exposure of our forecasted future gold and silver sales to potential declines in market prices for those metals. These put contracts ~~give~~gave us the option, but not the obligation, to realize established prices on quantities of silver and gold to be sold in the future. ~~The following tables summarize the quantities~~As of ~~metals for which we have entered into put contracts and the average exercise prices as of~~ ~~June~~ ~~30,~~~~2020~~ ~~and~~ December 31, ~~2019:~~2020, we had put contracts that provided average floor prices of $16.50 per ounce for silver and $1,650 per ounce for gold for a total of 1.1 million silver ounces and 12,992 gold ounces. We had 0 put option contracts outstanding as of March 31,2021.

June 30, 2020

Ounces under contract (in 000's)

Average price per ounce

Silver

Gold

Silver

Gold

(ounces)

(ounces)

(ounces)

(ounces)

Contracts on forecasted sales

2020 settlements
2,718 73 $ 15.67 $ 1,633

December 31, 2019

Ounces under contract (in 000's)

Average price per ounce

Silver

Gold

Silver

Gold

(ounces)

(ounces)

(ounces)

(ounces)

Contracts on forecasted sales

2020 settlements
5,700 130 $ 15.73 $ 1,435

These forward and put option contracts are not designated as hedges for accounting purposes and are marked-to-market through earnings each period.

Table of ~~June~~ ~~30,~~~~2020,~~ weContents

We recorded the following balances for the fair value of the forward contracts as of March 31,2021 and forward and put option contracts ~~held at that time:~~as of December 31,2020 (in millions):

•

~~a current asset of $0.2 million, which is included in other current assets and is net of $0.2 million for contracts in a fair value liability position; and~~

•

~~a current liability of $9.9 million, which is included in current derivatives liabilities and is net of $0.5 million for contracts in a fair value current asset position.~~

	March 31, 2021								December 31, 2020
Balance sheet line item:	Contracts in an asset position		Contracts in a liability position			Net asset (liability)			Contracts in an asset position		Contracts in a liability position			Net asset (liability)
Current derivatives assets	$	3.3	$	(1.1	)	$	2.2		$	0.2	$	(0.2	)	$	0
Non-current derivatives assets		2.3		(0.2	)		2.1			0.5		(0.1	)		0.4
Current derivatives liability		0		(3.9	)		(3.9	)		0.1		(11.8	)		(11.7	)
Other non-current liabilities		0.4		(1.2	)		(0.8	)		0		0			0

We recognized ~~a $3.3~~$2.8 million and $1.7 million net ~~loss~~gains during the first ~~six~~ ~~months~~quarters of 2021 and 2020, respectively, on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales of products. The net ~~loss~~gains recognized on the contracts offsets ~~gains~~losses related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement.

We recognized ~~a $6.1~~$0.5 million and $7.9 million net ~~loss~~gains during the first ~~half~~quarters of 2021 and 2020, respectively, on the contracts utilized to manage exposure to prices for forecasted future sales. The net ~~loss~~gains on these contracts isare included as a separate line item under other income (expense), as they relate to forecasted future sales, as opposed to sales that have already taken place but are subject to final pricing as discussed in the preceding paragraph. The net ~~loss~~gain for the first ~~half~~quarter of ~~2020~~2021 is the result of ~~increasing gold~~a decrease in zinc and ~~zinc prices, partially offset by decreasing~~ lead prices. ~~These programs, when utilized and the contracts are~~ ~~not~~ settled prior to their maturity dates, are designed to mitigate the impact of potential future declines in silver, gold, lead and zinc prices from the price levels established in the contracts (see average price information above). When those prices increase compared to the contracts, we incur losses on the contracts.

Credit-risk-related Contingent Features

Certain of our derivative contracts contain cross default provisions which provide that a default under our revolving credit agreement would cause a default under the derivative contract. As of ~~June~~March ~~30,~~31, ~~2020,~~2021, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was ~~$19.8~~$6.4 million as of ~~June~~March ~~30,~~31, ~~2020,~~2021, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at ~~June~~March ~~30,~~31, ~~2020,~~2021, we could have been required to settle our obligations under the agreements at their termination value of ~~$19.8~~$6.4 million.

Note ~~12.~~9.Fair Value Measurement

Accounting guidance has established a hierarchy for inputs used to measure assets and liabilities at fair value on a recurring basis. The three levels included in the hierarchy are:

Level 1: quoted prices in active markets for identical assets or liabilities;

Level 2: significant other observable inputs; and

Level 3: significant unobservable inputs.

Description	Balance at June 30, 2020		Balance at December 31, 2019		Input Hierarchy Level	Balance at March 31, 2021		Balance at December 31, 2020		Input Hierarchy Level
Assets:
Cash and cash equivalents:
Money market funds and other bank deposits	$	75,923	$	62,452	Level 1	$	139,750	$	129,830	Level 1
Available for sale securities:
Current and non-current investments:
Equity securities – mining industry		12,162		6,207	Level 1		11,717		19,389	Level 1
Trade accounts receivable:
Receivables from provisional concentrate sales		26,003		11,952	Level 2		35,274		27,864	Level 2
Restricted cash balances:
Certificates of deposit and other deposits		1,053		1,025	Level 1
Derivative contracts:
Certificates of deposit and other bank deposits							1,053		1,053	Level 1
Derivative contracts - current and non-current derivatives assets:
Metal forward and put option contracts							4,349		381	Level 2
Foreign exchange contracts		295		1,184	Level 2		9,192		7,647	Level 2
Metal forward and put option contracts		221		—	Level 2
Total assets	$	115,657	$	82,820		$	201,335	$	186,164

Liabilities:
Derivative contracts:
Derivative contracts - current derivatives liabilities and other non-current liabilities:
Metal forward and put option contracts						$	4,742	$	11,737	Level 2
Foreign exchange contracts	$	9,174	$	1,437	Level 2		0		19	Level 2
Metal forward and put option contracts		9,887		5,777	Level 2
Total Liabilities	$	19,061	$	7,214		$	4,742	$	11,756

Current and non-current restricted cash balances consist primarily of certificates of deposit, U.S. Treasury securities, and other deposits and are valued at cost, which approximates fair value.

Our non-current available for sale securities consist of marketable equity securities of companies in the mining industry which are valued using quoted market prices for each security.

Trade accounts receivable ~~include amounts due to us for shipments of concentrates, doré and metals sold~~ from doré to customers. Revenues and the corresponding accounts receivable for sales of metals products are recorded when title and risk of loss transfer to the customer (generally at the time of ship loading, or at the time of arrival at the customer for trucked products). Sales of concentrates are recorded using estimated forward prices for the anticipated month of settlement applied to our estimate of payable metal quantities contained in each shipment. Sales are recorded net of estimated treatment and refining charges, which are also impacted by changes in metals prices and quantities of contained metals. We estimate the prices at which sales of our concentrates will be settled due to the time elapsed between shipment and final settlement with the customer. Receivables for previously recordedprovisional concentrate sales are ~~adjusted~~subject to ~~reflect estimated~~final pricing and valued using quoted prices based on forward ~~metals prices at~~curves for the end of each period until final settlement by the customer. We obtain the forward metals prices used each period from a pricing service. Changes in metals prices between shipment and final settlement result in changes to revenues previously recorded upon shipment.particular metal. The embedded derivative contained in our concentrate sales is adjusted to fair market value through earnings each period prior to final settlement.

We use financially-settled forward contracts to manage exposure to changes in the exchange rate between USD and CAD and MXN, and the impact on CAD- and MXN-denominated operating costs incurred at our Casa Berardi and San Sebastian units (see Note 118 for more information). These contracts qualify for hedge accounting, with unrealized gains and losses related to the effective portion of the contracts included in accumulated other comprehensive loss, and unrealized gains and losses related to the ineffective portion of the contracts included in earnings each period. The fair value of each contract represents the present value of the difference between the forward exchange rate for the contract settlement period as of the measurement date and the contract settlement exchange rate.

We use financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments that have not reached final settlement. We also use financially-settled forward and put option contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our forecasted future sales (see Note 118 for more information). ~~These contracts do~~ ~~not~~ ~~qualify for hedge accounting, and are marked-to-market through earnings each period.~~ The fair value of each forward contract represents the present value of the difference between the forward metal price for the contract settlement period as of the measurement date and the contract settlement metal price. The fair value of each put option contract is measured using the Black-Scholes pricing model, with inputs for the period-end metal price and assumed metal price volatility and discount rate.

Our Senior Notes, which were recorded at their carrying value of ~~$468.3~~$468.8 million, net of unamortized initial purchaser discount and issuance costs, at ~~June~~ ~~30,~~~~2020,~~had a fair value of ~~$483.4~~$509.7 million at ~~June~~March ~~30,~~31, ~~2020.~~2021. Quoted market prices, which we consider to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. See Note 97 for more information.

Note ~~13.~~10. ~~Guarantor Subsidiaries~~Commitments, Contingencies and Obligations

~~Presented below~~General

We follow GAAP guidance in determining our accruals and disclosures with respect to loss contingencies, and evaluate such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are ~~Hecla’s unaudited interim condensed consolidating~~accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as ~~required by Rule~~incurred. If a loss contingency is 3-10not probable or reasonably estimable, disclosure of ~~Regulation S-~~the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Lucky Friday Water Permit Matters

In XDecember 2013, the Environmental Protection Agency ("EPA") issued to Hecla Limited a request for information under Section 308 of the ~~Securities Exchange~~Clean Water Act directing Hecla Limited to undertake a comprehensive groundwater investigation of Lucky Friday’s tailings pond ~~1934,~~no. ~~as amended, resulting from~~3 to evaluate whether the ~~guarantees by certain~~pond is causing the discharge of ~~Hecla's subsidiaries of the Senior Notes and IQ Notes (see~~ ~~Note~~ 9 for more information). The Guarantors consist of the following of Hecla's 100%-owned subsidiaries: Hecla Limited; Silver Hunter Mining Company; Rio Grande Silver, Inc.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Hecla Montana, Inc.; Revett Silver Company; RC Resources, Inc.; Troy Mine Inc.; Revett Exploration, Inc.; Revett Holdings, Inc.; Mines Management, Inc.; Newhi, Inc.; Montanore Minerals Corp.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; Hecla Juneau Mining Company; Klondex Holdings Inc.; Klondex Gold & Silver Mining Co.; Klondex Midas Holdings Limited; Klondex Aurora Mine Inc.; Klondex Hollister Mine Inc; and Hecla Quebec, Inc.pollutants via seepage to groundwater that is discharging to surface water. We completed the ~~offering~~investigation mandated by the EPA and submitted a draft report to the agency in December 2015. We are waiting for the EPA’s response and we cannot predict what further action, if any, the agency may take.

Johnny M Mine Area near San Mateo, McKinley County and San Mateo Creek Basin, New Mexico

In May 2011, the EPA made a formal request to Hecla Mining Company for information regarding the Johnny M Mine Area near San Mateo, McKinley County, New Mexico, and asserted that Hecla Mining Company may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") for environmental remediation and past costs the EPA has incurred at the site. Mining at the Johnny M Mine was conducted for a limited period of time by a predecessor of our subsidiary, Hecla Limited. In August 2012, Hecla Limited and the ~~Senior Notes~~EPA entered into a Settlement Agreement and Administrative Order on ~~February 19, 2020~~ Consent for Removal Action (“Consent Order”), pursuant to which Hecla Limited agreed to pay (i) $1.1 million to the EPA for its past response costs at the site and (ii) any future response costs at the site under the Consent Order, in exchange for a covenant not to sue by the EPA. Hecla Limited paid the $1.1 million to the EPA for its past response costs and in December 2014 submitted to EPA the Engineering Evaluation and Cost Analysis (“EE/CA”) for the site which recommended on-site disposal of mine-related material. In January 2021, the EPA contacted Hecla Limited to begin negotiations on a new consent order to design and implement the on-site disposal response action recommended in the EE/CA. Based on the foregoing, we believe it is probable that Hecla Limited will incur a liability for the CERCLA removal action and we have increased our ~~shelf registration statement previously file with the SEC. We issued~~accrual to $9.0 million in the first quarter of ~~four~~2021 ~~equal tranches~~($6.1 million at December 31, 2020) primarily representing estimated costs to begin design and implementation of ~~IQ Notes~~the remedy. It is possible that Hecla Limited’s liability will be more than $9.0 million, and any increase in liability could have a material adverse effect on ~~July 9, 2020.~~Hecla Limited’s or our results of operations or financial position.

The ~~unaudited interim condensed consolidating financial statements below have been prepared from our financial information on the same basis of accounting~~Johnny M Mine is in an area known as the ~~unaudited interim condensed consolidated financial statements set forth elsewhere~~San Mateo Creek Basin (“SMCB”), which is an approximately 321 square mile area in ~~this report. Investments~~New Mexico that contains numerous legacy uranium mines and mills. In addition to Johnny M, Hecla Limited's predecessor was involved at other mining sites within the SMCB. The EPA appears to have deferred consideration of listing the SMCB site on CERCLA’s National Priorities List ("Superfund") by removing the site from its emphasis list, and is working with various potentially responsible parties ("PRPs") at the site in order to study and potentially address perceived groundwater issues within the ~~subsidiaries are accounted for under~~SMCB. The EE/CA discussed above relates primarily to contaminated rock and soil at the equity method. Accordingly, the entries necessary to consolidate Hecla, the Guarantors, and our non-guarantor subsidiaries are reflected in the intercompany eliminations column. In the course of preparing consolidated financial statements, we eliminate the effects of various transactions conducted between Hecla and its subsidiaries and among the subsidiaries. While valid at an individual subsidiary level, such activities are eliminated in consolidation because, when taken as a whole, they doJohnny M site, not ~~represent business activity with~~ ~~third~~~~-party customers, vendors,~~groundwater and ~~other parties. Examples of such eliminations include the following:~~

•

~~Investments in subsidiaries~~. The acquisition of a company results in an investment in debt or equity capital on the records of the parent company and a contribution to debt or equity capital on the records of the subsidiary. Such investments and capital contributions are eliminated in consolidation.

•

~~Capital contributions~~~~. Certain of Hecla's subsidiaries do~~ ~~not~~ generate cash flow, either at all or that is sufficient to meet their capital needs, and their cash requirements are routinely met with inter-company advances from their parent companies. Generally on an annual basis, when ~~not~~ otherwise intended as debt, the boards of directors of such parent companies declare contributions of capital to their subsidiary companies, which increase the parents' investment and the subsidiaries' additional paid-in capital. In consolidation, investments in subsidiaries and related additional paid-in capital are eliminated.

•

~~Debt.~~ At times, inter-company debt agreements have been established between certain of Hecla's subsidiaries and their parents. The related debt liability and receivable balances, accrued interest expense (if any) and income activity (if any), and payments of principal and accrued interest amounts (if any) by the subsidiary companies to their parents are eliminated in consolidation.

•

~~Dividends.~~ Certain of Hecla's subsidiaries which generate cash flow routinely provide cash to their parent companies through inter-company transfers. On at least an annual basis, the boards of directors of such subsidiary companies declare dividends to their parent companies, which reduces the subsidiaries' retained earnings and increases the parents' dividend income. In consolidation, such activity is eliminated.

•

~~Deferred taxes~~~~. Our ability to realize deferred tax assets and liabilities is considered for~~ ~~two~~ consolidated tax groups of subsidiaries within the United States: The Nevada U.S. Group and the Hecla U.S. Group. Within each tax group, all subsidiaries' estimated future taxable income contributes to the ability of their tax group to realize all such assets and liabilities. However, when Hecla's subsidiaries are viewed independently, we use the separate return method to assess the realizability of each subsidiary's deferred tax assets and whether a valuation allowance is required against such deferred tax assets. In some instances, a parent company or subsidiary ~~may~~ ~~possess deferred tax assets whose realization depends on the future taxable incomes of other subsidiaries on a consolidated-return basis, but would~~ ~~not~~ be considered realizable if such parent or subsidiary filed on a separate stand-alone basis. In such a situation, a valuation allowance is assessed on that subsidiary's deferred tax assets, with the resulting adjustment reported in the eliminations column of the guarantor and parent's financial statements, as is the case in the unaudited interim financial statements set forth below. The separate return method can result in significant eliminations of deferred tax assets and liabilities and related income tax provisions and benefits. Non-current deferred tax asset balances are included in other non-current assets on the consolidating balance sheets and make up a large portion of that item, particularly for the guarantor balances.

~~Separate financial statements of the Guarantors are~~ not ~~presented because~~elsewhere within the ~~guarantees by~~SMCB site. It is possible that Hecla Limited’s liability at the ~~Guarantors are joint~~Johnny M Site, and ~~several and full and unconditional, except~~ for ~~certain customary release provisions, including: (~~1)any other mine site within the ~~sale or disposal~~SMCB at which Hecla Limited's predecessor may have operated, will be greater than our current accrual of ~~all or substantially all~~$9.0 million due to the increased scope of ~~the assets of the Guarantor; (~~2~~) the sale or other disposition of the capital stock of the Guarantor; (~~3~~) the Guarantor is designated as an unrestricted entity in accordance with the applicable provisions of the indenture; (~~4~~) Hecla ceases to be a borrower as defined in the indenture; and (~~5~~) upon legal or covenant defeasance or satisfaction and discharge of the indenture.~~required remediation.

2717

~~Unaudited Interim Condensed Consolidating Balance Sheets~~In July 2018, the EPA informed Hecla Limited that it and several other PRPs may be liable for cleanup of the SMCB site or for costs incurred by the EPA in cleaning up the site. The EPA stated it has incurred approximately $9.6 million in response costs to date. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site, including the relative contributions of contamination by the various PRPs.

As of June 30, 2020

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Assets

Cash and cash equivalents
$ 42,071 $ 24,523 $ 9,329 $ — $ 75,923
Other current assets
12,745 115,587 10,700 (74 ) 138,958
Properties, plants, equipment and mineral interests, net
1,913 2,343,623 9,347 — 2,354,883
Intercompany receivable (payable)
(25,989 ) (559,649 ) 221,658 363,980 —
Investments in subsidiaries
1,643,530 — — (1,643,530 ) —
Other non-current assets
277,344 24,666 (120,211 ) (148,155 ) 33,644
Total assets
$ 1,951,614 $ 1,948,750 $ 130,823 $ (1,427,779 ) $ 2,603,408
Liabilities and Stockholders' Equity

Current liabilities
$ (284,257 ) $ 150,204 $ 3,987 $ 245,702 $ 115,636
Long-term debt
518,252 15,848 288 — 534,388
Non-current portion of accrued reclamation
— 93,160 6,289 — 99,449
Non-current deferred tax liability
— 158,628 — (29,951 ) 128,677
Other non-current liabilities
58,926 6,673 966 — 66,565
Stockholders' equity
1,658,693 1,524,237 119,293 (1,643,530 ) 1,658,693
Total liabilities and stockholders' equity
$ 1,951,614 $ 1,948,750 $ 130,823 $ (1,427,779 ) $ 2,603,408

Carpenter Snow Creek and Barker-Hughesville Sites in Montana

As of December 31, 2019

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Assets

Cash and cash equivalents
$ 33,750 $ 15,357 $ 13,345 $ — $ 62,452
Other current assets
9,725 89,722 17,299 (74 ) 116,672
Properties, plants, equipment and mineral interests - net
1,913 2,410,458 11,327 — 2,423,698
Intercompany receivable (payable)
(28,381 ) (579,830 ) 216,632 391,579 —
Investments in subsidiaries
1,636,802 — — (1,636,802 ) —
Other non-current assets
289,422 24,325 (121,981 ) (157,280 ) 34,486
Total assets
$ 1,943,231 $ 1,960,032 $ 136,622 $ (1,402,577 ) $ 2,637,308
Liabilities and Stockholders' Equity

Current liabilities
$ (309,293 ) $ 155,441 $ 8,334 $ 262,492 $ 116,974
Long-term debt
504,729 17,271 761 — 522,761
Non-current portion of accrued reclamation
— 96,389 7,404 — 103,793
Non-current deferred tax liability
— 166,549 — (28,267 ) 138,282
Other non-current liabilities
55,372 6,577 1,126 — 63,075
Stockholders' equity
1,692,423 1,517,805 118,997 (1,636,802 ) 1,692,423
Total liabilities and stockholders' equity
$ 1,943,231 $ 1,960,032 $ 136,622 $ (1,402,577 ) $ 2,637,308

Claim for Indemnification Against CoCa Mines, Inc.

2818

~~Unaudited Interim Condensed Consolidating Statements of Operations~~Litigation Related to Klondex Acquisition

Three Months Ended June 30, 2020

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Revenues
$ (4,998 ) $ 166,420 $ 4,933 $ — $ 166,355
Cost of sales
(1,044 ) (88,705 ) (3,104 ) — (92,853 )
Depreciation, depletion, amortization
— (38,528 ) (895 ) — (39,423 )
General and administrative
(1,641 ) (4,789 ) (549 ) — (6,979 )
Exploration and pre-development
(11 ) (1,745 ) (769 ) — (2,525 )
Gain on derivative contracts
(14,002 ) — — — (14,002 )
Acquisition costs
(6 ) — — — (6 )
Equity in earnings of subsidiaries
(4,601 ) — — 4,601 —
Other expense
12,312 (31,301 ) 2,325 (7,305 ) (23,969 )
Income (loss) before income taxes
(13,991 ) 1,352 1,941 (2,704 ) (13,402 )
(Provision) benefit from income taxes
(37 ) (7,657 ) (237 ) 7,305 (626 )
Net income (loss)
(14,028 ) (6,305 ) 1,704 4,601 (14,028 )
Preferred stock dividends
(138 ) — — — (138 )
Income (loss) applicable to common stockholders
(14,166 ) (6,305 ) 1,704 4,601 (14,166 )
Net income (loss)
(14,028 ) (6,305 ) 1,704 4,601 (14,028 )
Changes in comprehensive income (loss)
10,384 — — — 10,384
Comprehensive income (loss)
$ (3,644 ) $ (6,305 ) $ 1,704 $ 4,601 $ (3,644 )

On May 24, 2019, a purported Hecla stockholder filed a putative class action lawsuit in U.S. District Court for the Southern District of New York against Hecla and certain of our executive officers, one of whom is also a director. The complaint, purportedly brought on behalf of all purchasers of Hecla common stock from March 19, 2018 through and including May 8, 2019, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks, among other things, damages and costs and expenses. Specifically, the complaint alleges that Hecla, under the authority and control of the individual defendants, made certain material false and misleading statements and omitted certain material information regarding Hecla’s Nevada Operations unit. The complaint alleges that these misstatements and omissions artificially inflated the market price of Hecla common stock during the class period, thus purportedly harming investors. Filings with the court regarding our motion to dismiss the lawsuit were completed in the first quarter of 2021. We cannot predict the outcome of these lawsuits or estimate damages if plaintiffs were to prevail. We believe that these claims are without merit and intend to defend them vigorously.

Debt

Six Months Ended June 30, 2020

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Revenues
$ (3,319 ) $ 291,736 $ 14,863 $ — $ 303,280
Cost of sales
(1,328 ) (167,456 ) (9,956 ) — (178,740 )
Depreciation, depletion, amortization
— (76,721 ) (2,368 ) — (79,089 )
General and administrative
(4,804 ) (10,128 ) (986 ) — (15,918 )
Exploration and pre-development
(23 ) (3,800 ) (1,767 ) — (5,590 )
Loss on derivative contracts
(6,109 ) — — — (6,109 )
Acquisition costs
(11 ) — — — (11 )
Equity in earnings of subsidiaries
6,729 — — (6,729 ) —
Other expense
(22,311 ) (20,597 ) 1,584 (8,148 ) (49,472 )
Income (loss) before income taxes
(31,176 ) 13,034 1,370 (14,877 ) (31,649 )
(Provision) benefit from income taxes
(37 ) (6,601 ) (1,074 ) 8,148 436
Net income (loss)
(31,213 ) 6,433 296 (6,729 ) (31,213 )
Preferred stock dividends
(276 ) — — — (276 )
Income (loss) applicable to common stockholders
(31,489 ) 6,433 296 (6,729 ) (31,489 )
Net income (loss)
(31,213 ) 6,433 296 (6,729 ) (31,213 )
Changes in comprehensive income (loss)
(8,951 ) — — — (8,951 )
Comprehensive income (loss)
$ (40,164 ) $ 6,433 $ 296 $ (6,729 ) $ (40,164 )

See Note 7 for information on the commitments related to our debt arrangements as of March 31,2021.

Other Commitments

Our contractual obligations as of March 31,2021 included approximately $2.1 million for various costs. In addition, our open purchase orders at March 31,2021 included approximately $4.0 million, $0.7 million, $2.8 million and $2.7 million for various capital and non-capital items at the Lucky Friday, Casa Berardi, Greens Creek and Nevada Operations units, respectively. We also have total commitments of approximately $18.2 million relating to scheduled payments on finance leases, including interest, primarily for equipment at our Greens Creek, Lucky Friday, Casa Berardi and Nevada Operations units, and total commitments of approximately $11.7 million relating to payments on operating leases (see Note 7 for more information). As part of our ongoing business and operations, we are required to provide surety bonds, bank letters of credit, and restricted deposits for various purposes, including financial support for environmental reclamation obligations and workers compensation programs. As of March 31,2021, we had surety bonds totaling $176.8 million and letters of credit totaling $20.3 million in place as financial support for future reclamation and closure costs, self-insurance, and employee benefit plans. The obligations associated with these instruments are generally related to performance requirements that we address through ongoing operations. As the requirements are met, the beneficiary of the associated instruments cancels or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure of the sites. We believe we are in compliance with all applicable bonding requirements and will be able to satisfy future bonding requirements as they arise.

Other Contingencies

We also have certain other contingencies resulting from litigation, claims, EPA investigations, and other commitments and are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. We currently have no basis to conclude that any or all of such contingencies will materially affect our financial position, results of operations or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in current accruals recorded by us, and there can be no assurance that their ultimate disposition will not have a material adverse effect on our financial position, results of operations or cash flows.

Three Months Ended June 30, 2019

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Revenues
$ 1,292 $ 121,846 $ 11,034 $ — $ 134,172
Cost of sales
(257 ) (95,235 ) (9,446 ) — (104,938 )
Depreciation, depletion, amortization
— (47,629 ) (1,848 ) — (49,477 )
General and administrative
(4,766 ) (3,738 ) (414 ) — (8,918 )
Exploration and pre-development
(3 ) (3,268 ) (1,873 ) — (5,144 )
Research and development
— (155 ) (3 ) — (158 )
Gain on derivative contracts
3,798 — — — 3,798
Acquisition costs
(163 ) (81 ) (153 ) — (397 )
Equity in earnings of subsidiaries
(48,370 ) — — 48,370 —
Other (expense) income
1,939 (26,675 ) 525 (2,438 ) (26,649 )
Income (loss) before income taxes
(46,530 ) (54,935 ) (2,178 ) 45,932 (57,711 )
(Provision) benefit from income taxes
(2 ) 2,558 6,184 2,439 11,179
Net income (loss)
(46,532 ) (52,377 ) 4,006 48,371 (46,532 )
Preferred stock dividends
(138 ) — — — (138 )
Income (loss) applicable to common stockholders
(46,670 ) (52,377 ) 4,006 48,371 (46,670 )
Net income (loss)
(46,532 ) (52,377 ) 4,006 48,371 (46,532 )
Changes in comprehensive income (loss)
3,540 — — — 3,540
Comprehensive income (loss)
$ (42,992 ) $ (52,377 ) $ 4,006 $ 48,371 $ (42,992 )

Note 11.Developments in Accounting Pronouncements

Accounting Standards Updates Adopted

Six Months Ended June 30, 2019

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Revenues
$ (1,185 ) $ 264,340 $ 23,634 $ — $ 286,789
Cost of sales
(718 ) (194,568 ) (20,038 ) — (215,324 )
Depreciation, depletion, amortization
— (84,656 ) (3,608 ) — (88,264 )
General and administrative
(9,159 ) (8,849 ) (869 ) — (18,877 )
Exploration and pre-development
(19 ) (6,330 ) (4,053 ) — (10,402 )
Research and development
— (558 ) (3 ) — (561 )
Loss on derivative contracts
1,999 — — — 1,999
Acquisition costs
(121 ) (136 ) (153 ) — (410 )
Equity in earnings of subsidiaries
(70,803 ) — — 70,803 —
Other (expense) income
7,943 (46,453 ) 1,932 (8,832 ) (45,410 )
Income (loss) before income taxes
(72,063 ) (77,210 ) (3,158 ) 61,971 (90,460 )
(Provision) benefit from income taxes
(2 ) 2,496 7,069 8,832 18,395
Net income (loss)
(72,065 ) (74,714 ) 3,911 70,803 (72,065 )
Preferred stock dividends
(276 ) — — — (276 )
Income (loss) applicable to common stockholders
(72,341 ) (74,714 ) 3,911 70,803 (72,341 )
Net income (loss)
(72,065 ) (74,714 ) 3,911 70,803 (72,065 )
Changes in comprehensive income (loss)
7,799 — — — 7,799
Comprehensive income (loss)
$ (64,266 ) $ (74,714 ) $ 3,911 $ 70,803 $ (64,266 )

In December 2019, the FASB issued ASU No.2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update contains a number of provisions intended to simplify the accounting for income taxes. The update is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We adopted the update as of January 1, 2021, which did not have a material impact on our consolidated financial statements or disclosures.

Accounting Standards Updates to Become Effective in Future Periods

In August 2020, the FASB issued ASU No.2020-06 Debt - Debt with Conversion and Other Options (Subtopic

470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. We are evaluating the impact of this update on our consolidated financial statements.

~~Unaudited Interim Condensed Consolidating Statements of Cash Flows~~

Six Months Ended June 30, 2020

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Cash flows from operating activities
$ (8,252 ) $ 77,161 $ 6,188 $ (32,644 ) $ 42,453
Cash flows from investing activities:

Additions to properties, plants, and equipment
— (30,385 ) (304 ) — (30,689 )
Other investing activities, net
(6,728 ) 156 (593 ) 6,728 (437 )
Cash flows from financing activities:

Dividends paid to stockholders
(2,898 ) — — — (2,898 )
Issuance of debt
679,500 — — — 679,500
Payments on debt
(666,500 ) (2,840 ) — — (669,340 )
Other financing activity
13,199 (34,040 ) (8,371 ) 25,916 (3,296 )
Effect of exchange rate changes on cash
— (858 ) (936 ) — (1,794 )
Changes in cash, cash equivalents and restricted cash and cash equivalents
8,321 9,194 (4,016 ) — 13,499
Beginning cash, cash equivalents and restricted cash and cash equivalents
33,750 16,382 13,345 — 63,477
Ending cash, cash equivalents and restricted cash and cash equivalents
$ 42,071 $ 25,576 $ 9,329 $ — $ 76,976

Six Months Ended June 30, 2019

Parent

Guarantors

Non-Guarantors

Eliminations

Consolidated

(in thousands)

Cash flows from operating activities
$ (168,393 ) $ 13,738 $ 25,818 $ 137,550 $ 8,713
Cash flows from investing activities:

Additions to properties, plants, and equipment
— (64,800 ) (6,445 ) (71,245 )
Other investing activities, net
71,485 (82 ) — (71,485 ) (82 )
Cash flows from financing activities:

Dividends paid to stockholders
(2,706 ) — — (2,706 )
Borrowings on debt
170,000 — — 170,000
Payments on debt
(118,000 ) 2,858 (6,235 ) (121,377 )
Other financing activity
41,363 37,620 (14,608 ) (66,065 ) (1,690 )
Effect of exchange rate changes on cash
— 432 — 432
Changes in cash, cash equivalents and restricted cash and cash equivalents
(6,251 ) (10,234 ) (1,470 ) — (17,955 )
Beginning cash, cash equivalents and restricted cash and cash equivalents
6,265 18,259 3,890 — 28,414
Ending cash, cash equivalents and restricted cash and cash equivalents
$ 14 $ 8,025 $ 2,420 $ — $ 10,459

Forward-Looking Statements

Certain statements contained in this Form 10~~-Q,~~10-Q, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative ~~Disclosures~~Disclosure About Market Risk, are intended to be covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Our forward-looking statements include our current expectations and projections about future results, performance, results of litigation, prospects and opportunities, including reserves and other mineralization. We have tried to identify these forward-looking statements by using words such as ~~“may,~~“may,” ~~“will,~~“will,” “expect,” “anticipate,” “believe,” “intend,” “feel,” “plan,” “estimate,” “project,” “forecast” and similar expressions. These forward-looking statements are based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

These risks, uncertainties and other factors include, but are not limited to, those set forth under Part I, Item ~~1A.~~1A – Risk Factors in our annual report filed on Form 10-K10-K for the year ended December~~31,~~~~2019,~~ ~~as updated in~~ ~~Part II, Item~~ ~~1A.~~ ~~– Risk Factors~~ ~~in our quarterly report on Form~~ 10~~-Q for the quarter ended~~ ~~March~~ 31, 2020. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to Hecla Mining Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), “Hecla”,” the Company”, “we,” “us” and “our” refer to Hecla Mining Company and its consolidated subsidiaries, except where the context requires otherwise. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2020 ("2020 Form 10-K"), filed with the United States Securities and Exchange Commission (the “SEC”). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Forward-Looking Statements” above for further discussion). References to “Notes” are Notes included in our Notes to Condensed Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to losses or income per share are on a diluted basis.

Overview

~~Hecla Mining Company~~Established in 1891 in northern Idaho’s Silver Valley, we believe we are the oldest operating precious metals mining company in the United States and ~~our subsidiaries have provided precious~~the largest silver producer in the United States. Our corporate offices are in Coeur d’Alene, Idaho and base metals to the U.S. and worldwide since 1891. We discover, acquire and develop mines and other mineral interests and produce and market concentrates, carbon material and doré containing silver, gold, lead and zinc. Vancouver, British Columbia. Our production profile includes:

~~We produce~~
•
concentrates containing silver, gold, lead ~~zinc and bulk concentrates and carbon material, which we sell to custom smelters, brokers and third-party processors,~~ and zinc, which is shipped to various smelters or sold to metal traders;

•

unrefined doré containing gold and silver, which is sold to refiners or further refined before sale of the metals to traders; and

•

carbon material containing gold and silver, which is sold to third-party processors.

Our operating properties comprise our five business segments for financial reporting purposes: the Greens Creek operating unit on Admiralty Island in Alaska, the Lucky Friday operating unit in Idaho, the Casa Berardi operating unit in Quebec, Canada, the San Sebastian operating unit in Durango, Mexico, and the Nevada Operations unit in northern Nevada. Since our operating mines are located in the United States, Canada, and Mexico, we believe they have low or relatively moderate political risk, and less economic risk than mines located in other parts of the ~~metals to traders. We~~world. Our exploration interests are ~~organized into five segments that encompass our operating~~also in the United States, Canada, and ~~development units: Greens Creek, Lucky Friday, Casa Berardi, San Sebastian~~Mexico, and ~~Nevada Operations.~~are located in historical mining districts. The map below shows the locations of our operating units, our exploration and pre-development projects, as well as our corporate offices located in Coeur d'Alene, Idaho and Vancouver, British Columbia.

3322

Our current business strategy is to focus our financial and human resources in the following areas:

•

rapidly responding to the threats from the COVID-19 pandemic to protect our workforce, operations and communities while maintaining liquidity;

•

operating our properties safely, in an environmentally responsible manner, and cost-effectively;

•

optimizing and improving operations at our units, which includes incurring costs for new technologies and equipment that may not result in measurable benefits;

•

expanding our proven and probable reserves and production capacity at our units;

•

conducting our business with financial stewardship to preserve our financial position in varying metals price and operational environments;

•

advancing permitting of the Rock Creek and Montanore projects;

•

maintaining and investing in exploration and pre-development projects in the vicinities of seven mining districts and projects we believe to be under-explored and under-invested: North Idaho's Silver Valley in the historic Coeur d'Alene Mining District; our Greens Creek unit on Alaska's Admiralty Island located near Juneau; the silver-producing district near Durango, Mexico; the Abitibi region of northwestern Quebec, Canada; our projects in northern Nevada; the Rock Creek and Montanore projects in northwestern Montana; and the Creede district of southwestern Colorado; and

•

continuing to seek opportunities to acquire or invest in mining properties and companies.

The COVID-19 outbreak impacted our operations in ~~the first half of~~ 2020, including ~~curtailing~~adversely impacting our expected production of gold at Casa ~~Berardi. In addition, we have~~Berardi, and has continued to impact our operations in 2021. We incurred additional costs of approximately ~~$0.2~~$0.6 million ~~per week~~in the first quarter of 2021 and $2.3 million for the full year of 2020 related to quarantining employees at Greens Creek, which started in late March 2020. See each segment section below for information on how those operations have been impacted by COVID-19. To mitigate the ~~impacts~~impact of COVID-19, we have taken precautionary measures, including implementing operational plans and practices and increasing our cash reserves through a temporary draw-down of our revolving credit ~~facility.~~facility, which has since been fully repaid. As long as they are required, the operational practices implemented could continue to have an adverse impact on our operating results due to additional costs or deferred production and ~~revenues or additional costs.~~revenues. There is uncertainty related to the potential additional impacts COVID-19 could have on our operations and financial results for the ~~year. See~~remainder of 2021. In our 2020 Form 10-K, see ~~Part II,~~ Item IA. Risk Factors - Natural disasters, public health crises (including COVID-19), political crises, and other catastrophic events or other events outside of our control may materially and adversely affect our business or financial results i~~n our Form 10-Q for the quarter ended March 31, 2020~~ and COVID-19 virus pandemic may heighten other risks for information on how restrictions related to COVID-19 have recently affected some of our operations.

A number of key factors may impact the execution of our strategy, including regulatory issues and metals prices. Metals prices can be very ~~volatile. As discussed in the~~ ~~Critical Accounting Estimates~~ ~~section below, metals prices~~volatile and are influenced by a number of factors beyond our ~~control.~~control (except on a limited basis through the use of derivative contracts). See Item 7.Critical Accounting Estimates in our 2020 Form 10-K. The average realized prices of silver, ~~and~~ gold ~~were higher, and the average prices for~~ lead and zinc ~~lower,~~were higher in the first ~~six~~three months of ~~2020~~2021 than ~~their levels from~~in the comparable period last year, as illustrated by the table in Results of Operations below. While we believe longer-term global economic and industrial trends could result in continued demand for the metals we produce, prices have been volatile and there can be no assurance that current prices will continue.

~~The total principal amount of our Senior Notes due February 15, 2028 ("Senior Notes") is $475 million, and they bear interest at a rate of 7.25% per year. The $469.5 million~~Volatility in net proceeds from the Senior Notes were used, along with cash on hand, to redeem, in March 2020, our previously-outstanding 6.875% Senior Notes that were due in 2021 and had a principal balance of $506.5 million ("2021 Notes"). Also, as a precaution due to uncertainties of the duration, severity and scope of the COVID-19 outbreak, we drew $210 million under our revolving credit facility during the first quarter of 2020; however, we repaid $160 million of that amount in the second quarter of 2020, with the remaining $50 million outstanding as of the end of the quarter. Amounts drawn on the revolving credit facility are subject to a variable rate of interest. In addition, in July 2020 we agreed to issue CAD$50 million (approximately USD$36.8 million at the time of the transaction) in aggregate principal amount of senior unsecured notes to Investissment Québec, a financing arm of the Québec government ("IQ Notes"). The IQ Notes mature in July 2025 and bear interest at a rate of 6.515% per year. The IQ Notes will be issued at a premium of 103.65%, implying an effective annual yield of 5.74% and an aggregate principal amount to be repaid of CAD$48.2 million. The IQ Notes will be issued in four equal installments of CAD$12.5 million in July, August, September and October 2020, with the first installment issued net of CAD$0.6 million in fees. The net proceeds from the IQ Notes will be available for general corporate purposes, including for open market purchases of a portion of the Senior Notes and to pay capital expenditures at our Casa Berardi unit. Under the note purchase agreement for the IQ Notes and subject to a force majeure event, we are required to invest in the aggregate CAD$100 million at the Casa Berardi unitglobal financial markets and other ~~exploration and development projects in Quebec over the four-year period commencing on July 9, 2020. See~~ ~~Note 9~~ of ~~Notes~~factors can pose a significant challenge to ~~Condensed Consolidated Financial Statements (Unaudited)~~ ~~for more information on our debt arrangements. As discussed in the~~ ~~Financial Liquidity and Capital Resources~~ section below, we believe that we will be able to meet the obligations associated with the Senior Notes, IQ Notes and amounts drawn on our revolving credit facility; however, a number of factors could impact our ability to ~~meet~~access credit and equity markets, should we need to do so, and to predict sales prices for our ~~debt obligations and fund our other projects.~~

~~We generated positive cash flows at San Sebastian each year from 2016 through the first half of 2020. However, that mine currently is expected~~products. To help mitigate this challenge, we utilize forward contracts to ~~end production~~manage exposure to declines in the ~~fourth quarter~~prices of ~~2020,~~(i) silver, gold, zinc and ~~there can be no assurance~~lead contained in our concentrates that have been shipped but have not yet settled, and (ii) zinc and lead that we ~~will be able~~forecast for future concentrate shipments. We have also utilized put option contracts to ~~develop~~manage exposure to declines in the prices of silver and ~~operate San Sebastian beyond the known mine life~~gold in our forecasted future sales of those metals. In addition, we have in place a $250 million revolving credit agreement, of which $20.3 million was used as ~~anticipated.~~

~~As further discussed in~~ ~~The~~~~Lucky Friday Segment~~ ~~section below, the union employees at Lucky Friday were on strike from~~of March ~~13, 2017 until the strike ended on January 7, 2020. Re-staffing~~31, 2021 for letters of the mine has been substantially completed, with a return to full production expected by the end of 2020. However, the ramp-up to full production could take longer or be more costly than anticipated, so there can be no assurance we will operate as currently anticipated.credit, leaving approximately $229.7 million available for borrowing.

We strive to achieve excellent mine safety and health performance. We seek to implement this goal by: training employees in safe work practices; establishing, following and improving safety standards; investigating accidents, incidents and losses to avoid recurrence; involving employees in the establishment of safety standards; and participating in the National Mining Association’s CORESafety program. We attempt to implement reasonable best practices with respect to mine safety and emergency preparedness. We work with MSHA ~~the Commission of Labor Standards, Pay Equity and Occupational Health and Safety in Quebec, and the Mexico Ministry of Economy and Mining~~ to address issues outlined in its investigations and inspections and continue to evaluate our safety practices. Achieving and maintaining compliance with MSHA regulations will be challenging and may increase our operating costs. See Item 1A. Risk Factors - We face substantial governmental regulation, including the Mine Safety and Health Act, various environmental laws and regulations and the 1872 Mining Law in our ~~annual report filed on~~2020 Form 10-K ~~for the year ended December 31, 2019~~.

Another challenge for us is the risk associated with environmental litigation and ongoing reclamation activities. As described in Item 1A. Risk Factors in our ~~annual report filed on~~2020 Form 10-K ~~for the year ended December 31, 2019~~ and in Note 410 of Notes to Condensed Consolidated Financial Statements (Unaudited), it is possible that our estimate of these liabilities (and our ability to estimate liabilities in general) may change in the future, affecting our strategic plans. We are involved in various environmental legal matters and the estimate of our environmental liabilities and liquidity needs, as well as our strategic plans, may be significantly impacted as a result of these matters or new matters that may arise. We strive to ensure that our activities are conducted in compliance with applicable laws and regulations and attempt to resolve environmental litigation on terms as favorable to us as possible.

Consolidated Results of Operations

Sales of products by metal for the ~~three- and six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
(in thousands)	2020			2019			2020			2019			2021			2020
Silver	$	61,756		$	36,298		$	99,328		$	81,804		$	77,760		$	37,572
Gold		89,212			78,166			179,906			157,845			101,408			90,694
Lead		12,454			6,670			18,874			15,695			15,893			6,420
Zinc		21,455			22,948			38,762			47,703			29,191			17,308
Less: smelter charges		(18,522	)		(9,910	)		(33,590	)		(16,258	)
Less: Smelter and refining charges														(13,400	)		(15,069	)
Sales of products	$	166,355		$	134,172		$	303,280		$	286,789		$	210,852		$	136,925

The fluctuations in sales for the ~~second~~first quarter ~~and first six months~~ of ~~2020~~2021 compared to the ~~same periods~~first quarter of ~~2019~~2020 were primarily due ~~to:~~to the following two reasons:

•

Higher average realized prices for silver, ~~and~~ gold, ~~partially offset by lower realized prices for~~ lead and ~~zinc, in the second quarter and first half of 2020 compared to the same periods of 2019.~~zinc. These price variances are illustrated in the ~~following table:~~table below.

Table of 2020 was higher than the average market price for the same period, as silver sales at Greens Creek occurring in March were exposed to changes in prices from the end of the first quarter until their final settlement in the second quarter; the silver price increased during that time, resulting in gains recognized in the second quarter of 2020.

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Silver –
London PM Fix ($/ounce)
$ 16.33 $ 14.89 $ 16.63 $ 15.23

Realized price per ounce
$ 18.44 $ 15.01 $ 16.75 $ 15.39
Gold –
London PM Fix ($/ounce)
$ 1,711 $ 1,310 $ 1,647 $ 1,307

Realized price per ounce
$ 1,736 $ 1,322 $ 1,658 $ 1,315
Lead –
LME Final Cash Buyer ($/pound)
$ 0.76 $ 0.85 $ 0.80 $ 0.89

Realized price per pound
$ 0.78 $ 0.84 $ 0.78 $ 0.89
Zinc –
LME Final Cash Buyer ($/pound)
$ 0.89 $ 1.25 $ 0.93 $ 1.24

Realized price per pound
$ 0.89 $ 1.17 $ 0.89 $ 1.23

	Three months ended March 31,
	2021		2020
Silver – London PM Fix ($/ounce)	$	26.29	$	16.94
Realized price per ounce	$	25.66	$	14.48
Gold – London PM Fix ($/ounce)	$	1,798	$	1,583
Realized price per ounce	$	1,770	$	1,588
Lead – LME Final Cash Buyer ($/pound)	$	0.92	$	0.84
Realized price per pound	$	0.92	$	0.78
Zinc – LME Final Cash Buyer ($/pound)	$	1.25	$	0.96
Realized price per pound	$	1.32	$	0.88

Average realized prices typically differ from average market prices primarily because concentrate sales are generally recorded as revenues at the time of shipment at forward prices for the estimated month of settlement, which differ from average market prices. Due to the time elapsed between shipment of concentrates and final settlement with the customers, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices each period through final settlement. For the ~~second~~first quarter ~~and first six months~~ of ~~2020,~~2021, we recorded net positive price adjustments to provisional settlements of ~~$7.0~~$0.6 million ~~and $9.6 million, respectively,~~ compared to net ~~negative~~positive price adjustments to provisional settlements of ~~$1.2~~$2.6 million ~~and $0.7 million, respectively,~~ in the ~~second~~first quarter ~~and first six months~~ of ~~2019.~~2020. The price adjustments related to silver, gold, ~~zinc~~lead and ~~lead~~zinc contained in our concentrate shipments were ~~partially offset in the 2020 periods, and~~ largely offset ~~in the 2019 periods,~~ by gains and losses on forward contracts for those ~~metals.~~metals for the first quarter of 2021. See Note 118 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information. The gains and losses on these contracts are included in revenues and impact the realized prices for silver, gold, lead and zinc. Realized prices are calculated by dividing gross revenues for each metal (which include the price adjustments and gains and losses on the forward contracts discussed above) by the payable quantities of each metal included in concentrate ~~doré~~ and ~~carbon material~~doré shipped during the period. ~~The average realized silver price for the second quarter~~

•

Higher quantities of silver, ~~lead~~gold, zinc and ~~zinc~~lead sold as a result of the timing of shipments and higher production of ~~those metals, partially offset by lower gold volume, in the second quarter~~silver, lead and ~~first half of 2020.~~zinc. See The Greens Creek Segment, The Lucky Friday Segment, The Casa Berardi Segment, The San Sebastian Segment and The Nevada Operations Segment sections below for more information on ~~metal~~metals production and sales volumes at each of our operating segments. Total metals production and sales volumes for each period are shown in the following table:

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Silver -
Ounces produced
3,403,781 3,018,765 6,649,250 5,941,896

Payable ounces sold
3,348,639 2,418,586 5,930,918 5,316,669
Gold -
Ounces produced
59,982 60,768 118,774 120,789

Payable ounces sold
51,398 59,127 108,501 120,063
Lead -
Tons produced
8,977 5,515 14,870 11,299

Payable tons sold
8,026 3,963 12,156 8,811
Zinc -
Tons produced
17,855 13,315 30,702 27,259

Payable tons sold
11,989 9,823 21,825 19,356

	Three Months Ended March 31,
	2021		2020
Silver - Ounces produced		3,459,446		3,245,469
Payable ounces sold		3,030,026		2,582,279
Gold - Ounces produced		52,004		58,792
Payable ounces sold		57,286		57,103
Lead - Tons produced		10,704		5,893
Payable tons sold		8,668		4,130
Zinc - Tons produced		16,107		12,847
Payable tons sold		11,027		9,836

The difference between what we report as "ounces/tons produced" and "payable ounces/tons sold" is attributable to the difference between the quantities of metals contained in ~~the concentrates we produce~~our products versus the portion of those metals actually paid for by our customers according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades which impact the amount of metals contained in concentrates produced and sold.

Sales, total cost of sales, gross profit, Cash Cost, After By-product Credits, per Ounce ("Cash Cost") (non-GAAP) and All-In Sustaining Cost, After By-product Credits, per Ounce ("AISC") (non-GAAP) at our operating units for the three-months ended March 31, 2021 and 2020 were as follows (in thousands, except for Cash Cost and AISC):

	Silver												Gold
	Greens Creek			Lucky Friday			San Sebastian			Total Silver			Casa Berardi			Nevada Operations			Total Gold
Three Months Ended March 31, 2021:
Sales	$	98,409		$	29,122		$	173		$	127,704		$	72,911		$	10,237		$	83,148
Total cost of sales		(53,181	)		(22,794	)		(94	)		(76,069	)		(62,516	)		(7,455	)		(69,971	)
Gross profit	$	45,228		$	6,328		$	79		$	51,635		$	10,395		$	2,782		$	13,177
Cash Cost per silver or gold ounce	$	(0.67	)	$	7.62		$	—		$	1.40		$	1,027		$	1,416		$	1,052
AISC per silver or gold ounce	$	1.59		$	14.24		$	—		$	7.21		$	1,272		$	1,461		$	1,284
Three Months Ended March 31, 2020:
Sales	$	53,833		$	2,830		$	9,927		$	66,590		$	46,172		$	24,163		$	70,335
Total cost of sales		(49,182	)		(2,832	)		(8,300	)		(60,314	)		(48,325	)		(16,914	)		(65,239	)
Gross profit	$	4,651		$	(2	)	$	1,627		$	6,276		$	(2,153	)	$	7,249		$	5,096
Cash Cost per silver or gold ounce	$	5.63		$	—		$	6.91		$	5.77		$	1,268		$	735		$	1,061
AISC per silver or gold ounce	$	7.90		$	—		$	9.59		$	11.06		$	1,615		$	808		$	1,302

(1)

A reconciliation of these non-GAAP measures to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).

While revenue from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product of Greens Creek, Lucky Friday and San Sebastian is appropriate because:

•

~~In addition,~~silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;

•

we have historically presented these units as a producer primarily of silver, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year;

•

metallurgical treatment ~~costs at~~maximizes silver recovery;

•

the Greens Creek ~~were higher~~deposit is a massive sulfide deposit containing an unusually high proportion of silver; and in most of its working areas, Greens Creek utilizes selective mining methods in which silver is the second quarter and first half of 2020 by approximately $6.3 million and $14.9 million, respectively, compared to the same periods of 2019, primarily as a result of unfavorable changes in smelter terms.metal targeted for highest recovery.

Likewise, we believe the identification of gold, lead and zinc as by-product credits at Greens Creek, Lucky Friday and San Sebastian is appropriate because of their lower economic value compared to silver and due to the fact that silver is the primary product we intend to produce. In addition, we have not consistently received sufficient revenue from any single by-product metal to warrant classification of such as a co-product.

We periodically review our revenues to ensure that reporting of primary products and by-products is appropriate. Because for Greens Creek, Lucky Friday and San Sebastian we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset operating costs within our calculations of Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce.

We believe the identification of silver as a by-product credit is appropriate at Casa Berardi and Nevada Operations because of its lower economic value compared to gold and due to the fact that gold is the primary product we intend to produce there. In addition, we do not receive sufficient revenue from silver at Casa Berardi to warrant classification of such as a co-product. Because we consider silver to be a by-product of our gold production at Casa Berardi and Nevada Operations, the value of silver offsets operating costs within our calculations of Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce.

For the first quarter of 2021, we recorded ~~losses~~income applicable to common ~~shareholders~~stockholders of ~~$14.2~~$18.8 million ($0.04 per basic common share), compared to a loss of $17.3 million ($0.03 per basic common share) ~~for~~during the ~~second~~first quarter of 2020 and $31.5 million ($0.06 per basic common share) for the first six months of 2020, compared to losses applicable to common shareholders of $46.7 million ($0.10 per basic common share) and $72.3 million ($0.15 per basic common share) for the second quarter and first six months of 2019, respectively.2020. The following factors contributed to the results for the ~~second quarter and~~ first ~~six~~three months of ~~2020~~2021 compared to the ~~same periods in 2019:~~first quarter of 2020:

•

~~Higher~~Variances in gross profit (loss) at our ~~Nevada operations by $21.7 million and $42.8 million, respectively,~~operating units as illustrated in the second quarter and first half of 2020. Gross profit at our Casa Berardi unit was higher by $14.1 million and $20.9 million, respectively, in the second quarter and first half of 2020 compared to the same periods of 2019. Gross profit at our San Sebastian unit was higher by $1.1 million and $2.5 million, respectively, in the second quarter and first half of 2020 compared to the same periods in 2019. Gross profit at our Greens Creek unit was higher in the second quarter of 2020 by $17.5 million, but lower in the first half of 2020 by $3.9 million, compared to the same periods in 2019. Gross profit was substantially unchanged at our Lucky Friday unit.table above. See The Greens Creek Segment, The Lucky Friday Segment, The Casa Berardi Segment, The San Sebastian Segmentand The Nevada Operations Segment sections below.

•

Exploration and pre-development expense decreased by $2.6 million and $4.8 million in the second quarter and first half of 2020, respectively, compared to the same periods in 2019. In the first half of 2020, exploration was primarily at our San Sebastian and Casa Berardi units.

•

Higher costs related to ramp-up at Lucky Friday and suspension of other operations by $7.3 million and $17.5 million, respectively, in the second quarter and first half of 2020 compared to the same periods of 2019. The increase was due to (i) higherRamp-up costs at Lucky Friday decreased by $8.1 million in the first quarter of 2021 compared to the first quarter of 2020 due to the ~~transition~~return to full production starting in the fourth quarter of production between salary and hourly personnel and the recall, hire and training of the returning hourly workforce there, (ii) placement of the Midas and Hollister mines and Aurora mill in Nevada on care-and-maintenance, and (iii) the temporary suspension of operations at Casa Berardi and San Sebastian in response to COVID-19, which lead to lower production at those operations.2020. See The Lucky Friday Segment ~~The Nevada Operations Segment,~~ ~~The Casa Berardi Segment~~ ~~and~~ ~~The San Sebastian Segment~~ ~~sections~~section below.

•

~~Losses on base metal derivatives contracts of $14.0 million in the second quarter of 2020 and $6.1~~Lower interest expense by $5.6 million in the first ~~half of 2020, compared to gains of $3.8 million in the second quarter and $2.0 million in the first half of 2019. See~~ ~~Note 11~~ of ~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~ ~~for more information.~~

•

Net foreign exchange loss of $3.2 million in the second quarter and a gain of $3.4 million in the first half of 2020, versus net losses of $4.4 million and $7.5 million, respectively, in the second quarter and first half of 2019. The variances are primarily related to the impact of changes in the CAD-to-USD exchange rate on the remeasurement of our net monetary liabilities in Quebec. During the first half of 2020, the applicable CAD-to-USD exchange rate increased from 1.2989 to 1.3628, compared to a decrease in the rate from 1.3643 to 1.3087 during the first half of 2019.

•

General and administrative expense decreased by $1.9 million and $3.0 million, respectively, in the second quarter and first half of 2020 compared to the same periods of 2019 primarily due to lower incentive compensation and timing of issuance of shares to directors.

•

~~A $0.7 million loss recognized in the second~~ quarter of 2020 on the write-down of equipment at Nevada Operations determined to be held-for-sale compared to a $4.6 million loss recognized in the second quarter of 2019 on the write-down of exploration interests in Quebec.

•

In June 2020, we gifted 650,000 shares of our common stock valued at $2.0 million at the time of the gift to the Hecla Charitable Foundation (the "Foundation"), and recognized expense for that amount in the second quarter of 2020. The Foundation is a 501(c)(3) entity established in 2007 to provide grants and disburse funds for educational and charitable purposes to qualifying organizations in order to promote the social, environmental and economic sustainability and development of the communities where we have operations and activities.

•

~~Higher interest expense by $6.1 million in the first half of 2020~~2021 compared to the first ~~half~~quarter of ~~2019,~~2020, with the ~~increase resulting from~~decrease due to the following items in 2020: (i) interest recognized on both ~~the~~our 7.25% Senior Notes due February 15, 2028 ("Senior Notes") and our previously-outstanding 6.875% Senior Notes that were due in 2021 ~~Notes~~("2021 Notes") for an overlapping period of almost one month, as the Senior Notes were issued on February 19, 2020 and the 2021 Notes were redeemed on March 19, 2020, (ii) $1.7 million in unamortized initial purchaser discount on the 2021 Notes recognized as expense upon their redemption and (iii) higher interest related to amounts drawn on our revolving credit facility.

•

~~Unrealized gains~~A net loss on investments of $6.4 million and $5.4 million, respectively, in the second quarter and first half of 2020 compared to losses of $1.1 million and $1.0 million, respectively, in the same periods of 2019 due to changes in the prices of shares in other mining companies ~~held.~~of $2.4 million, including a $3.6 million unrealized loss and a $1.2 million gain on exchange of investments, in the first quarter of 2021 compared to a net loss of $1.0 million in the first quarter of 2020.

•

Higher other operating expense by $2.7 million in the first quarter of 2021 compared to the first quarter of 2020 due to project costs incurred to identify and implement potential operational improvements at Casa Berardi.

•

~~Income~~Provision for closed operations and environmental matters increased by $3.2 million in the first quarter of 2021 compared to the first quarter of 2020 primarily due to a $2.9 million increase in the accrual for estimated costs at the Johnny M site in New Mexico (see Note 10 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).

•

Exploration and pre-development expense increased by $3.6 million in the first quarter of 2021 compared to the first quarter of 2020. In the first quarter of 2021, exploration was primarily at our San Sebastian, Casa Berardi and Nevada Operations units.

•

A gain on metal derivatives contracts of $0.5 million in the first quarter of 2021 compared to a gain of $7.9 million in the first quarter of 2020. See Note 8 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.

•

A net foreign exchange loss in the first quarter of 2021 of $2.1 million versus a net gain of $6.6 million in the first quarter of 2020, with the variance primarily related to the impact of a weakening of the Canadian dollar ("CAD") relative to the U.S. dollar ("USD") on remeasurement of our assets and liabilities in Quebec. During the first quarter of 2021, the applicable CAD-to-USD exchange rate decreased from 1.2732 to 1.2575, compared to an increase in the rate from 1.2989 to 1.4186 during the first quarter of 2020.

•

An income and mining tax provision of ~~$0.6~~$4.6 million for the second quarter of 2020 and benefit of $0.4 million for the six-month period ended June 30, 2020 compared to income tax benefits of $11.2 million and $18.4 million, respectively, for the same periods in 2019. The benefits in the first ~~half~~quarter of ~~2020~~2021 compared to an income and ~~both periods~~mining tax benefit of ~~2019 are~~$1.1 million in the first quarter of 2020. The provision in the 2021 period is primarily the result of ~~losses in Nevada and Quebec. The provision in the second quarter of 2020 is due to~~ income in Quebec ~~offset by losses in Nevada.~~and the reclassification of certain income-based state and provincial taxes from Cost of sales and other direct production costs to Income and mining tax provision (see Note 3 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).

3728

The Greens Creek Segment

Dollars are in thousands (except per ounce and per ton amounts)	Three Months Ended June 30,						Six Months Ended June 30,						Three months ended March 31,
	2020			2019			2020			2019			2021			2020
Sales	$	84,890		$	55,398		$	138,724		$	135,527		$	98,409		$	53,833
Cost of sales and other direct production costs		(44,684	)		(34,800	)		(81,436	)		(76,542	)		(38,360	)		(36,753	)
Depreciation, depletion and amortization		(12,988	)		(10,850	)		(25,417	)		(23,220	)		(14,821	)		(12,429	)
Cost of sales and other direct production costs and depreciation, depletion and amortization		(57,672	)		(45,650	)		(106,853	)		(99,762	)
Total cost of sales														(53,181	)		(49,182	)
Gross profit	$	27,218		$	9,748		$	31,871		$	35,765		$	45,228		$	4,651
Tons of ore milled		215,275			209,370			414,079			416,195			194,080			198,804
Production:
Silver (ounces)		2,753,919			2,372,270			5,529,626			4,605,017			2,584,870			2,775,707
Gold (ounces)		13,104			13,257			25,377			27,585			13,266			12,273
Zinc (tons)		16,184			12,739			28,671			26,257			13,354			12,487
Lead (tons)		5,889			4,628			11,087			9,410			4,924			5,198
Payable metal quantities sold:
Silver (ounces)		2,753,736			1,738,377			4,847,456			3,979,549			2,247,274			2,093,720
Gold (ounces)		12,355			8,739			22,676			22,603			10,547			10,321
Zinc (tons)		10,650			9,462			20,302			18,995			9,097			9,652
Lead (tons)		5,233			2,810			8,693			7,154			3,645			3,460
Ore grades:
Silver ounces per ton		15.56			14.36			16.19			13.91			16.01			16.87
Gold ounces per ton		0.08			0.09			0.08			0.10			0.09			0.08
Zinc percent		8.2	%		6.8	%		7.6	%		7.1	%		7.62			6.89
Lead percent		3.3	%		2.8	%		3.2	%		2.8	%		3.06			3.12
Mining cost per ton	$	81.16		$	80.41		$	82.40		$	79.62
Milling cost per ton	$	34.90		$	35.10		$	38.61		$	35.48
Cash Cost, After By-product Credits, Per Silver Ounce ⁽¹⁾	$	5.19		$	2.38		$	5.41		$	1.46
All-In Sustaining Costs ("AISC"), After By-Product Credits, per Silver Ounce ⁽¹⁾	$	7.11		$	6.37		$	7.51		$	4.85
Total production cost per ton													$	182.61		$	185.92
Cash Cost, After By-product Credits, per Silver Ounce ⁽¹⁾													$	(0.67	)	$	5.63
AISC, After By-product Credits, per Silver Ounce ⁽¹⁾													$	1.59		$	7.90
Capital additions													$	4,892		$	5,510

(1)

The $40.6 million increase in gross profit during the first quarter of 2021 compared to the same 2020 period was the result of higher sales due to:

•

higher realized prices for silver, gold, zinc and lead;

•

higher overall metals sales volumes due to the timing of concentrate shipments. Silver sales volume was higher in spite of lower silver production primarily resulting from lower grades due to normal variations in the ore body; and

•

lower concentrate treatment costs of $5.7 million primarily as a result of favorable changes in smelter terms, with approximately $4 million to be non-recurring.

The chart below illustrates the factors contributing to the variances in Cash Cost, After By-product Credits, per Silver Ounce for the first quarter of 2021 compared to the first quarter of 2020:

The following table summarizes the components of Cash Cost, After By-product Credits, per Silver Ounce:

	Three Months Ended March 31,
	2021			2020
Cash Cost, Before By-product Credits, per Silver Ounce	$	18.98		$	20.09
By-product credits		(19.65	)		(14.46	)
Cash Cost, After By-product Credits, per Silver Ounce	$	(0.67	)	$	5.63

The following table summarizes the components of AISC, After By-product Credits, per Silver Ounce:

	Three Months Ended March 31,
	2021			2020
AISC, Before By-product Credits, per Silver Ounce	$	21.24		$	22.36
By-product credits		(19.65	)		(14.46	)
AISC, After By-product Credits, per Silver Ounce	$	1.59		$	7.90

The decrease in Cash Costs and AISC, After By-Product Credits, per Silver Ounce for the first quarter of 2021 compared to 2020 was primarily due to the higher by-product credits, lower treatment costs and reclassification of mine license tax from production costs to income and mining tax provision effective January 1, 2021.

Restrictions imposed by the State of Alaska beginning in late March 2020 in response to the COVID-19 virus pandemic, including the requirement for employees returning to Alaska to self-quarantine for 14 days ~~changed~~(changed in June 2020 to 7 ~~days,~~days), has caused us to revise the normal operating procedures and incur additional costs for staffing operations at Greens Creek. ~~Restrictions~~The changes at Greens Creek have not materially impacted our operations to date; however, restrictions could have a material impact if they continue longer than anticipated or become broader.

3830

The Lucky Friday Segment

Dollars are in thousands (except per ounce and per ton amounts)	Three Months Ended March 31,
	2021			2020
Sales	$	29,122		$	2,830
Cost of sales and other direct production costs		(16,458	)		(2,530	)
Depreciation, depletion and amortization		(6,336	)		(302	)
Total cost of sales		(22,794	)		(2,832	)
Gross profit (loss)	$	6,328		$	(2	)
Tons of ore milled		81,071			10,219
Production:
Silver (ounces)		863,901			95,748
Lead (tons)		5,780			695
Zinc (tons)		2,753			360
Payable metal quantities sold:
Silver (ounces)		763,823			101,102
Lead (tons)		5,023			670
Zinc (tons)		1,930			184
Ore grades:
Silver ounces per ton		11.18			9.87
Lead percent		7.51			7.23
Zinc percent		3.70			3.85
Total production cost per ton	$	181.28		$	—
Cash Cost, After By-product Credits, per Silver Ounce ⁽¹⁾	$	7.62		$	—
AISC, After By-product Credits, per Silver Ounce ⁽¹⁾	$	14.24		$	—
Capital additions	$	5,912		$	4,295

The increases in sales, gross profit, ore tonnage and metals production in the first quarter of 2021 compared to the first quarter of 2020 was the result of a full quarter of production following the return to full production during the fourth quarter of 2020 (discussed further below).

The $17.5 million increase in gross profit for the second quarter of 2020 compared to the second quarter of 2019 was due to higher metal sales volumes due to the timing of shipments, and also higher grades for silver, zinc and lead, and higher average realized silver and gold prices, partially offset by higher treatment costs and lower zinc and lead prices. The $3.9 million decrease in gross profit for the first six months of 2020 compared to the same period in 2019 was primarily the result of higher treatment costs and lower average realized zinc and lead prices, partially offset by higher metal sales volumes and higher silver and gold prices. Treatment costs were higher by $6.3 million and $14.9 million, respectively, for the second quarter and first half of 2020 compared to the same periods of 2019 primarily due to unfavorable changes in smelter terms. Treatment costs for the first quarter of 2020 were also impacted by failure by a metals trader customer to perform its obligation to purchase a spot sale of concentrate, for which we are seeking remedy, although there can be no assurance we will be successful.

~~The~~ chart below illustrates the factors contributing to ~~the variances in~~ Cash Cost, After By-product Credits, ~~Per~~per Silver Ounce for the ~~second~~first quarter of 2021. Total production costs and Cash Cost and AISC, After By-product Credits, per Silver Ounce are not presented for the first ~~six months~~quarter of 2020, ~~compared to~~as production was limited during the ~~same periods of 2019.~~ramp-up after the strike and results are not comparable.

The following table summarizes the components of Cash Cost, After By-product Credits, per Silver Ounce:

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Cash Cost, Before By-product Credits, per Silver Ounce
$ 22.06 $ 20.83 $ 21.07 $ 21.11
By-product credits
(16.87 ) (18.45 ) (15.66 ) (19.65 )
Cash Cost, After By-product Credits, per Silver Ounce
$ 5.19 $ 2.38 $ 5.41 $ 1.46

	Three Months Ended March 31,
	2021
Cash Cost, Before By-product Credits, per Silver Ounce		24.43
By-product credits		(16.81	)
Cash Cost, After By-product Credits, per Silver Ounce		7.62

The following table summarizes the components of AISC, After By-product Credits, per Silver Ounce:

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

AISC, Before By-product Credits, per Silver Ounce
$ 23.98 $ 24.82 $ 23.17 $ 24.50
By-product credits
(16.87 ) (18.45 ) (15.66 ) (19.65 )
AISC, After By-product Credits, per Silver Ounce
$ 7.11 $ 6.37 $ 7.51 $ 4.85

The increase in Cash Costs and AISC, After By-product Credits, per Silver Ounce for the second quarter and first six months of 2020 compared to 2019 was the result of higher treatment costs and lower by-product credits per ounce, partially offset by lower mining, milling and other costs on a per-ounce basis. For AISC, After By-Product Credits, per Silver Ounce, these factors were partially offset by lower capital spending.

Mining and milling costs per ounce decreased in the second quarter and first half of 2020 compared to 2019 on a per-ounce basis primarily due to higher silver production as a result of higher silver grades.

~~Other cash costs per ounce for the first six months of 2020 were lower compared to 2019 due to higher silver production, partially offset by higher expense for Alaska mine license tax.~~

Treatment costs per ounce were higher in the second quarter and first six months of 2020 compared to 2019 as a result of unfavorable changes in terms and higher silver prices, partially offset by higher silver production, with costs in the first quarter of 2020 also impacted by failure by a metals trader customer to perform its obligation to purchase a spot sale of concentrate, as discussed above. Treatment costs include the value of silver not payable to us through the smelting process. The silver not payable to us is either recovered by the smelters through further processing or ultimately not recovered and included in the smelters' waste material.

By-product credits per ounce were lower in the second quarter and first six months of 2020 compared to 2019 due to lower zinc and lead prices and the impact of higher silver production, which causes the by-product credits to be less on a per-silver ounce basis. For the six month period, by-product credits were also impacted by lower gold production in 2020 compared to 2019.

The difference between what we report as "production" and "payable metal quantities sold" is attributable to the difference between the quantities of metals contained in the concentrates we produce versus the portion of those metals actually paid for by our customers according to the terms of our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades which impact the amount of metals contained in concentrates produced and sold.

~~While revenue from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product of the Greens Creek unit is appropriate because:~~

•

~~silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;~~

•

we have historically presented Greens Creek as a producer primarily of silver, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year;

•

~~metallurgical treatment maximizes silver recovery;~~

•

~~the Greens Creek deposit is a massive sulfide deposit containing an unusually high proportion of silver; and~~

•

~~in most of its working areas, Greens Creek utilizes selective mining methods in which silver is the metal targeted for highest recovery.~~

Likewise, we believe the identification of gold, lead and zinc as by-product credits is appropriate because of their lower economic value compared to silver and due to the fact that silver is the primary product we intend to produce. In addition, we have not consistently received sufficient revenue from any single by-product metal to warrant classification of such as a co-product.

We periodically review our revenues to ensure that reporting of primary products and by-products is appropriate. Because we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset operating costs within our calculations of Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce.

~~The Lucky Friday Segment~~

Dollars are in thousands (except per ounce and per ton amounts)

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Sales
$ 11,455 $ 4,951 $ 14,285 $ 7,133
Cost of sales and other direct production costs
(9,561 ) (4,529 ) (12,091 ) (6,541 )
Depreciation, depletion and amortization
(1,894 ) (422 ) (2,196 ) (591 )
Cost of sales and other direct production costs and depreciation, depletion and amortization
(11,455 ) (4,951 ) (14,287 ) (7,132 )
Gross profit
$ — $ — $ (2 ) $ 1
Tons of ore milled
44,682 13,697 54,901 27,500
Production:

Silver (ounces)
469,537 127,147 565,285 300,774
Lead (tons)
3,088 887 3,783 1,889
Zinc (tons)
1,671 576 2,031 1,002
Payable metal quantities sold:

Silver (ounces)
424,348 177,266 525,449 264,111
Lead (tons)
2,793 1,153 3,463 1,657
Zinc (tons)
1,339 361 1,523 361
Ore grades:

Silver ounces per ton
10.99 10.12 10.78 11.73
Lead percent
7.33
%
7.19
%
7.31
%
7.58
%
Zinc percent
4.07
%
5.03
%
4.03
%
4.28
%

The increases in ore tonnage and metals production in the second quarter and first six months of 2020 compared to the same periods in 2019 are the result of a ramp-up in production following the strike that ended in January 2020 (discussed further below).

	Three Months Ended March 31,
	2021
AISC, Before By-product Credits, per Silver Ounce	$	31.05
By-product credits		(16.81	)
AISC, After By-product Credits, per Silver Ounce		14.24

Many of the employees at our Lucky Friday unit are represented by a union, and the ~~previous~~current collective bargaining agreement with the union ~~expired~~expires on ~~April 30, 2016.~~January 6, 2023. The unionized employees were on strike from March 13, 2017 until January 7, 2020, when the union ratified a new collective bargaining agreement. Salaried personnel performed limited production and capital improvements from July 2017 until the end of the strike. Re-staffing of the mine commenced in the first quarter of ~~2020, and we~~2020. We have substantially completed the re-staffing ~~process. We anticipate a return~~and ramp-up process, and the mine has returned to full production bystarting with the ~~end~~fourth quarter of ~~2020; however, the ramp-up to full production could take longer or be more costly than anticipated.~~2020. Costs related to ramp-up activities totaled ~~$2.9 million and $9.3~~$8.1 million in the ~~second~~first quarter ~~and first half~~ of 2020, ~~respectively, and suspension-related costs during the strike in the second quarter and first half of 2019 totaled $1.1 million and $3.0 million, respectively. These costs are combined with~~which include non-cash depreciation expense of ~~$2.3~~$1.8 million and ~~$4.1 million for the second quarter of first half of 2020, respectively, and $1.2 million and $2.1 million for the second quarter and first half of 2019, respectively,~~are reported in a separate line item on our consolidated statements of ~~operations.~~operations, with no ramp-up costs recognized in the first quarter of 2021. These ~~restart and suspension~~ramp-up costs are excluded from the calculation of gross profit, total production cost per ton, Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce, when presented.

See Note 410 of Notes to Condensed Consolidated Financial Statements (Unaudited) for a contingency related to groundwater monitoring at the Lucky Friday mine in prior periods.

4132

The Casa Berardi Segment

Dollars are in thousands (except per ounce and per ton amounts)	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Sales	$	50,005		$	45,500		$	96,177		$	85,562		$	72,911		$	46,172
Cost of sales and other direct production costs		(28,301	)		(36,591	)		(60,229	)		(69,517	)		(36,975	)		(31,928	)
Depreciation, depletion and amortization		(17,281	)		(18,561	)		(33,678	)		(34,716	)		(25,541	)		(16,397	)
Cost of sales and other direct production costs and depreciation, depletion and amortization		(45,582	)		(55,152	)		(93,907	)		(104,233	)
Total cost of sales														(62,516	)		(48,325	)
Gross profit (loss)	$	4,423		$	(9,652	)	$	2,270		$	(18,671	)	$	10,395		$	(2,153	)
Tons of ore milled		280,420			347,596			612,038			677,347			368,403			331,618
Production:
Gold (ounces)		30,756			31,270			57,508			63,069			36,190			26,752
Silver (ounces)		5,495			6,164			11,429			14,404			10,675			5,934
Payable metal quantities sold:
Gold (ounces)		28,754			34,647			57,836			65,260			40,869			29,082
Silver (ounces)		4,383			4,900			12,806			13,362			8,715			8,423
Ore grades:
Gold ounces per ton		0.13			0.11			0.12			0.12			0.120			0.102
Silver ounces per ton		0.02			0.02			0.02			0.03			0.04			0.02
Mining cost per ton	$	71.68		$	76.35		$	74.21		$	81.11
Milling cost per ton	$	21.11		$	18.28		$	21.57		$	17.06
Total production cost per ton													$	99.67		$	102.45
Cash Cost, After By-product Credits, per Gold Ounce ⁽¹⁾	$	919		$	1,101		$	1,081		$	1,107		$	1,027		$	1,268
AISC, After By-product Credits, per Gold Ounce ⁽¹⁾	$	1,077		$	1,437		$	1,327		$	1,387		$	1,272		$	1,615
Capital additions													$	13,847		$	8,506

(1)

Gross profit increased by ~~$14.1 million and $20.9~~$12.5 million for the ~~second~~first quarter ~~and first half~~ of ~~2020, respectively,~~2021 compared to the ~~same periods~~first quarter of ~~2019,~~2020 primarily due to higher sales resulting from higher average ~~realized~~gold prices and volume, partially offset by higher total cost of sales resulting from the higher sales volume. The lower gold volume ~~resulting~~in the first quarter of 2020 resulted from reduced ~~mill throughput. The~~ore grades and lower ~~mill throughput was~~production than anticipated due to a government COVID-19-related order. In late March 2020, the Government of Quebec ordered the mining industry to reduce to minimum operations as part of the fight against the COVID-19 virus, causing us to suspend our Casa Berardi operations from March 24, 2020 until April 15, 2020, when limited mining operations ~~resumed.~~resumed, resulting in reduced mill throughput. As a result of the suspension of operations, gold production was negatively impacted by approximately 5,200 and 6,500 ounces ~~lower~~ in March ~~2020~~ and ~~approximately 6,500 ounces lower in~~ April 2020, ~~than previously-forecasted full production levels.~~respectively. Production may continue to be adversely impacted by the COVID-19 mitigation practices in place until they are no longer required. Suspension-related costs totaling ~~$1.6~~$0.9 million for the first ~~half~~quarter of 2020 are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, mining and milling cost per ton, and Cash Cost and AISC, After By-product Credits, per Gold Ounce.

~~Mining costs per ton were lower~~Total capital additions increased by ~~6% and 9%, respectively, for~~$5.3 million in the ~~second~~first quarter ~~and first half~~ of ~~2020~~2021 compared to the ~~same periods~~first quarter of ~~last year~~2020 primarily due to ~~reduced contractor~~growth capital costs incurred for development of the new 160 zone open pit mine, partially offset by lower ~~ore production. Milling costs per ton were higher by 15% and 26%, respectively, for the second quarter and first half of 2020 compared to the same periods of last year due primarily to lower~~sustaining capital costs. We expect limited ore production ~~and higher contractor costs.~~from the 160 zone pit to begin in the fourth quarter of 2021.

4233

The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, ~~Per~~per Gold Ounce for the ~~second~~first quarter ~~and~~of 2021 compared to the first ~~half~~quarter of ~~2020 and 2019:~~2020:

The following table summarizes the components of Cash Cost, After By-product Credits, per Gold Ounce:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Cash Cost, Before By-product Credits, per Gold Ounce	$	922		$	1,104		$	1,084		$	1,110		$	1,035		$	1,272
By-product credits		(3	)		(3	)		(3	)		(3	)		(8	)		(4	)
Cash Cost, After By-product Credits, per Gold Ounce	$	919		$	1,101		$	1,081		$	1,107		$	1,027		$	1,268

The following table summarizes the components of AISC, After By-product Credits, per Gold Ounce:

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
AISC, Before By-product Credits, per Gold Ounce	$	1,080		$	1,440		$	1,330		$	1,390		$	1,280		$	1,619
By-product credits		(3	)		(3	)		(3	)		(3	)		(8	)		(4	)
AISC, After By-product Credits, per Gold Ounce	$	1,077		$	1,437		$	1,327		$	1,387		$	1,272		$	1,615

The decrease in Cash Cost and AISC, After By-product Credits, per Gold Ounce for the ~~second~~first quarter ~~and first half~~ of ~~2020~~2021 compared to the ~~same periods in 2019~~first quarter of 2020 was primarily ~~due to lower mining costs, partially offset by lower~~the result of higher gold ~~production. The decrease in~~production, with AISC, After By-product Credits, per Gold Ounce ~~was attributed to~~also impacted by lower sustaining capital ~~and~~spending, partially offset by higher exploration spending.

The difference between what we report as "production" and "payable metal quantities sold" is mainly attributable to inventory changes incidental to the timing of sales of refined metals and shipping schedules.

We believe the identification of silver as a by-product credit is appropriate at Casa Berardi because of its lower economic value compared to gold and due to the fact that gold is the primary product we intend to produce there. In addition, we do not receive sufficient revenue from silver at Casa Berardi to warrant classification of such as a co-product. Because we consider silver to be a by-product of our gold production at Casa Berardi, the value of silver offsets operating costs within our calculations of Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce.

4334

The San Sebastian Segment

Dollars are in thousands (except per ounce and per ton amounts)	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Sales	$	4,934		$	10,993		$	14,860		$	23,593		$	173		$	9,927
Cost of sales and other direct production costs		(3,115	)		(9,295	)		(9,943	)		(19,887	)		(94	)		(6,827	)
Depreciation, depletion and amortization		(895	)		(1,848	)		(2,368	)		(3,608	)		—			(1,473	)
Cost of sales and other direct production costs and depreciation, depletion and amortization		(4,010	)		(11,143	)		(12,311	)		(23,495	)
Gross profit (loss)	$	924		$	(150	)	$	2,549		$	98
Total cost of sales														(94	)		(8,300	)
Gross profit													$	79		$	1,627
Tons of ore milled		21,647			45,869			57,123			90,344			—			35,476
Production:
Silver (ounces)		158,842			463,735			505,467			904,814			—			346,625
Gold (ounces)		1,331			3,547			4,133			7,077			—			2,802
Payable metal quantities sold:
Silver (ounces)		162,780			441,710			516,476			938,260			3,392			353,696
Gold (ounces)		1,220			3,410			4,044			7,140			47			2,824
Ore grades:
Silver ounces per ton		7.96			11.03			9.63			10.99			—			10.64
Gold ounces per ton		0.07			0.09			0.09			0.09			—			0.091
Mining cost per ton	$	31.01		$	108.25		$	67.59		$	116.79
Milling cost per ton	$	51.68		$	61.43		$	58.95		$	61.81
Total production cost per ton													$	—		$	178.02
Cash Cost, After By-product Credits, per Silver Ounce ⁽¹⁾	$	1.14		$	9.22		$	5.09		$	10.20		$	—		$	6.91
AISC, After By-product Credits, per Silver Ounce ⁽¹⁾	$	1.85		$	15.50		$	5.65		$	16.02		$	—		$	9.59
Capital additions													$	—		$	803

(1)

A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP).

The ~~$1.1~~$1.5 million ~~and $2.5 million increases~~decrease in gross profit ~~(loss) for~~in the ~~second~~first quarter ~~and first half~~ of ~~2020, respectively,~~2021 compared to the ~~same periods in 2019 are~~first quarter of 2020 is primarily due to ~~higher average silver and gold prices and lower costs, partially offset by~~ lower metal ~~volumes due to lower ore grades and mill throughput.~~

volumes. Mining ~~and milling cost per ton were lower by 71% and 16%, respectively,~~at San Sebastian was completed in the ~~second~~third quarter of 2020, and ~~lower by 42% and 5%, respectively, for~~milling was completed in the ~~first half~~fourth quarter of 2020, ~~compared to the same periods of 2019. The decreases were mainly due to lower contractor costs, partially offset by lower ore tonnage.~~

~~The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Silver Ounce for the second quarter~~with exploration and ~~first half of 2020 compared to the same periods in 2019:~~evaluation activities ongoing.

~~The following table summarizes the components of Cash Cost, After By-product Credits, per Silver Ounce:~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Cash Cost, Before By-product Credits, per Silver Ounce
$ 15.61 $ 19.23 $ 18.39 $ 20.42
By-product credits
(14.47 ) (10.01 ) (13.30 ) (10.22 )
Cash Cost, After By-product Credits, per Silver Ounce
$ 1.14 $ 9.22 $ 5.09 $ 10.20

~~The following table summarizes the components of AISC, After By-product Credits, per Silver Ounce:~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

AISC, Before By-product Credits, per Silver Ounce
$ 16.32 $ 25.51 $ 18.95 $ 26.24
By-product credits
(14.47 ) (10.01 ) (13.30 ) (10.22 )
AISC, After By-product Credits, per Silver Ounce
$ 1.85 $ 15.50 $ 5.65 $ 16.02

The decrease in Cash Cost and AISC, After By-product Credits, per Silver Ounce in the second quarter and first half of 2020 compared to the same periods of 2019 was primarily the result of higher by-product credits per ounce due to higher gold prices, partially offset by lower silver production. The decrease in AISC, After By-product Credits, per Silver Ounce in the second quarter and first half of 2020 compared to the same periods of 2019 is also a result of lower capital and exploration spending.

~~We periodically review our revenues to ensure that reporting of primary products and by-products is appropriate. We believe the identification of gold as a by-product credit is appropriate~~Suspension-related costs at San Sebastian because of its anticipated lower economic value compared to silver over the life of the mine. In addition, we do not receive sufficient revenue from gold at San Sebastian to warrant classification of such as a co-product. Because we consider gold to be a by-product of our silver production at San Sebastian, the value of gold offsets operating costs within our calculations of Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce.

In early April 2020, the Government of Mexico issued an order to the mining industry to reduce operations to a minimum level until April 30 in response to COVID-19, and the order was subsequently extended until May 30. Our operations at San Sebastian were suspended during that time. The closure is not expected to have a material impact on full-year production. Suspension-related costs totaling ~~$1.0~~$0.7 million for the first ~~half~~quarter of ~~2020~~2021 are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, ~~mining and milling cost per ton,~~total production costs and Cash Cost and AISC, After By-product Credits, per ~~Gold~~Silver Ounce.

~~We continue~~

The chart below illustrates the factors contributing to ~~study~~Cash Cost, After By-product Credits, Per Silver Ounce for the Hugh Zone and El Toro opportunities at San Sebastian. The Hugh Zone was discovered in 2005 and is the deeper sulfide extension of the past-producing Francine vein, and El Toro is a near-surface oxide deposit discovered in 2019. The remaining work on the Hugh Zone is focused on the ability to generate a third salable concentrate (copper) from the ore, which has a significant impact on the potential return of the project and how the two deposits should be sequenced. The mine currently is expected to end production in the fourthfirst quarter of ~~2020. We believe the ability to produce a third concentrate, if achieved, could result in a restart of production in 2021 or 2022.~~2020:

The following table summarizes the components of Cash Cost, After By-product Credits, per Silver Ounce:

	Three Months Ended March 31,
	2020
Cash Cost, Before By-product Credits, per Silver Ounce	$	19.67
By-product credits		(12.76	)
Cash Cost, After By-product Credits, per Silver Ounce	$	6.91

The following table summarizes the components of AISC, After By-product Credits, per Silver Ounce:

	Three Months Ended March 31,
	2020
AISC, Before By-product Credits, per Silver Ounce	$	22.35
By-product credits		(12.76	)
AISC, After By-product Credits, per Silver Ounce	$	9.59

The Nevada Operations Segment

Dollars are in thousands (except per ounce and per ton amounts)	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Sales	$	15,071		$	17,330		$	39,234		$	34,974		$	10,237		$	24,163
Cost of sales and other direct production costs		(7,192	)		(19,723	)		(15,041	)		(42,837	)		(4,822	)		(7,849	)
Depreciation, depletion and amortization		(6,365	)		(17,796	)		(15,430	)		(26,129	)		(2,633	)		(9,065	)
Cost of sales and other direct production costs and depreciation, depletion and amortization		(13,557	)		(37,519	)		(30,471	)		(68,966	)
Gross profit (loss)	$	1,514		$	(20,189	)	$	8,763		$	(33,992	)
Total cost of sales														(7,455	)		(16,914	)
Gross profit													$	2,782		$	7,249
Tons of ore milled		10,686			58,417			27,984			99,782			16,459			17,298
Production:
Gold (ounces)		14,791			12,694			31,756			23,058			2,548			16,965
Silver (ounces)		15,988			49,449			37,443			116,887			—			21,455
Payable metal quantities sold:
Gold (ounces)		9,068			12,331			23,944			25,060			5,823			14,876
Silver (ounces)		3,392			56,333			28,731			121,387			6,821			25,339
Ore grades:
Gold ounces per ton		1.519			0.259			1.232			0.276			0.185			1.055
Silver ounces per ton		2.07			1.63			1.7			1.99			—			1.47
Mining cost per ton	$	403.38		$	129.75		$	402.94		$	164.08
Milling cost per ton	$	219.32		$	75.44		$	176.63		$	90.74
Total production cost per ton													$	360.72		$	745.14
Cash Cost, After By-product Credits, per Gold Ounce ⁽¹⁾	$	694		$	1,274		$	716		$	1,502		$	1,416		$	735
AISC, After By-product Credits, per Gold Ounce ⁽¹⁾	$	769		$	2,347		$	787		$	2,666		$	1,461		$	808
Capital additions													$	89		$	857

(1)

The ~~increases~~decrease in gross profit for the ~~second~~first quarter ~~and~~of 2021 compared to the first quarter of 2020 is a result of lower metals production. During the second half of 2020, ~~compared to~~all ore mined at the same periods of 2019 were primarily the result of higher average gold prices and higher gold production, due to higher grades. In addition, cost of sales and other direct production costs for the first half of 2020 included write-downs totaling approximately $1.5 million of the values of stockpile, in-process and finished goods inventory to their net realizable value,Nevada Operations was stockpiled, with no ~~portion~~ore milled and no production reported during that period. Mining of that amount recognized in the second quarter of 2020, compared to $18.6 million and $28.3 million, respectively, in such write-downs for the second quarter and first half of 2019. The write-downs in the 2019 periods were primarily attributed to development costs incurred at the Fire Creek mine, which were ceased in the second quarter of 2019 when the decision was made to limit near-term production to areas of the mine where development was already completed.

Mining and milling costs per ton were higher by 384% and 191%, respectively, for the second quarter of 2020 and by 184% and 95%, respectively, for the first half of 2020 compared to the same periods of 2019. The increases were primarily the result of lower mill throughput.

~~The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Gold Ounce for the second quarter and first half of 2020:~~

~~The following table summarizes the components of Cash Cost, After By-product Credits, per Gold Ounce:~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

Cash Cost, Before By-product Credits, per Gold Ounce
$ 713 1,332 $ 736 1,580
By-product credits
(19 ) (58 ) (20 ) (78 )
Cash Cost, After By-product Credits, per Gold Ounce
$ 694 $ 1,274 $ 716 $ 1,502

~~The following table summarizes the components of AISC, After By-product Credits, per Gold Ounce:~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2020

2019

2020

2019

AISC, Before By-product Credits, per Gold Ounce
$ 788 $ 2,405 $ 807 $ 2,744
By-product credits
(19 ) (58 ) (20 ) (78 )
AISC, After By-product Credits, per Gold Ounce
$ 769 $ 2,347 $ 787 $ 2,666

The decreases in Cash Costs and AISC, After By-product Credits, per Gold ounce in the second quarter and first half of 2020 compared to the same periods of 2019 were due to higher gold production resulting from increased grades, with the decreases in AISC, After By-product Credits, per Gold Ounce also attributed to lower exploration and capital spending.

We believe the identification of silver as a by-product credit is appropriate at Nevada Operations because of its lower economic value compared to gold and due to the fact that gold is the primary product we intend to produce there. In addition, we do not receive sufficient revenue from silver at Nevada Operations to warrant classification of such as a co-product. Because we consider silver to be a by-product of our gold production at Nevada Operations, the value of silver offsets operating costs within our calculations of Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce.

Because total production and capital costs had exceeded sales since acquisition, we conducted a review of our Nevada operations during the second quarter of 2019. The review resulted in (i) a plan to limit near-term miningnon-refractory ore at Fire Creek toin areas where development has already been performed was completed ~~and (ii) suspension~~in the fourth quarter of ~~production and development~~2020. Processing of the ~~Hatter Graben project~~stockpiled non-refractory ore at the Midas mill commenced at the end of the first quarter of 2021, and is expected to be completed in the second quarter. In addition, third-party processing of a bulk sample of Fire Creek refractory ore commenced in the first quarter of 2021 and is expected to be completed in the second quarter. Fire Creek is expected to be placed on care-and-maintenance in the second quarter of 2021 after its remaining non-refractory ore stockpile is processed. We also expect to process an additional 10,000 tons of Fire Creek refractory ore at the third-party facility in the second half of 2021.

Production was suspended at the Hollister ~~resulting~~mine in ~~lower anticipated near-term production~~the third quarter of 2019 and ~~capitalized development costs. Production~~ at the Midas mine and Aurora mill ~~was suspended~~ in ~~late 2019.~~late-2019. Suspension-related costs at Nevada Operations totaling ~~$6.7~~$3.6 million and $4.0 million for the first ~~half~~quarters of 2021 and 2020, ~~at Hollister, Midas and Aurora, which are currently on care-and-maintenance,~~respectively, are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, ~~mining and milling cost~~total production costs per ton and Cash Cost and AISC, After By-product Credits, per Gold Ounce.

We determined this review and the resulting plans represented a triggering event requiring an assessment of recoverability of the carrying value of our long-lived assets ("carrying value assessment") in Nevada as of June 30, 2019. In our carrying value assessment, our estimate of undiscounted future cash flows and the estimated value of mineral interests exceeded the carrying value of the Nevada assets, and we concluded impairment was not indicated. ThereTotal production costs per ton were ~~no subsequent events or changes in circumstances during the remainder of 2019 or~~lower by 52% for the first ~~half~~quarter of 2021 compared to the first quarter of 2020, that indicated the carrying value of our long-term assets in Nevada was not recoverable. We have entered into a third-party ore processing arrangement for a bulk sample of ore, with the potential of establishing a long-term arrangement which could reduce transportationprimarily due to lower mining and milling ~~costs. Mining of~~costs, as production for the 2021 period was from stockpiled bulk sample material commenced in the second quarter of 2020, with costs for mining the material totaling $4.3 million included in stockpiled ore inventory as of June 30, 2020. Additionally, we have commenced studies of the assets in order to determine how to mine themprocessed at lower costs. Recoverability of carrying value will be contingent upon the favorable resolution of operational issues, including, but not limited to: (i) ore grade control, (ii) mill recoveries and reconciliation, (iii) the potential availability ofa third-party processing of ore produced at the Fire Creek mine, (iv) availability of sufficient resources (including funding) to resume and complete necessary development work and drilling on a timely basis, (v) hydrological studies and (vi) permitting. Based on the current mine plan, mining at Fire Creek in areas where development has already been performed is expected to be completed in the third quarter of 2020.facility.

Our estimates of undiscounted future cash flows for our Nevada assets are most sensitive to (i) changes in metal prices and (ii) estimates of metals to be extracted and recovered. If events or changes occur that adversely affect our estimate of undiscounted future cash flows from our Nevada assets, including (i) an increase in expected costs, (ii) a sustained decline in gold prices, or (iii) suspension of production and placement of our Nevada operations on care-and-maintenance due to the inability to resolve the operational issues identified in the preceding paragraph in a timely manner, or other factors, we may be required to again perform a carrying value assessment for our Nevada assets. If a future assessment indicates the carrying value of the assets exceeds the estimated undiscounted future cash flows, an impairment loss, which could be material, would be recognized for the difference between the carrying value and fair value of the assets. The estimate of potential impairment involves significant judgment and assumptions, and no assurance can be given as to whether we will recognize an impairment in the future or the amount of a potential impairment. The carrying value of our properties, plants, equipment and mineral interests in Nevada as of June 30, 2020 was $483.9 million, consisting of the following (in millions):

Value beyond proven and probable reserves
$ 382.2
Mills and tailings facilities
41.5
Buildings and equipment
24.7
Development

19.0

Mineral properties
10.4
Asset retirement obligation asset
3.1
Land
3.0
Total
$ 483.9

4837

The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, Per Gold Ounce for the first quarter of 2021 and 2020:

The following table summarizes the components of Cash Cost, After By-product Credits, per Gold Ounce:

	Three Months Ended March 31,
	2021		2020
Cash Cost, Before By-product Credits, per Gold Ounce	$	1,416	$	756
By-product credits		—		(21	)
Cash Cost, After By-product Credits, per Gold Ounce	$	1,416	$	735

The following table summarizes the components of AISC, After By-product Credits, per Gold Ounce:

	Three Months Ended March 31,
	2021		2020
AISC, Before By-product Credits, per Gold Ounce	$	1,461	$	829
By-product credits		—		(21	)
AISC, After By-product Credits, per Gold Ounce	$	1,461	$	808

The increase in Cash Costs and AISC, After By-product Credits, per Gold ounce in the first quarter of 2021 compared to the first quarter of 2020 was due to lower gold production resulting from decreased grades and ore volume.

See Item 1A. Risk Factors - Operation, Development, Exploration and Acquisition Risks in our ~~annual report filed on~~2020 Form 10-K ~~for the year ended December 31, 2019~~ for a discussion of certain risks relating to our recent and ongoing analysis of the carrying value of the Nevada assets.

Corporate Matters

Employee Benefit Plans

Our defined benefit pension plans provide a significant benefit to our employees, but represent a significant liability to us. The liability recorded for the underfunded status of our plans was ~~$59.5~~$29.6 million and ~~$56.8~~$44.9 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. In ~~April 2020,~~January 2021, we contributed ~~$0.4~~$16.8 million in shares of our common stock to our ~~defined benefit plans,~~supplemental executive retirement plan ("SERP"), and expect to contribute an additional approximately ~~$10.0 million in cash or shares of our common stock in 2020, including $4.8~~$0.8 million to ~~satisfy~~ the ~~remaining minimum funding requirement for the year.~~SERP in 2021. We do not expect to be required to contribute to our defined benefit pension plans in 2021, but we may choose to do so. While the economic variables which will determine future funding requirements are uncertain, we expect contributions to continue to be required in future years under current plan provisions, and we periodically examine the plans for affordability and competitiveness. See Note 7 9 of Notes to ~~Condensed~~ Consolidated Financial Statements ~~(Unaudited)~~in our 2020 Form 10-K for more information.

Income and Mining Taxes

During the first quarter of 2021, an income and mining tax provision of approximately $4.6 million resulted in an effective tax rate of 19.6% for that period. This compares to an income and mining tax benefit of $1.1 million, or an effective tax rate of 5.8%, for the first quarter of 2020. The comparability of our income and mining tax (provision) benefit and effective tax rate for the reported periods was impacted by multiple factors, primarily: (i) mining taxes; (ii) variations in our income before income taxes; (iii) geographic distribution of that income; (iv) foreign exchange rates; (v) percentage depletion; (vi) the non-recognition of tax assets; and (vii) the reclassification of the Alaska mine license tax effective January 1, 2021, which increased our income and mining tax provision by $3.0 million. Therefore, the effective tax rate will fluctuate, sometimes significantly, period to period.

Each reporting period we assess our deferred tax ~~balance~~balances based on a review of long-range forecasts and quarterly activity. In 2018, through the acquisition of Klondex Mines Ltd., we acquired a U.S. consolidated tax group (the "Nevada U.S. Group") that did not join the existing consolidated U.S. tax group of Hecla Mining Company and subsidiaries (“Hecla U.S.”). We recognized a fullA valuation allowance ~~on our Hecla U.S. net~~is provided for deferred tax assets atfor which it is more likely than not the ~~end of 2017 based on results of~~related tax ~~law changes and maintain a full valuation allowance on Hecla U.S. net~~benefits will not be realized. We analyze our deferred tax assets ~~at June 30, 2020.~~

Our net U.S. deferred tax liability for the Nevada U.S. Group at June 30, 2020 was $35.1 million compared to the $38.3 million net deferred tax liability at December 31, 2019. The $3.2 million decreaseand, if it is ~~for current period activity in Nevada. The deferred tax liability is primarily related to the excess~~determined that we will not realize all or a portion of ~~the carrying value of the mineral resource assets over the tax bases of those assets for U.S. tax reporting.~~

Our net Canadian deferred tax liability at June 30, 2020 was $93.6 million, a decrease of $6.3 million from the $99.9 million net deferred tax liability at December 31, 2019. The decrease was primarily due to the impact of weakening of the CAD relative to the USD on remeasurement of the deferred tax liability balance. The deferred tax liability is primarily related to the excess of the carrying value of the mineral resource assets over the tax bases of those assets for Canadian tax reporting.

Our Mexican net deferred tax asset at June 30, 2020 was $3.2 million, a decrease of $0.3 million from the net deferred tax asset of $3.5 million at December 31, 2019. The decrease was primarily due to the impact of weakening of the MXN relative to the USD on remeasurement of the deferred tax asset balance. A $2.2 million partial valuation allowance remains onour deferred tax assets, ~~in Mexico.~~

Aswe will record or increase a ~~result~~valuation allowance. Conversely, if it is determined we will ultimately more likely than not be able to realize all or a portion of the ~~Tax Cuts and Jobs Act enacted~~related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact our ability to realize our deferred tax assets. For additional information, please see Item 1A - Risk Factors in ~~December 2017,~~ our ~~remaining Alternative Minimum Tax ("AMT") credit carryforward of $10.7 million became partially refundable through~~ 2020 and fully refundable in 2021. An Alaska AMT refund of $0.5 million was received in the first half of 2020, leaving a net AMT credit receivable of $10.2 million as of June 30, 2020. In March 2020, the U.S. government issued the Coronavirus Aid, Relief and Economic Security Act, which allowed companies to claim immediate refunds of AMT credits. As a result, the remaining $10.2 million AMT credit is classified as a current receivable as of June 30, 2020.10-K.

Reconciliation of Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) to Cash Cost, Before By-product Credits and Cash Cost, After By-product Credits (non-GAAP) and All-In Sustaining Cost, Before By-product Credits and All-In Sustaining Cost, After By-product Credits (non-GAAP)

The tables below present reconciliations between the most comparable GAAP measure of cost of sales and other direct production costs and depreciation, depletion and amortization to the non-GAAP measures of (i) Cash Cost, Before By-product Credits, (ii) Cash Cost, After By-product Credits, (iii) AISC, Before By-product Credits and (iv) AISC, After By-product Credits for our operations at the Greens Creek, Lucky Friday, San Sebastian, Casa Berardi and Nevada Operations units and for the Company for the ~~three- and six-month~~three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce are measures developed by precious metals companies (including the Silver Institute and the World Gold Council) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that these non-GAAP measures as we report them are the same as those reported by other mining companies.

Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine's operating performance. We use AISC, After By-product Credits, per Ounce as a measure of our mines' net cash flow after costs for exploration, pre-development, reclamation, and sustaining capital. This is similar to the Cash Cost, After By-product Credits, per Ounce non-GAAP measure we report, but also includes on-site exploration, reclamation, and sustaining capital costs. Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce also allow us to benchmark the performance of each of our mines versus those of our competitors. As a silver and gold mining company, we also use these statistics on an aggregate basis - aggregating the Greens Creek, Lucky Friday and San Sebastian mines - to compare our performance with that of other silver mining companies, and aggregating Casa Berardi and Nevada Operations for comparison with other gold mining companies. Similarly, these statistics are useful in identifying acquisition and investment opportunities as they provide a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics.

Cash Cost, Before By-product Credits and AISC, Before By-product Credits include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs ~~royalties~~ and ~~mining production taxes.~~royalties. AISC, Before By-product Credits for each mine also includes on-site exploration, reclamation, and sustaining capital costs. AISC, Before By-product Credits for our consolidated silver properties also includes corporate costs for general and administrative expense, exploration and sustaining capital projects. By-product credits include revenues earned from all metals other than the primary metal produced at each unit. As depicted in the tables below, by-product credits comprise an essential element of our silver unit cost structure, distinguishing our silver operations due to the polymetallic nature of their orebodies.

In addition to the uses described above, Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce provide management and investors an indication of operating cash flow, after consideration of the average price received from production. We also use these measurements for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective.

The Casa Berardi, Nevada Operations and combined gold properties information below reports Cash Cost, After By-product Credits, per Gold Ounce and AISC, After By-product Credits, per Gold Ounce for the production of gold, their primary product, and by-product revenues earned from silver, which is a by-product at Casa Berardi and Nevada Operations. Only costs and ounces produced relating to units with the same primary product are combined to represent Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce. Thus, the gold produced at our Casa Berardi and Nevada Operations units is not included as a by-product credit when calculating Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce for the total of Greens Creek, Lucky Friday and San Sebastian, our combined silver properties. Similarly, the silver produced at our other three units is not included as a by-product credit when calculating the gold metrics for Casa Berardi and Nevada Operations.

5040

In thousands (except per ounce amounts)	Three Months Ended June 30, 2020														Three Months Ended March 31, 2021
	Greens Creek			Lucky Friday⁽²⁾			San Sebastian ⁽³⁾			Corporate⁽⁴⁾		Total Silver			Greens Creek			Lucky Friday⁽²⁾			San Sebastian⁽³⁾			Corporate⁽⁴⁾		Total Silver
Cost of sales and other direct production costs and depreciation, depletion and amortization	$	57,672			11,455		$	4,010				$	73,137
Total cost of sales															$	53,181		$	22,794		$	94				$	76,069
Depreciation, depletion and amortization		(12,988	)		(1,894	)		(895	)				(15,777	)		(14,821	)		(6,336	)		—					(21,157	)
Treatment costs		20,016			3,032			47					23,095			10,541			4,978			—					15,519
Change in product inventory		(4,020	)		(118	)		(398	)				(4,536	)		401			(93	)		—					308
Reclamation and other costs		93			—			(296	)				(203	)		(261	)		(233	)		(94	)				(588	)
Exclusion of Lucky Friday costs		—			(12,475	)		—					(12,475	)
Cash Cost, Before By-product Credits ⁽¹⁾		60,773			—			2,468					63,241			49,041			21,110			—					70,151
Reclamation and other costs		789						114					903			848			264			—					1,112
Exploration		—						—			314		314			123			—			—			435		558
Sustaining capital		4,501						(1	)		—		4,500			4,892			5,454			—			—		10,346
General and administrative											6,979		6,979												8,007		8,007
AISC, Before By-product Credits ⁽¹⁾		66,063			—			2,581					75,937			54,904			26,828			—					90,174
By-product credits:
Zinc		(19,913	)		—								(19,913	)		(22,767	)		(4,753	)		—					(27,520	)
Gold		(19,427	)		—			(2,287	)				(21,714	)		(20,996	)		—			—					(20,996	)
Lead		(7,133	)		—								(7,133	)		(7,020	)		(9,775	)		—					(16,795	)
Total By-product credits		(46,473	)		—			(2,287	)				(48,760	)		(50,783	)		(14,528	)		—					(65,311	)
Cash Cost, After By-product Credits	$	14,300		$	—		$	181				$	14,481		$	(1,742	)	$	6,582		$	—				$	4,840
AISC, After By-product Credits	$	19,590		$	—		$	294				$	27,177		$	4,121		$	12,300		$	—				$	24,863
Divided by ounces produced		2,754			—			158					2,912			2,585			864			—					3,449
Cash Cost, Before By-product Credits, per Ounce	$	22.06		$	—		$	15.61				$	21.71		$	18.98		$	24.43		$	—				$	20.34
By-product credits per ounce		(16.87	)		—			(14.47	)				(16.74	)		(19.65	)		(16.81	)		—					(18.94	)
Cash Cost, After By-product Credits, per Ounce	$	5.19		$	—		$	1.14				$	4.97		$	(0.67	)	$	7.62		$	—				$	1.40
AISC, Before By-product Credits, per Ounce	$	23.98		$	—		$	16.32				$	26.07		$	21.24		$	31.05		$	—				$	26.15
By-product credits per ounce		(16.87	)		—			(14.47	)				(16.74	)		(19.65	)		(16.81	)		—					(18.94	)
AISC, After By-product Credits, per Ounce	$	7.11		$	—		$	1.85				$	9.33		$	1.59		$	14.24		$	—				$	7.21

5141

In thousands (except per ounce amounts)	Three months ended June 30, 2020									Three Months Ended March 31, 2021
	Casa Berardi ⁽⁵⁾			Nevada Operations ⁽⁶⁾			Total Gold			Casa Berardi ⁽⁵⁾			Nevada Operations ⁽⁶⁾			Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization	$	45,582		$	13,557		$	59,139
Total cost of sales										$	62,516		$	7,455		$	69,971
Depreciation, depletion and amortization		(17,281	)		(6,365	)		(23,646	)		(25,541	)		(2,633	)		(28,174	)
Treatment costs		558			19			577			714			11			725
Change in product inventory		(400	)		3,669			3,269			(47	)		(1,084	)		(1,131	)
Reclamation and other costs		(92	)		(328	)		(420	)		(208	)		(27	)		(235	)
Cash costs excluded											—			(115	)		(115	)
Cash Cost, Before By-product Credits ⁽¹⁾		28,367			10,552			38,919			37,434			3,607			41,041
Reclamation and other costs		94			327			421			208			27			235
Exploration		467			—			467			907			—			907
Sustaining capital		4,278			774			5,052			7,758			89			7,847
General and administrative																	—
AISC, Before By-product Credits ⁽¹⁾		33,206			11,653			44,859			46,307			3,723			50,030
By-product credits:
Silver		(92	)		(282	)		(374	)		(278	)		—			(278	)
Total By-product credits		(92	)		(282	)		(374	)		(278	)		—			(278	)
Cash Cost, After By-product Credits	$	28,275		$	10,270		$	38,545		$	37,156		$	3,607		$	40,763
AISC, After By-product Credits	$	33,114		$	11,371		$	44,485		$	46,029		$	3,723		$	49,752
Divided by ounces produced		31			15			46			36			3			39
Cash Cost, Before By-product Credits, per Ounce	$	922		$	713		$	854		$	1,035		$	1,416		$	1,059
By-product credits per ounce		(3	)		(19	)		(8	)		(8	)		—			(7	)
Cash Cost, After By-product Credits, per Ounce	$	919		$	694		$	846		$	1,027		$	1,416		$	1,052
AISC, Before By-product Credits, per Ounce	$	1,080		$	788		$	985		$	1,280		$	1,461		$	1,291
By-product credits per ounce		(3	)		(19	)		(8	)		(8	)		—			(7	)
AISC, After By-product Credits, per Ounce	$	1,077		$	769		$	977		$	1,272		$	1,461		$	1,284

5242

In thousands (except per ounce amounts)

Three months ended June 30, 2020

Total
Silver

Total
Gold

Total

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 73,137 $ 59,139 $ 132,276
Depreciation, depletion and amortization
(15,777 ) (23,646 ) (39,423 )
Treatment costs
23,095 577 23,672
Change in product inventory
(4,536 ) 3,269 (1,267 )
Reclamation and other costs
(203 ) (420 ) (623 )
Exclusion of Lucky Friday costs
(12,475 ) — (12,475 )
Cash Cost, Before By-product Credits ⁽¹⁾
63,241 38,919 102,160
Reclamation and other costs
903 421 1,324
Exploration
314 467 781
Sustaining capital
4,500 5,052 9,552
General and administrative
6,979 — 6,979
AISC, Before By-product Credits ⁽¹⁾
75,937 44,859 120,796
By-product credits:

Zinc
(19,913 ) — (19,913 )
Gold
(21,714 ) — (21,714 )
Lead
(7,133 ) — (7,133 )
Silver
(374 ) (374 )
Total By-product credits
(48,760 ) (374 ) (49,134 )
Cash Cost, After By-product Credits
$ 14,481 $ 38,545 $ 53,026
AISC, After By-product Credits
$ 27,177 $ 44,485 $ 71,662
Divided by ounces produced
2,912 46
Cash Cost, Before By-product Credits, per Ounce
$ 21.71 $ 854
By-product credits per ounce
(16.74 ) (8 )
Cash Cost, After By-product Credits, per Ounce
$ 4.97 $ 846
AISC, Before By-product Credits, per Ounce
$ 26.07 $ 985
By-product credits per ounce
(16.74 ) (8 )
AISC, After By-product Credits, per Ounce
$ 9.33 $ 977

In thousands (except per ounce amounts)	Three Months Ended March 31, 2021
	Total Silver			Total Gold			Total
Total cost of sales	$	76,069		$	69,971		$	146,040
Depreciation, depletion and amortization		(21,157	)		(28,174	)		(49,331	)
Treatment costs		15,519			725			16,244
Change in product inventory		308			(1,131	)		(823	)
Reclamation and other costs		(588	)		(235	)		(823	)
Cash costs excluded		—			(115	)		(115	)
Cash Cost, Before By-product Credits ⁽¹⁾		70,151			41,041			111,192
Reclamation and other costs		1,112			235			1,347
Exploration		558			907			1,465
Sustaining capital		10,346			7,847			18,193
General and administrative		8,007			—			8,007
AISC, Before By-product Credits ⁽¹⁾		90,174			50,030			140,204
By-product credits:
Zinc		(27,520	)		—			(27,520	)
Gold		(20,996	)		—			(20,996	)
Lead		(16,795	)		—			(16,795	)
Silver					(278	)		(278	)
Total By-product credits		(65,311	)		(278	)		(65,589	)
Cash Cost, After By-product Credits	$	4,840		$	40,763		$	45,603
AISC, After By-product Credits	$	24,863		$	49,752		$	74,615
Divided by ounces produced		3,449			39
Cash Cost, Before By-product Credits, per Ounce	$	20.34		$	1,059
By-product credits per ounce		(18.94	)		(7	)
Cash Cost, After By-product Credits, per Ounce	$	1.40		$	1,052
AISC, Before By-product Credits, per Ounce	$	26.15		$	1,291
By-product credits per ounce		(18.94	)		(7	)
AISC, After By-product Credits, per Ounce	$	7.21		$	1,284

5343

In thousands (except per ounce amounts)

Three Months Ended June 30, 2019

Greens
Creek

Lucky
Friday⁽²⁾

San
Sebastian

Corporate⁽⁴⁾

Total
Silver

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 45,650 $ 4,951 $ 11,143 $ 61,744
Depreciation, depletion and amortization
(10,850 ) (422 ) (1,848 ) (13,120 )
Treatment costs
10,964 524 238 11,726
Change in product inventory
4,577 (641 ) (190 ) 3,746
Reclamation and other costs
(933 ) — (422 ) (1,355 )
Exclusion of Lucky Friday cash costs
— (4,412 ) — (4,412 )
Cash Cost, Before By-product Credits ⁽¹⁾
49,408 — 8,921 58,329
Reclamation and other costs
738 — 123 861
Exploration
79 — 1,483 497 2,059
Sustaining capital
8,665 — 1,308 12 9,985
General and administrative
8,918 8,918
AISC, Before By-product Credits ⁽¹⁾
58,890 — 11,835 80,152
By-product credits:

Zinc
(22,221 ) — — (22,221 )
Gold
(15,350 ) — (4,645 ) (19,995 )
Lead
(6,198 ) — — (6,198 )
Total By-product credits
(43,769 ) — (4,645 ) (48,414 )
Cash Cost, After By-product Credits
$ 5,639 $ — $ 4,276 $ 9,915
AISC, After By-product Credits
$ 15,121 $ — $ 7,190 $ 31,738
Divided by ounces produced
2,372 — 464 2,836
Cash Cost, Before By-product Credits, per Ounce
$ 20.83 $ — $ 19.23 $ 20.57
By-product credits per ounce
(18.45 ) — (10.01 ) (17.07 )
Cash Cost, After By-product Credits, per Ounce
$ 2.38 $ — $ 9.22 $ 3.50
AISC, Before By-product Credits, per Ounce
$ 24.82 $ — $ 25.51 $ 28.23
By-product credits per ounce
(18.45 ) — (10.01 ) (17.07 )
AISC, After By-product Credits, per Ounce
$ 6.37 $ — $ 15.50 $ 11.16

In thousands (except per ounce amounts)	Three Months Ended March 31, 2020
	Greens Creek			Lucky Friday⁽²⁾			San Sebastian			Corporate⁽⁴⁾		Total Silver
Total cost of sales	$	49,182		$	2,832		$	8,300				$	60,314
Depreciation, depletion and amortization		(12,429	)		(302	)		(1,473	)				(14,204	)
Treatment costs		15,826			432			104					16,362
Change in product inventory		2,870			914			253					4,037
Reclamation and other costs		319			—			(361	)				(42	)
Exclusion of Lucky Friday costs		—			(3,876	)		—					(3,876	)
Cash Cost, Before By-product Credits ⁽¹⁾		55,768			—			6,823					62,591
Reclamation and other costs		788			—			114					902
Exploration		4			—			767			350		1,121
Sustaining capital		5,510			—			56			—		5,566
General and administrative											8,939		8,939
AISC, Before By-product Credits ⁽¹⁾		62,070			—			7,760					79,119
By-product credits:
Zinc		(16,026	)		—			—					(16,026	)
Gold		(17,197	)		—			(4,429	)				(21,626	)
Lead		(6,926	)		—			—					(6,926	)
Total By-product credits		(40,149	)		—			(4,429	)				(44,578	)
Cash Cost, After By-product Credits	$	15,619		$	—		$	2,394				$	18,013
AISC, After By-product Credits	$	21,921		$	—		$	3,331				$	34,541
Divided by ounces produced		2,776			—			347					3,123
Cash Cost, Before By-product Credits, per Ounce	$	20.09		$	—		$	19.67				$	20.04
By-product credits per ounce		(14.46	)		—			(12.76	)				(14.27	)
Cash Cost, After By-product Credits, per Ounce	$	5.63		$	—		$	6.91				$	5.77
AISC, Before By-product Credits, per Ounce	$	22.36		$	—		$	22.35				$	25.33
By-product credits per ounce		(14.46	)		—			(12.76	)				(14.27	)
AISC, After By-product Credits, per Ounce	$	7.90		$	—		$	9.59					11.06

5444

In thousands (except per ounce amounts)	Three Months Ended June 30, 2019									Three Months Ended March 31, 2020
	Casa Berardi			Nevada Operations			Total Gold			Casa Berardi			Nevada Operations			Total Gold
Cost of sales and other direct production costs and depreciation, depletion and amortization	$	55,152		$	37,519		$	92,671
Total cost of sales										$	48,325		$	16,914		$	65,239
Depreciation, depletion and amortization		(18,561	)		(17,796	)		(36,357	)		(16,397	)		(9,065	)		(25,462	)
Treatment costs		427			36			463			574			26			600
Change in product inventory		(2,367	)		(1,969	)		(4,336	)		1,608			5,280			6,888
Reclamation and other costs		(128	)		(885	)		(1,013	)		(97	)		(326	)		(423	)
Cash Cost, Before By-product Credits ⁽¹⁾		34,523			16,905			51,428			34,013			12,829			46,842
Reclamation and other costs		127			378			505			96			327			423
Exploration		941			698			1,639			691			85			776
Sustaining capital		9,431			12,553			21,984			8,506			826			9,332
AISC, Before By-product Credits ⁽¹⁾		45,022			30,534			75,556			43,306			14,067			57,373
By-product credits:
Silver		(91	)		(739	)		(830	)		(100	)		(353	)		(453	)
Total By-product credits		(91	)		(739	)		(830	)		(100	)		(353	)		(453	)
Cash Cost, After By-product Credits	$	34,432		$	16,166		$	50,598		$	33,913		$	12,476		$	46,389
AISC, After By-product Credits	$	44,931		$	29,795		$	74,726		$	43,206		$	13,714		$	56,920
Divided by ounces produced		31			13			44			27			17			44
Cash Cost, Before By-product Credits, per Ounce	$	1,104		$	1,332		$	1,170		$	1,272		$	756		$	1,071
By-product credits per ounce		(3	)		(58	)		(19	)		(4	)		(21	)		(10	)
Cash Cost, After By-product Credits, per Ounce	$	1,101		$	1,274		$	1,151		$	1,268		$	735		$	1,061
AISC, Before By-product Credits, per Ounce	$	1,440		$	2,405		$	1,719		$	1,619		$	829		$	1,312
By-product credits per ounce		(3	)		(58	)		(19	)		(4	)		(21	)		(10	)
AISC, After By-product Credits, per Ounce	$	1,437		$	2,347		$	1,700		$	1,615		$	808		$	1,302

5545

In thousands (except per ounce amounts)

Three Months Ended June 30, 2019

Total
Silver

Total
Gold

Total

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 61,744 $ 92,671 $ 154,415
Depreciation, depletion and amortization
(13,120 ) (36,357 ) (49,477 )
Treatment costs
11,726 463 12,189
Change in product inventory
3,746 (4,336 ) (590 )
Reclamation and other costs
(1,355 ) (1,013 ) (2,368 )
Exclusion of Lucky Friday cash costs
(4,412 ) — (4,412 )
Cash Cost, Before By-product Credits ⁽¹⁾
58,329 51,428 109,757
Reclamation and other costs
861 505 1,366
Exploration
2,059 1,639 3,698
Sustaining capital
9,985 21,984 31,969
General and administrative
8,918 — 8,918
AISC, Before By-product Credits ⁽¹⁾
80,152 75,556 155,708
By-product credits:

Zinc
(22,221 ) — (22,221 )
Gold
(19,995 ) — (19,995 )
Lead
(6,198 ) — (6,198 )
Silver
(830 ) (830 )
Total By-product credits
(48,414 ) (830 ) (49,244 )
Cash Cost, After By-product Credits
$ 9,915 $ 50,598 $ 60,513
AISC, After By-product Credits
$ 31,738 $ 74,726 $ 106,464
Divided by ounces produced
2,836 44
Cash Cost, Before By-product Credits, per Ounce
$ 20.57 $ 1,170
By-product credits per ounce
(17.07 ) (19 )
Cash Cost, After By-product Credits, per Ounce
$ 3.50 $ 1,151
AISC, Before By-product Credits, per Ounce
$ 28.23 $ 1,719
By-product credits per ounce
(17.07 ) (19 )
AISC, After By-product Credits, per Ounce
$ 11.16 $ 1,700

In thousands (except per ounce amounts)

Six Months Ended June 30, 2020

Greens
Creek

Lucky
Friday⁽²⁾

San
Sebastian ⁽³⁾

Corporate⁽⁴⁾

Total
Silver

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 106,853 $ 14,287 $ 12,311 $ 133,451
Depreciation, depletion and amortization
(25,417 ) (2,196 ) (2,368 ) (29,981 )
Treatment costs
35,842 3,464 151 39,457
Change in product inventory
(1,150 ) 796 (145 ) (499 )
Reclamation and other costs
413 — (658 ) (245 )
Exclusion of Lucky Friday costs
— (16,351 ) — (16,351 )
Cash Cost, Before By-product Credits ⁽¹⁾
116,541 — 9,291 125,832
Reclamation and other costs
1,577 — 228 1,805
Exploration
4 — — 664 668
Sustaining capital
10,011 — 55 — 10,066
General and administrative
15,918 15,918
AISC, Before By-product Credits ⁽¹⁾
128,133 — 9,574 154,289
By-product credits:

Zinc
(35,939 ) — (35,939 )
Gold
(36,624 ) (6,716 ) (43,340 )
Lead
(14,059 ) — (14,059 )
Total By-product credits
(86,622 ) — (6,716 ) (93,338 )
Cash Cost, After By-product Credits
$ 29,919 $ — $ 2,575 $ 32,494
AISC, After By-product Credits
$ 41,511 $ — $ 2,858 $ 60,951
Divided by ounces produced
5,530 — 505 6,035
Cash Cost, Before By-product Credits, per Ounce
$ 21.07 $ — $ 18.39 $ 20.85
By-product credits per ounce
(15.66 ) — (13.30 ) (15.47 )
Cash Cost, After By-product Credits, per Ounce
$ 5.41 $ — $ 5.09 $ 5.38
AISC, Before By-product Credits, per Ounce
$ 23.17 $ — $ 18.95 $ 25.57
By-product credits per ounce
(15.66 ) — (13.30 ) (15.47 )
AISC, After By-product Credits, per Ounce
$ 7.51 $ — $ 5.65 $ 10.10

In thousands (except per ounce amounts)

Six Months Ended June 30, 2020

Casa
Berardi ⁽⁵⁾

Nevada
Operations ⁽⁶⁾

Total
Gold

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 93,907 $ 30,471 $ 124,378
Depreciation, depletion and amortization
(33,678 ) (15,430 ) (49,108 )
Treatment costs
1,132 45 1,177
Change in product inventory
1,208 8,949 10,157
Reclamation and other costs
(189 ) (654 ) (843 )
Cash Cost, Before By-product Credits ⁽¹⁾
62,380 23,381 85,761
Reclamation and other costs
190 654 844
Exploration
1,158 — 1,158
Sustaining capital
12,784 1,600 14,384
AISC, Before By-product Credits ⁽¹⁾
76,512 25,635 102,147
By-product credits:

Silver
(192 ) (635 ) (827 )
Total By-product credits
(192 ) (635 ) (827 )
Cash Cost, After By-product Credits
$ 62,188 $ 22,746 $ 84,934
AISC, After By-product Credits
$ 76,320 $ 25,000 $ 101,320
Divided by ounces produced
58 32 90
Cash Cost, Before By-product Credits, per Ounce
$ 1,084 $ 736 $ 961
By-product credits per ounce
(3 ) (20 ) (9 )
Cash Cost, After By-product Credits, per Ounce
$ 1,081 $ 716 $ 952
AISC, Before By-product Credits, per Ounce
$ 1,330 $ 807 $ 1,144
By-product credits per ounce
(3 ) (20 ) (9 )
AISC, After By-product Credits, per Ounce
$ 1,327 $ 787 $ 1,135

In thousands (except per ounce amounts)

Six Months Ended June 30, 2020

Total
Silver

Total
Gold

Total

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 133,451 $ 124,378 $ 257,829
Depreciation, depletion and amortization
(29,981 ) (49,108 ) (79,089 )
Treatment costs
39,457 1,177 40,634
Change in product inventory
(499 ) 10,157 9,658
Reclamation and other costs
(245 ) (843 ) (1,088 )
Exclusion of Lucky Friday costs
(16,351 ) — (16,351 )
Cash Cost, Before By-product Credits ⁽¹⁾
125,832 85,761 211,593
Reclamation and other costs
1,805 844 2,649
Exploration
668 1,158 1,826
Sustaining capital
10,066 14,384 24,450
General and administrative
15,918 — 15,918
AISC, Before By-product Credits ⁽¹⁾
154,289 102,147 256,436
By-product credits:

Zinc
(35,939 ) — (35,939 )
Gold
(43,340 ) — (43,340 )
Lead
(14,059 ) — (14,059 )
Silver
(827 ) (827 )
Total By-product credits
(93,338 ) (827 ) (94,165 )
Cash Cost, After By-product Credits
$ 32,494 $ 84,934 $ 117,428
AISC, After By-product Credits
$ 60,951 $ 101,320 $ 162,271
Divided by ounces produced
6,035 90
Cash Cost, Before By-product Credits, per Ounce
$ 20.85 $ 961
By-product credits per ounce
(15.47 ) (9 )
Cash Cost, After By-product Credits, per Ounce
$ 5.38 $ 952
AISC, Before By-product Credits, per Ounce
$ 25.57 $ 1,144
By-product credits per ounce
(15.47 ) (9 )
AISC, After By-product Credits, per Ounce
$ 10.10 $ 1,135

In thousands (except per ounce amounts)

Six Months Ended June 30, 2019

Greens
Creek

Lucky
Friday⁽²⁾

San
Sebastian

Corporate⁽⁴⁾

Total
Silver

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 99,762 $ 7,132 $ 23,495 $ 130,389
Depreciation, depletion and amortization
(23,220 ) (591 ) (3,608 ) (27,419 )
Treatment costs
21,316 1,334 369 23,019
Change in product inventory
712 842 (1,043 ) 511
Reclamation and other costs
(1,347 ) — (735 ) (2,082 )
Exclusion of Lucky Friday cash costs
— (8,717 ) — (8,717 )
Cash Cost, Before By-product Credits ⁽¹⁾
97,223 — 18,478 115,701
Reclamation and other costs
1,475 — 246 1,721
Exploration
160 — 3,200 938 4,298
Sustaining capital
13,977 — 1,814 73 15,864
General and administrative
18,877 18,877
AISC, Before By-product Credits ⁽¹⁾
112,835 — 23,738 156,461
By-product credits:

Zinc
(45,506 ) — — (45,506 )
Gold
(31,868 ) (9,247 ) (41,115 )
Lead
(13,115 ) — — (13,115 )
Total By-product credits
(90,489 ) — (9,247 ) (99,736 )
Cash Cost, After By-product Credits
$ 6,734 $ — $ 9,231 $ 15,965
AISC, After By-product Credits
$ 22,346 $ — $ 14,491 $ 56,725
Divided by ounces produced
4,605 — 905 5,510
Cash Cost, Before By-product Credits, per Ounce
$ 21.11 $ — $ 20.42 $ 21.00
By-product credits per ounce
(19.65 ) — (10.22 ) (18.10 )
Cash Cost, After By-product Credits, per Ounce
$ 1.46 $ — $ 10.20 $ 2.90
AISC, Before By-product Credits, per Ounce
$ 24.50 $ — $ 26.24 $ 28.39
By-product credits per ounce
(19.65 ) — (10.22 ) (18.10 )
AISC, After By-product Credits, per Ounce
$ 4.85 $ — $ 16.02 $ 10.29

In thousands (except per ounce amounts)

Six Months Ended June 30, 2019

Casa
Berardi

Nevada
Operations

Total
Gold

Cost of sales and other direct production costs and depreciation, depletion and amortization
$ 104,233 $ 68,966 $ 173,199
Depreciation, depletion and amortization
(34,716 ) (26,129 ) (60,845 )
Treatment costs
869 74 943
Change in product inventory
(99 ) (5,215 ) (5,314 )
Reclamation and other costs
(257 ) (1,264 ) (1,521 )
Cash Cost, Before By-product Credits ⁽¹⁾
70,030 36,432 106,462
Reclamation and other costs
256 756 1,012
Exploration
2,287 816 3,103
Sustaining capital
15,123 25,260 40,383
AISC, Before By-product Credits ⁽¹⁾
87,696 63,264 150,960
By-product credits:

Silver
(217 ) (1,796 ) (2,013 )
Total By-product credits
(217 ) (1,796 ) (2,013 )
Cash Cost, After By-product Credits
$ 69,813 $ 34,636 $ 104,449
AISC, After By-product Credits
$ 87,479 $ 61,468 $ 148,947
Divided by ounces produced
63 23 86
Cash Cost, Before By-product Credits, per Ounce
$ 1,110 $ 1,580 $ 1,236
By-product credits per ounce
(3 ) (78 ) (23 )
Cash Cost, After By-product Credits, per Ounce
$ 1,107 $ 1,502 $ 1,213
AISC, Before By-product Credits, per Ounce
$ 1,390 $ 2,744 $ 1,752
By-product credits per ounce
(3 ) (78 ) (23 )
AISC, After By-product Credits, per Ounce
$ 1,387 $ 2,666 $ 1,729

In thousands (except per ounce amounts)	Six Months Ended June 30, 2019									Three Months Ended March 31, 2020
	Total Silver			Total Gold			Total			Total Silver			Total Gold			Total
Cost of sales and other direct production costs and depreciation, depletion and amortization	$	130,389		$	173,199		$	303,588
Total cost of sales										$	60,314		$	65,239		$	125,553
Depreciation, depletion and amortization		(27,419	)		(60,845	)		(88,264	)		(14,204	)		(25,462	)		(39,666	)
Treatment costs		23,019			943			23,962			16,362			600			16,962
Change in product inventory		511			(5,314	)		(4,803	)		4,037			6,888			10,925
Reclamation and other costs		(2,082	)		(1,521	)		(3,603	)		(42	)		(423	)		(465	)
Exclusion of Lucky Friday cash costs		(8,717	)		—			(8,717	)
Exclusion of Lucky Friday costs											(3,876	)		—			(3,876	)
Cash Cost, Before By-product Credits ⁽¹⁾		115,701			106,462			222,163			62,591			46,842			109,433
Reclamation and other costs		1,721			1,012			2,733			902			423			1,325
Exploration		4,298			3,103			7,401			1,121			776			1,897
Sustaining capital		15,864			40,383			56,247			5,566			9,332			14,898
General and administrative		18,877			—			18,877			8,939			—			8,939
AISC, Before By-product Credits ⁽¹⁾		156,461			150,960			307,421			79,119			57,373			136,492
By-product credits:
Zinc		(45,506	)		—			(45,506	)		(16,026	)		—			(16,026	)
Gold		(41,115	)		—			(41,115	)		(21,626	)		—			(21,626	)
Lead		(13,115	)		—			(13,115	)		(6,926	)		—			(6,926	)
Silver					(2,013	)		(2,013	)		0			(453	)		(453	)
Total By-product credits		(99,736	)		(2,013	)		(101,749	)		(44,578	)		(453	)		(45,031	)
Cash Cost, After By-product Credits	$	15,965		$	104,449		$	120,414		$	18,013		$	46,389		$	64,402
AISC, After By-product Credits	$	56,725		$	148,947		$	205,672		$	34,541		$	56,920		$	91,461
Divided by ounces produced		5,510			86						3,123			44
Cash Cost, Before By-product Credits, per Ounce	$	21.00		$	1,236					$	20.04		$	1,071
By-product credits per ounce		(18.10	)		(23	)					(14.27	)		(10	)
Cash Cost, After By-product Credits, per Ounce	$	2.90		$	1,213					$	5.77		$	1,061
AISC, Before By-product Credits, per Ounce	$	28.39		$	1,752					$	25.33		$	1,312
By-product credits per ounce		(18.10	)		(23	)					(14.27	)		(10	)
AISC, After By-product Credits, per Ounce	$	10.29		$	1,729					$	11.06		$	1,302

(1)

Includes all direct and indirect operating costs related to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs ~~royalties~~ and ~~mining production taxes,~~royalties, before by-product revenues earned from all metals other than the primary metal produced at each unit. AISC, Before By-product Credits also includes on-site exploration, reclamation, and sustaining capital costs.

(2)

The unionized employees at Lucky Friday were on strike from March 2017 until January 2020, and production at Lucky Friday ~~has~~had been limited ~~since~~from the start of the ~~strike.~~strike until the ramp-up was substantially completed in the fourth quarter of 2020. Costs related to ramp-up activities totaling ~~$9.3~~$6.3 million, ~~in the first half of 2020, and suspension-related costs totaling $3.0 million during the strike in the first half of 2019,~~ along with ~~$4.1~~$1.8 million ~~and $2.1 million, respectively,~~ in non-cash depreciation expense, ~~for those periods,~~in the first quarter of 2020 have been excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits, and AISC, After By-product Credits.

(3)

In early April 2020, the Government of Mexico issued an order to the mining industry to reduce operations to a minimum level until April 30 in response to COVID-19, and the order was subsequently extended until May 30. Our operationsMining at San Sebastian ~~were suspended during that time.~~was completed in the third quarter of 2020, and milling was completed in the fourth quarter of 2020. Suspension-related costs at San Sebastian totaling ~~$1.0~~$0.7 million for the first ~~half~~quarter of ~~2020~~2021 are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, ~~mining and milling cost per ton, and~~ Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits, and AISC, After By-product ~~Credits, per Gold Ounce.~~Credits.

(4)	AISC, Before By-product Credits for our consolidated silver properties includes corporate costs for general and administrative expense, exploration and sustaining capital.

(5)

In late March 2020, the Government of Quebec ordered the mining industry to reduce to minimum operations as part of the fight against the COVID-19 virus, causing us to suspend our Casa Berardi operations from approximately March 24 until April 15, when limited mining operations resumed, resulting in reduced mill throughput. Suspension-related costs totaling ~~$1.6~~$0.9 million for the first ~~half~~quarter of 2020 are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, ~~and~~ Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits, and AISC, After By-product ~~Credits, per Gold Ounce.~~Credits.

(6)

Production was suspended at the Hollister ~~mine in the third quarter of 2019~~ and ~~at the~~ Midas ~~mine~~mines and Aurora mill in ~~late-2019.~~the latter part of 2019. Suspension-related costs at ~~Hollister, Midas~~Nevada Operations totaling $3.6 million and ~~Aurora totaling $6.7~~$4.0 million for the first ~~half~~quarters of 2021 and 2020, respectively, are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of cost of sales and other direct production costs and depreciation, depletion and amortization, ~~and~~ Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits, and AISC, After By-product ~~Credits, per Gold Ounce.~~Credits.

Financial Liquidity and Capital Resources

We have a disciplined cash management strategy of maintaining financial flexibility to execute our capital priorities and provide long-term value to our shareholders. Consistent with that strategy, we aim to reduce our net debt and maintain sufficient liquidity to fund debt service costs, operations, capital development and exploration projects, while returning cash to stockholders through dividends and potential share repurchases.

At March 31, 2021, we had $139.8 million in cash and cash equivalents, of which $16.8 million was held in foreign subsidiaries' local currency denominated accounts readily convertible to U.S. dollars that, if repatriated, may be subject to withholding taxes. We expect that there would be no additional tax burden upon repatriation after considering the cash cost associated with the withholding taxes. We believe that our liquidity and capital resources from our U.S. operations are adequate to fund our U.S. operations and corporate activities.

Our liquid assets include (in millions):

	June 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Cash and cash equivalents held in U.S. dollars	$	52.2	$	50.3	$	123.0	$	116.4
Cash and cash equivalents held in foreign currency		23.7		12.2		16.8		13.4
Total cash and cash equivalents		75.9		62.5		139.8		129.8
Marketable equity securities - non-current		12.2		6.2
Marketable equity securities, current and non-current						11.7		19.3
Total cash, cash equivalents and investments	$	88.1	$	68.7	$	151.5	$	149.1

Cash and cash equivalents increased by ~~$13.4~~$10.0 million in the first ~~six~~three months of ~~2020.~~2021 as a result of operational performance. Cash held in foreign currencies represents balances in ~~Canadian dollars~~CAD and Mexican pesos ("MXN"), with ~~the $11.5~~a $3.4 million increase in the first ~~half~~quarter of ~~2020~~2021 resulting from ~~increases~~an increase in ~~both currencies~~CAD held. The value of ~~non-current~~ marketable equity securities ~~increased~~decreased by ~~$6.0 million (see~~ ~~Note 2~~ of ~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~ ~~for more information).~~$7.6 million.

On February 19, 2020, we completed an offering of Senior Notes in the total principal amount of ~~US$~~USD$475 million. The Senior Notes are due February 15, 2028 and bear interest at a rate of 7.25% per year from the most recent payment date to which interest has been paid or provided for. ~~The net proceeds from the~~In July 2020, we agreed to issue our Series 2020-A Senior Notes ~~were used, along with cash on hand, to redeem,~~due July 9, 2025 (the “IQ Notes”) for CAD$50 million (approximately USD$36.8 million at the time of the transaction) in ~~March 2020, our previously-outstanding 2021 Notes having a~~aggregate principal, ~~balance of $506.5 million. Also,~~which mature in July ~~2018 we entered into~~2025 and bear interest at a ~~new~~rate of 6.515% per year. We also have a $250 million revolving credit ~~facility. Interest~~facility, with interest is payable on amounts drawn ~~from the revolving credit facility~~ at aan annual rate of between 2.25% and 4.00% over the London Interbank Offered Rate, or between 1.25% and 3.00% over an alternative base ~~rate, with interest payable on~~rate. There was no amount outstanding under the revolving credit facility as of March 31, June 30, September 30, and December 31 of each year. As a precaution due to uncertainties of the duration, severity and scope of the COVID-19 outbreak, we drew $210.0 million on the facility in the first quarter of 2020. In the second quarter of 2020, we repaid $160.0 million of the amount drawn on the facility,2021, with the ~~remaining $50~~exception of $20.3 million ~~outstanding as~~utilized for letters of the end of the quarter. In addition, in July 2020 we agreed to issue CAD$50 million (approximately USD$36.8 million at the time of the transaction) in aggregate principal amount of our IQ Notes, which mature in July 2025 and bear interest at a rate of 6.515% per year. The IQ Notes will be issued at a premium of 103.65%, implying an effective annual yield of 5.74% and an aggregate principal amount to be repaid of CAD$48.2 million. The IQ Notes will be issued in four equal installments of CAD$12.5 million in July, August, September and October 2020, with the first installment issued net of CAD$0.6 million in fees. The net proceeds from the IQ Notes will be available for general corporate purposes, including for open market purchases of a portion of the Senior Notes and to pay for capital expenditures at our Casa Berardi unit. Under the note purchase agreement for the IQ Notes and subject to a force majeure event, we are required to invest in the aggregate CAD$100 million at the Casa Berardi unit and other exploration and development projects in Quebec over the four-year period commencing on July 9, 2020.credit. See Note 97 of Notes to Condensed Consolidated Financial Statements (Unaudited)for more information on our debt arrangements.

We continue to address the COVID-19 outbreak and face uncertainty related to the potential additional ~~impacts~~impact it could have on our operations. It is possible that future restrictions at ~~Casa Berardi, San Sebastian or Greens Creek (or at~~ any ~~other operation)~~of our operations could have an adverse impact on operations or ~~2020~~ financial results, including materially so, beyond ~~the second quarter of 2020.~~2021. We have taken precautionary measures to mitigate the ~~impacts~~impact of COVID-19, including implementing revised operational ~~plans and practices and increasing our cash reserves through a draw-down of our revolving credit facility.~~plans. As long as they are required, the revised operational practices ~~implemented~~ could continue to have an adverse impact on our operating results due to deferred production and revenues or additional costs. If required, increasing or prolonged restrictions on our operations could require access to additional sources of liquidity, which may not be available to us. See ~~Part II,~~ Item 1A. Risk Factors - Natural disasters, public health crises, political crises (including COVID-19), and other catastrophic events or other events outside of our control may materially and adversely affect our business or financial results and COVID-19 virus pandemic may heighten other risksin our ~~quarterly report on~~2020 Form ~~10-Q for the period ended March 31, 2020~~10-K for information on how restrictions related to COVID-19 have ~~recently~~ affected some of our operations.

~~As further discussed in the~~ ~~Lucky Friday Segment~~ section above, the union employees at Lucky Friday were on strike from March 13, 2017 until the strike ended on January 7, 2020, and production at Lucky Friday has been limited since the start of the strike. Re-staffing of the mine has been substantially completed, with a return to full production anticipated by the end of 2020. However, the ramp-up to full production could take longer or be more costly than anticipated.

Pursuant to our common stock dividend policy described in Note 810 of Notes to ~~Condensed~~ Consolidated Financial Statements ~~(Unaudited)~~,in our ~~board~~2020 Form 10-K, our Board of ~~directors~~Directors declared and paid dividends on common stock totaling ~~$2.6~~$4.7 million in the first ~~half~~quarter of ~~2020~~2021 and ~~$2.4~~$1.3 million in the first ~~half~~quarter of ~~2019.~~2020. Our dividend policy has a ~~silver-price-linked~~silver-linked component which ties the amount of declared common stock dividends to our realized silver price for the preceding quarter. Another component of our common stock dividend policy anticipates paying an annual minimum dividend. During May 2021, our Board of Directors approved an increase in our silver-linked dividend by $0.01 per year and approved a quarterly silver-linked dividend of $0.075 based on the first quarter of 2021 realized silver price of $25.66. The table below provides an overview of the augmented silver-linked dividend policy and the increased minimum dividends.

Quarterly Average Realized Silver Price per Ounce	Quarterly Silver-Linked Dividend per Share	Annualized Silver-Linked Dividend per Share	Annualized Minimum Dividend	Annualized Dividends per Share: Silver-Linked and Minimum
$25	$0.0075	$0.03	$0.015	$0.045
$30	$0.0125	$0.05	$0.015	$0.065
$35	$0.0225	$0.09	$0.015	$0.105
$40	$0.0325	$0.13	$0.015	$0.145
$45	$0.0425	$0.17	$0.015	$0.185
$50	$0.0525	$0.21	$0.015	$0.225

The declaration and payment of dividends on common stock is at the sole discretion of our board of directors, and there can be no assurance that we will continue to declare and pay common stock dividends in the future.

~~On May 8, 2012, we announced that~~Pursuant to our ~~board of directors approved a~~ stock repurchase ~~program. Under the~~ program described in Note 10 of Notes to Consolidated Financial Statements in our 2020 Form 10-K, we are authorized to repurchase up to 20 million shares of our outstanding common stock from time to time in open market or privately negotiated transactions, depending on prevailing market conditions and other factors. The repurchase program may be modified, suspended or discontinued by us at any time. Whether or not we engage in repurchases from time to time may depend on a variety of factors, including not only price and cash resources, but customary black-out restrictions, whether we have any material inside information, limitations on share repurchases or cash usage that may be imposed by our credit agreement or in connection with issuances of securities, alternative uses for cash, applicable law, and other investment opportunities from time to time. As of ~~June 30,~~March 31, 2021 and December 31, 2020, 934,100 shares had been purchased in prior periods at an average price of $3.99 per share, leaving 19.1 million shares that may yet be purchased under the program. We have not repurchased any shares since June 2014. The closing price of our common stock at ~~August~~May 4, ~~2020,~~2021, was ~~$6.05~~$6.25 per share.

Pursuant to an equity distribution agreement dated February 18, 2021, we may offer and sell up to 60 million shares of our common stock from time to time to or through sales agents. Sales of the shares, if any, will be made by means of ordinary brokers transactions or as otherwise agreed between the Company and the agents as principals. Whether or not we engage in sales from time to time may depend on a variety of factors, including share price, our cash resources, customary black-out restrictions, and whether we have any material inside information. The agreement can be terminated by us at any time. Any shares issued under the equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form S-3. No shares ~~were purchased~~have been sold under the ~~program during the first half~~agreement as of ~~2020.~~March 31, 2021.

We may defer some capital investment and/or exploration and pre-development activities, engage in asset sales or secure additional capital if necessary to maintain liquidity. We also may pursue additional acquisition opportunities, which could require additional equity issuances or other forms of financing. There can be no assurance that such financing will be available to us.

As a result of our current cash balances, the performance of our current and expected operations, current metals prices, proceeds from potential at-the-market sales of common stock, and availability of our revolving credit facility, we believe we will be able to meet our obligations and other potential cash requirements during the next 12 months from the date of this report. Our obligations and other uses of cash may include, but are not limited to: debt service obligations related to the Senior Notes and IQ Notes; principal and interest payments under our revolving credit facility; deferral of revenues, care-and-maintenance and other costs related to addressing the impacts of COVID-19 on our operations; capital expenditures at our operations; potential acquisitions of other mining companies or properties; regulatory matters; litigation; potential repurchases of our common stock under the program described above; and payment of dividends on common stock, if declared by our board of directors. We currently estimate a total of approximately ~~$90~~$110 million will be spent in 2021 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, ~~in 2020,~~ including ~~$33.8~~$21.4 million already incurred ~~in the first half~~as of ~~2020.~~March 31, 2021. We also estimate exploration and pre-development expenditures will total approximately ~~$13.2~~$38.5 million in ~~2020,~~2021, including ~~$5.6~~$6.7 million already incurred ~~in the first half~~as of ~~2020.~~March 31, 2021. Our expenditures for these items and our related plans for ~~2020~~2021 may change based upon our financial position, metals prices, and other considerations. Our ability to fund the activities described above will depend on our operating performance, metals prices, our ability to estimate revenues and costs, sources of liquidity available to us, including the revolving credit facility, and other factors. A sustained downturn in metals prices, significant increase in operational or capital costs or other uses of cash, our inability to access the credit facility or the sources of liquidity discussed above, or other factors beyond our control could impact our plans.

Six Months Ended

June 30, 2020

June 30, 2019

Cash provided by operating activities (in millions)
$ 42.5 $ 8.7

	Three Months Ended
	March 31, 2021		March 31, 2020
Cash provided by operating activities (in millions)	$	37.9	$	4.9

Cash provided by operating activities in the first ~~half~~quarter of ~~2020 of $42.5~~2021 increased by $33.0 million ~~represented a $33.8 million increase~~ compared to the ~~$8.7 million provided by operating activities in the~~ first ~~half~~quarter of ~~2019.~~2020. The ~~variance~~increase was ~~the result of~~due to a higher net income, ~~as adjusted for non-cash items, reductions to accounts receivable,~~generated from higher metal sales volumes and ~~increases to accrued payroll~~realized prices, and ~~taxes,~~lower product inventory, partially offset by ~~increases~~lower accounts payable and accrued liabilities, the timing of payment of incentive compensation related to ~~inventory~~prior-year performance and ~~decreases~~higher accounts receivable due to ~~accounts payable.~~the timing of concentrate shipments. In the first quarter of 2021, we made interest payments on our Senior Notes and IQ Notes of $17.2 million and $0.9 million, respectively, In the first quarter of 2020, we made interest payments on our previously-outstanding 2021 Notes, upon their redemption, and revolving credit facility of $13.3 million and $0.6 million, respectively.

Six Months Ended

June 30, 2020

June 30, 2019

Cash used in investing activities (in millions)
$ (31.1 ) $ (71.3 )

Table of ~~employees' elections to utilize net share settlement to satisfy their tax withholding obligations related to incentive compensation paid in stock and vesting of restricted stock units. See~~ ~~Note 8~~ of ~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~ ~~for more information.~~

	Three Months Ended
	March 31, 2021			March 31, 2020
Cash used in investing activities (in millions)	$	(21.4	)	$	(19.7	)

During the first ~~half~~quarter of ~~2020,~~2021 we invested ~~$30.7~~$21.4 million in capital expenditures ~~not including $3.1~~compared to $19.9 million in ~~non-cash finance lease additions, a decrease~~the first quarter of ~~$40.6 million compared to~~2020, with the ~~same period in 2019. The~~ variance isprimarily due to ~~reduced expenditures~~increased spending at ~~all of our operations except Lucky Friday, where we have been preparing for a return to production after the end of the strike in January 2020.~~Casa Berardi.

Six Months Ended

June 30, 2020

June 30, 2019

Cash provided by financing activities (in millions)
$ 4.0 $ 44.2

	Three Months Ended
	March 31, 2021			March 31, 2020
Cash provided by (used in) financing activities (in millions)	$	(6.8	)	$	169.8

In the first ~~half~~quarter of 2020, we received $469.5 million in net proceeds from the issuance of our Senior Notes and drew $210.0 million on our revolving credit facility, and had debt repayments of $506.5 million for redemption of our 2021 ~~Notes and $160.0 million for our revolving credit facility. In~~Notes. We had no borrowings or repayments of debt in the first ~~half~~quarter of ~~2019, we drew $170.0 million and had repayments of $118.0 million on our revolving credit facility.~~2021. We ~~made repayments on our finance leases of $2.8 million and $3.4 million in the six-month periods ended June 30, 2020 and 2019, respectively. During the first six months of 2020 and 2019, we~~ paid cash dividends on our common stock ~~totaling $2.6~~of $4.7 million and ~~$2.4~~$1.3 million in the first quarter of 2021 and 2020, respectively, and cash dividends of ~~$0.3~~$0.1 million on our Series B Preferred Stock during each of those periods. We ~~acquired treasury shares for $2.7~~made repayments on our capital leases of $1.9 million and ~~$1.6~~$1.3 million in the first ~~half~~quarter of 2021 and 2020, ~~and 2019, respectively, as a result~~respectively.

The effect of changes in foreign exchange rates resulted in a ~~$1.8~~$0.2 million ~~decrease~~increase in cash and cash equivalents in the first ~~half~~quarter of ~~2020~~2021 compared to ~~an increase~~a decrease of ~~$0.4~~$1.7 million in the first ~~half~~quarter of ~~2019,~~2020, with the variance due to ~~weakening~~strengthening of the CAD and MXN relative to the USD in the ~~2020~~2021 period.

Contractual Obligations, Contingent Liabilities and Commitments

The table below presents our fixed, non-cancelable contractual obligations and commitments primarily related to our Senior Notes, IQ Notes, credit facility, outstanding purchase orders, certain capital expenditures and lease arrangements as of ~~June 30, 2020~~March 31, 2021 (in thousands):

	Payments Due By Period										Payments Due By Period
	Less than 1 year		1-3 years		4-5 years		More than 5 years		Total		Less than 1 year		1-3 years		4-5 years		More than 5 years		Total
Purchase obligations ⁽¹⁾	$	10,722		—		—	$	—	$	10,722	$	10,162	$	—	$	—	$	—	$	10,162
Credit facility⁽²⁾		—		50,000		—		—		50,000
Contractual obligations ⁽³⁾		1,302		—		—		—		1,302
Contractual obligations ⁽²⁾												2,053		—		—		—		2,053
Credit facility ⁽³⁾												1,722		1,477		—		—		3,199
Finance lease commitments ⁽⁴⁾		6,123		6,592		960		—		13,675		7,329		8,775		2,076		—		18,180
Operating lease commitments ⁽⁵⁾		3,946		6,001		2,052		2,601		14,600		3,696		4,708		1,074		2,213		11,691
Supplemental executive retirement plan ⁽⁶⁾		622		1,509		2,107		6,440		10,678		758		1,691		2,575		6,985		12,009
Defined benefit pension plans ⁽⁶⁾		4,800		—		—		—		4,800
Senior notes ⁽⁷⁾		34,438		68,875		68,875		565,398		737,586
Senior Notes ⁽⁷⁾												34,438		68,875		68,875		539,570		711,758
IQ Notes ⁽⁸⁾												2,499		4,998		41,544		—		49,041
Total contractual cash obligations	$	61,953	$	132,977	$	73,994	$	574,439	$	843,363	$	62,657	$	90,524	$	116,144	$	548,768	$	818,093

(1)

Consists of open purchase orders of approximately ~~$5.6~~$2.8 million at the Greens Creek unit, ~~$0.3~~$4.0 million at the Lucky Friday unit, $0.7 million at the Casa Berardi unit ~~$2.1 million at the Lucky Friday unit~~ and ~~$2.8~~$2.7 million at the Nevada Operations unit.

(2)

As of March 31, 2021, we were committed to approximately $2.1 million for various items.

(3)

We have a $250 million revolving credit agreement under which we are required to pay a standby fee of between 0.5625% and 1.00% per annum on undrawn amounts and interest of between 2.25% and 4.00% over the London Interbank Offered Rate or between 1.25% and 3.00% over an alternative base rate on drawn amounts under the revolving credit agreement. We had ~~$50.0 million drawn and $28.2~~$20.3 million in letters of credit outstanding as of ~~June 30, 2020.~~March 31, 2021. The ~~amount~~amounts in the table above ~~only includes the principal balance~~assume no additional amounts will be drawn in future periods, and ~~not an estimate of interest to be paid or~~include only the standby fee on ~~potentially~~the current undrawn ~~amounts, as the timing of repayment of the principal balance and future draws is unknown at this time.~~balance. For more information on our credit facility, see Note 97 of Notes to Condensed Consolidated Financial Statements (Unaudited).

~~(3)~~

~~As of June 30, 2020, we were committed to approximately $1.3 million for various items at Greens Creek.~~

(4)

Includes scheduled finance lease payments of ~~$11.3~~$17.5 million, $0.4 million ~~$1.2 million~~ and ~~$0.8~~$0.3 million (including interest), respectively, for equipment at our Greens Creek, ~~Lucky Friday,~~ Casa Berardi and Nevada Operations units. ~~These leases have fixed payment terms and contain bargain purchase options at the end of the lease periods (see~~ ~~Note 9~~ of ~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~ ~~for more information).~~

(5)

We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease arrangements.

(6)

We sponsor defined benefit pension plans covering substantially all U.S. employees and provide certain post-retirement benefits for qualifying retired employees, along with a supplemental executive retirement ~~plan.~~plan ("SERP"). These amounts represent our estimate of the future ~~funding~~benefit payment requirements for ~~these plans.~~the next 10 years for the SERP as of March 31, 2021. However, in January 2021, we contributed $16.8 million in shares of our common stock to the SERP in order to fund future benefit payments. We believe we will have future funding requirements related to our defined benefit pension plans and benefit payment obligations for the SERP beyond ~~one year;~~10 years; however, such ~~obligations~~funding requirements are not fixed in nature and are difficult to estimate, as they involve significant assumptions. See Note 74 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.

(7)

On February 19, 2020, we completed an offering of $475 million in aggregate principal amount of our Senior Notes due February 15, 2028. The Senior Notes bear interest at a rate of 7.25% per year from the original date of issuance or the most recent payment date to which interest has been paid or provided for. Interest on the Senior Notes is payable on February 15 and August 15 of each year, commencing August 15, 2020. See Note 97 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.

(8)

On July 9, 2020, we entered into a note purchase agreement pursuant to which we issued our IQ Notes for CAD$50 million (approximately USD$36.8 million at the time of the transaction) in aggregate principal. The IQ Notes were issued at a premium of 103.65%, or CAD$1.8 million, implying an effective annual yield of 5.74% and an aggregate principal amount to be repaid of CAD$48.2 million. The IQ Notes were issued in four equal installments of CAD$12.5 million on July 9, August 9, September 9 and October 9, 2020. The IQ Notes bear interest on amounts outstanding at a rate of 6.515% per year, payable on January 9 and July 9 of each year, commencing January 9, 2021. See Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.

We record liabilities for costs associated with mine closure, reclamation of land and other environmental matters. At ~~June 30, 2020,~~March 31, 2021, our liabilities for these matters totaled ~~$104.6~~$120.3 million. Future expenditures related to closure, reclamation and environmental expenditures at our sites are difficult to estimate, although we anticipate we will incur expenditures relating to these obligations over the next 30 years. For additional information relating to our environmental obligations, see Note 410 of Notes to Condensed Consolidated Financial Statements (Unaudited).

Off-Balance Sheet Arrangements

At ~~June 30, 2020,~~March 31, 2021, we had no existing off-balance sheet arrangements, as defined under SEC regulations, that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that ~~are~~would be material to investors.

~~Critical Accounting Estimates~~Guarantor Subsidiaries

~~Our significant accounting policies~~Presented below are ~~described in~~Hecla’s unaudited interim condensed consolidating financial statements as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934, as amended, resulting from the guarantees by certain of Hecla's subsidiaries of the Senior Notes (see Note 17 for more information). The Guarantors consist of the following of Hecla's 100%-owned subsidiaries: Hecla Limited; Silver Hunter Mining Company; Rio Grande Silver, Inc.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Hecla Montana, Inc.; Revett Silver Company; RC Resources, Inc.; Troy Mine Inc.; Revett Exploration, Inc.; Revett Holdings, Inc.; Mines Management, Inc.; Newhi, Inc.; Montanore Minerals Corp.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; Hecla Juneau Mining Company; Klondex Holdings Inc.; Klondex Gold & Silver Mining Co.; Klondex Midas Holdings Limited; Klondex Aurora Mine Inc.; Klondex Hollister Mine Inc; and Hecla Quebec, Inc.. We completed the offering of the Senior Notes ~~to Consolidated Financial Statements~~ in ~~Part IV~~ ofon February 19, 2020 under our ~~annual report~~shelf registration statement previously filed ~~on Form 10-K for the year ended December 31, 2019~~. ~~As described in such~~ ~~Note 1~~, we are required to make estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses. Our estimates are based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates.

We believe that our most critical accounting estimates are related to future metals prices; obligations for environmental, reclamation, and closure matters; mineral reserves; and accounting for business combinations, as they require us to make assumptions that are highly uncertain at the time the accounting estimates are made and changes in them are reasonably likely to occur from period to period. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our board of directors, and the Audit Committee has reviewed the disclosures presented below. In addition, there are other items within our financial statements that require estimation, but are not deemed to be critical. However, changes in estimates used in these and other items could have a material impact on our financial statements.SEC.

6651

~~Future Metals Prices~~The unaudited interim condensed consolidating financial statements below have been prepared from our financial information on the same basis of accounting as the unaudited interim condensed consolidated financial statements set forth elsewhere in this report. Investments in the subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate Hecla, the Guarantors, and our non-guarantor subsidiaries are reflected in the intercompany eliminations column. In the course of preparing consolidated financial statements, we eliminate the effects of various transactions conducted between Hecla and its subsidiaries and among the subsidiaries. While valid at an individual subsidiary level, such activities are eliminated in consolidation because, when taken as a whole, they do not represent business activity with third-party customers, vendors, and other parties. Examples of such eliminations include the following:

•

Investments in subsidiaries. The acquisition of a company results in an investment in debt or equity capital on the records of the parent company and a contribution to debt or equity capital on the records of the subsidiary. Such investments and capital contributions are eliminated in consolidation.

~~Metals prices~~

•

Capital contributions. Certain of Hecla's subsidiaries do not generate cash flow, either at all or that is sufficient to meet their capital needs, and their cash requirements are routinely met with inter-company advances from their parent companies. Generally on an annual basis, when not otherwise intended as debt, the boards of directors of such parent companies declare contributions of capital to their subsidiary companies, which increase the parents' investment and the subsidiaries' additional paid-in capital. In consolidation, investments in subsidiaries and related additional paid-in capital are eliminated.

•

Debt. At times, inter-company debt agreements have been established between certain of Hecla's subsidiaries and their parents. The related debt liability and receivable balances, accrued interest expense (if any) and income activity (if any), and payments of principal and accrued interest amounts (if any) by the subsidiary companies to their parents are eliminated in consolidation.

•

Dividends. Certain of Hecla's subsidiaries which generate cash flow routinely provide cash to their parent companies through inter-company transfers. On at least an annual basis, the boards of directors of such subsidiary companies declare dividends to their parent companies, which reduces the subsidiaries' retained earnings and increases the parents' dividend income. In consolidation, such activity is eliminated.

•

Deferred taxes. Our ability to realize deferred tax assets and liabilities is considered for two consolidated tax groups of subsidiaries within the United States: The Nevada U.S. Group and the Hecla U.S. Group. Within each tax group, all subsidiaries' estimated future taxable income contributes to the ability of their tax group to realize all such assets and liabilities. However, when Hecla's subsidiaries are viewed independently, we use the separate return method to assess the realizability of each subsidiary's deferred tax assets and whether a valuation allowance is required against such deferred tax assets. In some instances, a parent company or subsidiary may possess deferred tax assets whose realization depends on the future taxable incomes of other subsidiaries on a consolidated-return basis, but would not be considered realizable if such parent or subsidiary filed on a separate stand-alone basis. In such a situation, a valuation allowance is assessed on that subsidiary's deferred tax assets, with the resulting adjustment reported in the eliminations column of the guarantor and parent's financial statements, as is the case in the unaudited interim financial statements set forth below. The separate return method can result in significant eliminations of deferred tax assets and liabilities and related income tax provisions and benefits. Non-current deferred tax asset balances are included in other non-current assets on the consolidating balance sheets and make up a large portion of that item, particularly for the guarantor balances.

Separate financial statements of the Guarantors are ~~key components~~not presented because the guarantees by the Guarantors are joint and several and full and unconditional, except for certain customary release provisions, including: (1) the sale or disposal of all or substantially all of the assets of the Guarantor; (2) the sale or other disposition of the capital stock of the Guarantor; (3) the Guarantor is designated as an unrestricted entity in ~~estimates that determine~~accordance with the ~~valuation~~applicable provisions of some of our significant assets and liabilities, including properties, plants, equipment and mineral interests, deferred tax assets, and certain accounts receivable. Metals prices are also an important componentthe indenture; (4) Hecla ceases to be a borrower as defined in the ~~estimation of reserves. As shown under~~ ~~Part I~~, ~~Item 1. - Business~~ in our annual report filed on Form 10-K for the year ended December 31, 2019, metals prices have historically been volatile. Silver demand arises from investment demand, particularly in exchange-traded funds, industrial demand,indenture; and ~~consumer demand. Gold demand arises primarily from investment~~(5) upon legal or covenant defeasance or satisfaction and ~~consumer demand. Investment demand for silver and gold can be influenced by several factors, including: the value~~discharge of the U.S. dollar and other currencies, changing U.S. budget deficits, widening availability of exchange-traded funds, interest rate levels, the health of credit markets, and inflationary expectations. Uncertainty related to the political environment in the U.S., Britain's exit from the European Union, U.S. and global trading policies (including tariffs), and a global economic recovery, including recent uncertainty in China and from the current downturn and continued uncertainty resulting from the COVID-19 outbreak, could result in continued investment demand for precious metals. Industrial demand for silver is closely linked to world Gross Domestic Product growth and industrial fabrication levels, as it is difficult to substitute for silver in industrial fabrication. Consumer demand is driven significantly by demand for jewelry and other retail products. We believe that long-term industrial and economic trends, including urbanization and growth of the middle class in countries such as China and India, will result in continued consumer demand for silver and gold and industrial demand for silver. However, the global economy has been significantly impacted by the COVID-19 outbreak, with the ultimate severity and duration of the downtown unknown, and China has recently experienced economic contraction which could resume in the future. There can be no assurance whether these trends will continue or how they will impact prices of the metals we produce. In the past, we have recorded impairments to our asset carrying value because of low prices, and we can offer no assurance that prices will either remain at their current levels or increase.

Processes supporting valuation of our assets and liabilities that are most significantly affected by prices include analysis of asset carrying values, depreciation, reserves, and deferred income taxes. On at least an annual basis - and more frequently if circumstances warrant - we examine our depreciation rates, reserve estimates, and the valuation allowances on our deferred tax assets. We examine the carrying values of our assets as changes in facts and circumstances warrant. In our evaluation of carrying values and deferred taxes, we apply several pricing views to our forecasting model, including current prices, analyst price estimates, forward-curve prices, and historical prices (see ~~Mineral Reserves~~, below, regarding prices used for reserve estimates). Using applicable accounting guidance and our view of metals markets, we use the probability-weighted average of the various methods to determine whether the values of our assets are fairly stated, and to determine the level of valuation allowances, if any, on our deferred tax assets. In addition, estimates of future metals prices are used in the valuation of certain assets in the determination of the purchase price allocations for our acquisitions (see ~~Business Combinations~~ ~~below).~~

Sales of concentrates sold directly to customers are recorded as revenues upon completion of the performance obligation and transfer of control of the product to the customer (generally at the time of shipment) using estimated forward metals prices for the estimated month of settlement. Due to the time elapsed between shipment of concentrates to the customer and final settlement with the customer, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales and trade accounts receivable are adjusted to estimated settlement prices until final settlement by the customer. Changes in metals prices between shipment and final settlement result in changes to revenues and accounts receivable previously recorded upon shipment. As a result, our trade accounts receivable balances related to concentrate sales are subject to changes in metals prices until final settlement occurs. For more information, see ~~Note 6~~ of ~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~.

~~We utilize financially-settled forward and put option contracts to manage our exposure to changes in prices for silver, gold, zinc and lead. See~~ ~~Item 3. – Quantitative and Qualitative Disclosures About Market Risk - Commodity-Price Risk Management~~ below for more information on our contract programs. These contracts do not qualify for hedge accounting and are therefore marked-to-market through earnings each period. Changes in silver, gold, zinc and lead prices between the dates that the contracts are entered into and their settlements will result in changes to the fair value asset or liability associated with the contracts, with a corresponding gain or loss recognized in earnings.

~~Obligations for Environmental, Reclamation and Closure Matters~~

Accrued reclamation and closure costs can represent a significant and variable liability on our balance sheet. We have estimated our liabilities under appropriate accounting guidance, and on at least an annual basis - and more frequently if warranted - management reviews our liabilities with our Audit Committee. However, the ranges of liability could exceed the liabilities recognized. If substantial damages were awarded, claims were settled, or remediation costs incurred in excess of our accruals, our financial results or condition could be materially adversely affected.

~~Mineral Reserves~~

Critical estimates are inherent in the process of determining our reserves. Our reserves are affected largely by our assessment of future metals prices, as well as by engineering and geological estimates of ore grade, accessibility and production cost. Metals prices are estimated at long-term averages, as described in ~~Part I~~, ~~Item 2. - Properties~~ ~~in our annual report filed on Form 10-K for the year ended December 31, 2019. Our assessment of reserves occurs at least annually, and periodically utilizes external audits.~~indenture.

6752

Table of ~~our properties, plants, equipment and mineral interests. Reserve estimates are used in determining appropriate rates~~Contents

~~Reserves are a key component in the valuation~~Unaudited Interim Condensed Consolidating Balance Sheets

	As of March 31, 2021
	Parent			Guarantors				Non- Guarantors			Eliminations			Consolidated
	(in thousands)
Assets
Cash and cash equivalents	$	95,223		$	16,876			$	27,651		$	—		$	139,750
Other current assets		7,378			149,096				1,763			(70	)		158,167
Properties, plants, equipment and mineral interests - net		1,913			2,310,363				8,271			—			2,320,547
Intercompany receivable (payable)		(139,294	)		(367,504	)			220,389			286,409			—
Investments in subsidiaries		1,768,493			—				—			(1,768,493	)		—
Other non-current assets		306,995			20,305				(121,813	)		(168,874	)		36,613
Total assets	$	2,040,708		$	2,129,136			$	136,261		$	(1,651,028	)	$	2,655,077
Liabilities and Stockholders' Equity
Current liabilities	$	(233,794	)	$	184,713			$	5,705		$	152,494		$	109,118
Long-term debt		507,992			17,088				170			—			525,250
Non-current portion of accrued reclamation		—			107,055				6,616			—			113,671
Non-current deferred tax liability		15,384			168,865				—			(35,029	)		149,220
Other non-current liabilities		26,251			5,992				700			—			32,943
Stockholders' equity		1,724,875			1,645,423		��		123,070			(1,768,493	)		1,724,875
Total liabilities and stockholders' equity	$	2,040,708		$	2,129,136			$	136,261		$	(1,651,028	)	$	2,655,077

Unaudited Interim Condensed Consolidating Statements of units-of-production depreciation, with net book value of many assets depreciated over remaining estimated reserves. Reserves are also a key component in forecasts, with which we compare future cash flows to current asset values in an effort to ensure that carrying values are reported appropriately. Our forecasts are also used in determining the level of valuation allowances on our deferred tax assets. Reserves also play a key role in the valuation of certain assets in the determination of the purchase price allocations for acquisitions. Annual reserve estimates are also used to determine conversions of mineral assets beyond the known reserve resulting from business combinations to depreciable reserves, in periods subsequent to the business combinations (see ~~Business Combinations~~ ~~below). Reserves are a culmination of many estimates and are not guarantees that we will recover the indicated quantities of metals or that we will do so at a profitable level.~~Operations

	Three Months Ended March 31, 2021
	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
	(in thousands)
Sales	$	2,846		$	207,833		$	173		$	—		$	210,852
Cost of sales		559			(97,160	)		(108	)		—			(96,709	)
Depreciation, depletion and amortization		—			(49,331	)		—			—			(49,331	)
General and administrative		(3,113	)		(4,779	)		(115	)		—			(8,007	)
Exploration and pre-development		—			(4,892	)		(1,798	)		—			(6,690	)
Gain on derivative contracts		473			—			—			—			473
Equity in earnings of subsidiaries		14,566			—			—			(14,566	)		—
Other (expense) income		4,292			(18,956	)		(5,102	)		(7,217	)		(26,983	)
(Loss) income before income and mining taxes		19,623			32,715			(6,950	)		(21,783	)		23,605
Income and mining tax (provision) benefit		(652	)		(11,850	)		651			7,217			(4,634	)
Net income (loss)		18,971			20,865			(6,299	)		(14,566	)		18,971
Preferred stock dividends		(138	)		—			—			—			(138	)
Income (loss) applicable to common stockholders		18,833			20,865			(6,299	)		(14,566	)		18,833
Net income (loss)		18,971			20,865			(6,299	)		(14,566	)		18,971
Changes in comprehensive income (loss)		1,832			—			—			—			1,832
Comprehensive income (loss)	$	20,803		$	20,865		$	(6,299	)	$	(14,566	)	$	20,803

~~Business Combinations~~Unaudited Interim Condensed Consolidating Statements of Cash Flows

	Three Months Ended March 31, 2021
	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
	(in thousands)
Cash flows from operating activities	$	(27,033	)	$	67,045		$	652		$	(2,728	)	$	37,936
Cash flows from investing activities:
Additions to properties, plants, equipment and mineral interests		—			(21,413	)		—			—			(21,413	)
Other investing activities, net		(28,804	)		—			19			28,804			19
Cash flows from financing activities:
Dividends paid to stockholders		(4,826	)		—			—						(4,826	)
Payments on debt		—			(1,881	)		—						(1,881	)
Other financing activity		66,630			(38,466	)		(2,170	)		(26,076	)		(82	)
Effect of exchange rate changes on cash		—			189			(22	)		—			167
Changes in cash, cash equivalents and restricted cash and cash equivalents		5,967			5,474			(1,521	)		—			9,920
Beginning cash, cash equivalents and restricted cash and cash equivalents		89,256			12,455			29,172			—			130,883
Ending cash, cash equivalents and restricted cash and cash equivalents	$	95,223		$	17,929		$	27,651		$	—		$	140,803

~~We are required to allocate the purchase price~~

Table of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The valuation of assets acquired and liabilities assumed requires management to make significant estimates and assumptions, especially with respect to long-lived assets (including mineral assets beyond the known reserve). These estimates include future metals prices and mineral reserves, as discussed above. Management may also be required to make estimates related to the valuation of deferred tax assets or liabilities as part of the purchase price allocation for business combinations. In some cases, we use third-party appraisers to determine the fair values of property and other identifiable assets. In addition, costs related to business combinations are included in earnings as incurred, and our financial results for periods in which business combinations are pursued could be adversely affected as a result.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The following discussion about our exposure to market risks and risk management activities includes forward-looking statements that involve risks and uncertainties, as well as summarizes the financial instruments held by us at ~~June 30, 2020,~~March 31, 2021, which are sensitive to changes in commodity prices and foreign exchange ~~rates and interest~~ rates and are not held for trading purposes. Actual results could differ materially from those projected in the forward-looking statements. In the normal course of business, we also face risks that are either non-financial or non-quantifiable (See ~~Part I~~, Item 1A. – Risk Factors of our ~~annual report filed on~~2020 Form ~~10-K for the year ended December 31, 2019, as updated in~~ ~~Part II, Item 1A. – Risk Factors~~ ~~in our quarterly report filed on Form 10-Q for the period ended March 31, 2020)~~10-K).

Metals Prices

Changes in the market prices of silver, gold, lead and zinc can significantly affect our profitability and cash flow. ~~As discussed in~~ ~~Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates~~~~, metals~~Metal prices can and often do fluctuate ~~due to~~widely and are affected by numerous factors beyond our ~~control. As discussed below, we~~control (see Item 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us in our 2020 Form 10-K ). We utilize financially-settled forward and put option contracts to manage our exposure to changes in prices for silver, gold, zinc and lead.

Provisional Sales

Sales of all metals products sold directly to customers, including by-product metals, are recorded as revenues when all performance obligations have been completed and the transaction price can be determined or reasonably estimated. For concentrate sales, revenues are generally recorded at the time of shipment at forward prices for the estimated month of settlement. Due to the time elapsed between shipment to the customer and the final settlement with the customer we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the customer. Changes in metals prices between shipment and final settlement will result in changes to revenues previously recorded upon shipment. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control (see ~~Part I~~, Item ~~1A.~~ 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us in our ~~annual report filed on~~2020 Form ~~10-K for the year ended December 31, 2019)~~10-K). At ~~June 30, 2020,~~March 31, 2021, metals contained in concentrate sales and exposed to future price changes totaled ~~approximately 2.6~~2.0 million ounces of silver, ~~7,969~~5,523 ounces of gold, ~~9,983~~8,831 tons of zinc, and ~~7,405~~4,522 tons of lead. If the price for each metal were to change by 10%, the change in the total value of the concentrates sold would be approximately ~~$9.0~~$8.8 million. As discussed in Commodity-Price Risk Management below, we utilize a program designed and intended to mitigate the risk of negative price adjustments with limited mark-to-market financially-settled forward contracts for our silver, gold, zinc and lead sales. ~~Therefore, the impact of changes in prices on the value of concentrates sold would be substantially offset by a gain or loss on forward contracts.~~

Commodity-Price Risk Management

~~We may at times use commodity forward sales commitments, commodity swap contracts~~See Note 8 of Notes to Condensed Consolidated Financial Statements (Unaudited) and ~~commodity put~~Item 7A. Quantitative and ~~call option contracts to manage~~Qualitative Disclosures About Market Risk in our ~~exposure to fluctuation in the prices of certain metals we produce. Contract positions are designed to ensure that we will receive~~2020 Form 10-K for a ~~defined minimum price for certain quantities~~description of our ~~production, thereby partially offsetting our exposure to fluctuations in market prices. Our~~commodity-price risk management policy allows for up to 75% of our planned metals price exposure for five years into the future, with certain other limitations, to be covered under such programs that would establish a ceiling for prices to be realized on future metals sales. These instruments do, however, expose us to (i) credit risk in the form of non-performance by counterparties for contracts in which the contract price exceeds the spot price of a commodity and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production covered under contract positions.program.

We are currently using financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement. In addition, we are using financially-settled forward contracts to manage the exposure to changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments. The following tables summarize the quantities of metals committed under forward sales contracts at June 30, 2020 and December 31, 2019:

June 30, 2020

Ounces/pounds under contract (in 000's)

Average price per ounce/pound

Silver

Gold

Zinc

Lead

Silver

Gold

Zinc

Lead

(ounces)

(ounces)

(pounds)

(pounds)

(ounces)

(ounces)

(pounds)

(pounds)

Contracts on provisional sales

2020 settlements
2,303 7 17,086 11,409 $ 16.97 $ 1,728 $ 0.89 $ 0.75
Contracts on forecasted sales

2020 settlements
— — 26,731 8,322 N/A N/A $ 0.88 $ 0.78
2021 settlements
— — 4,134 1,102 N/A N/A $ 0.91 $ 0.77

December 31, 2019

Ounces/pounds under contract (in 000's)

Average price per ounce/pound

Silver

Gold

Zinc

Lead

Silver

Gold

Zinc

Lead

(ounces)

(ounces)

(pounds)

(pounds)

(ounces)

(ounces)

(pounds)

(pounds)

Contracts on provisional sales

2020 settlements
2,556 10 21,550 2,159 $ 17.20 $ 1,481 $ 1.04 $ 0.88
Contracts on forecasted sales

2020 settlements
— — 441 11,740 N/A N/A $ 1.13 $ 0.98

In June 2019, we began using financially-settled put option contracts to manage the exposure of our forecasted future gold and silver sales to potential declines in market prices for those metals. These put contracts give us the option, but not the obligation, to realize established prices on quantities of silver and gold to be sold in the future. The following tables summarize the quantities of metals for which we have entered into put contracts and the average exercise prices as of June 30, 2020 and December 31, 2019:

~~These forward and put option contracts do not qualify for hedge accounting and are marked-to-market through earnings each period.~~

~~As of June 30, 2020, we recorded the following balances for the fair value of the forward and put option contracts held at that time:~~

•

~~a current asset of $0.2 million, which is included in other current assets and is net of $0.2 million for contracts in a fair value liability position; and~~

•

~~a current liability of $9.9 million, which is included in current derivatives liabilities and is net of $0.5 million for contracts in a fair value current asset position.~~

We recognized a $3.3 million net loss during the first half of 2020 on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales of products. The net loss recognized on the contracts offsets gains related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement.

We recognized a $6.1 million net loss during the first half of 2020 on the contracts utilized to manage exposure to prices for forecasted future sales. The net loss on these contracts is included as a separate line item under other income (expense), as they relate to forecasted future sales, as opposed to sales that have already taken place but are subject to final pricing as discussed in the preceding paragraph. The net loss for the first half of 2020 is the result of increasing gold and zinc prices, partially offset by decreasing lead prices. These programs, when utilized and the contracts are not settled prior to their maturity dates, are designed to mitigate the impact of potential future declines in silver, gold, lead and zinc prices from the price levels established in the contracts (see average price information above). When those prices increase compared to the contract prices, we incur losses on the contracts.

Foreign Currency Risk Management

We operate or have mining interests in Canada and Mexico, which exposes us to risks associated with fluctuations in the exchange rates between the ~~U.S. dollar ("USD")~~USD and the ~~Canadian dollar ("CAD")~~CAD and ~~the Mexican peso ("MXN"),~~MXN, respectively. We have determined the functional currency for our Canadian and Mexican operations is the USD. As such, foreign exchange gains and losses associated with the re-measurement of monetary assets and liabilities from CAD and MXN to USD are recorded to earnings each period. For the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, we recognized a net foreign exchange loss of $2.1 million and gain of ~~$3.4 million.~~$6.6 million, respectively. Foreign currency exchange rates are influenced by a number of factors beyond our control. A 10% change in the exchange rate between the USD and CAD from the rate at ~~June 30, 2020~~March 31, 2021 would have resulted in a change of approximately ~~$8.0~~$10.5 million in our net foreign exchange gain or loss. A 10% change in the exchange rate between the USD and MXN from the rate at ~~June 30, 2020~~March 31, 2021 would have resulted in a change of approximately ~~$0.6~~$0.1 million in our net foreign exchange gain or loss.

7055

In April 2016, we initiated a program to manage our exposure to fluctuations in the exchange rate between the USD and CAD and the impact on our future operating costs denominated in CAD. In October 2016, we also initiated a similar program with respect to MXN, which was not in use as of June 30, 2020. When in use, the programs utilize forward contracts to buy CAD and MXN, and each contract is designated as a cash flow hedge. As of June 30, 2020, we had 140 forward contracts outstanding to buy CAD$315.1 million having a notional amount of US$239.9 million. The CAD contracts are related to cash operating costs at Casa Berardi forecasted to be incurred from 2020 through 2023 and have CAD-to-USD exchange rates ranging between 1.2702 and 1.3785. There were no outstanding MXN contracts as of June 30, 2020. Our risk management policy allows for up to 75% of our planned cost exposure for five years into the future to be hedged under such programs, and for potential additional programs to manage other foreign currency-related exposure areas.

~~As of June 30, 2020, we recorded the following balances for the fair value of the contracts:~~

•

~~a current asset of $0.1 million, which is included in other current assets;~~

•

~~a non-current asset of $0.2 million, which is included in other non-current assets; and~~

•

~~a current liability of $3.9 million, which is included in current derivatives liabilities; and~~

•

~~a non-current liability of $5.3 million, which is included in non-current derivatives liabilities.~~

Net unrealized losses of approximately $9.3 million related to the effective portion of the hedges were included in accumulated other comprehensive loss as of June 30, 2020. Unrealized gains and losses will be transferred from accumulated other comprehensive loss to current earnings as the underlying operating expenses are recognized. We estimate approximately $4.0 million in net unrealized losses included in accumulated other comprehensive loss as of June 30, 2020 would be reclassified to current earnings in the next twelve months. Net realized losses of approximately $1.9 million on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive loss and included in cost of sales and other direct production costs for the six months ended June 30, 2020. No net unrealized gains or losses related to ineffectiveness of the hedges were included in gain (loss) on derivatives contracts on our consolidated statements of operations and comprehensive income (loss) for the six months ended June 30, 2020.

~~Interest Rates~~

We have a $250 million credit facility, and amounts drawn on the facility are subject to variable rates of interest based on a spread over the London Interbank Offered Rate or an alternative base rate. Interest rates fluctuate due to economic factors beyond our control. We had $50.0 million drawn under the facility as of June 30, 2020. See Note 98 of Notes to Condensed Consolidated Financial Statements (Unaudited) and Note 11 of Notes to Consolidated Financial Statements in our 2020 Form 10-K for ~~more information on~~a description of our ~~credit facility.~~foreign currency risk management.

Item 4.Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as required by Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures, including controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management (including our CEO and CFO), were effective as of ~~June 30, 2020,~~March 31, 2021, in assuring them in a timely manner that material information required to be disclosed in this report has been properly recorded, processed, summarized and reported. There were no changes in our internal control over financial reporting during the quarter ended ~~June 30, 2020,~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

Part II - Other Information

Hecla Mining Company and Subsidiaries

Item 1.Legal Proceedings

For information concerning legal proceedings, refer to Note 410 of Notes to Condensed Consolidated Financial Statements (Unaudited), which is incorporated by reference into this Item 1.

Item 1A. Risk Factors

~~Part I,~~ Item ~~1A. –~~1A - Risk Factors of our annual report filed on Form 10-K for the year ended December ~~31, 2019, as updated in~~ ~~Part II, Item 1A. – Risk Factors~~ ~~in our quarterly report on Form 10-Q for the period ended March~~ 31, 2020 sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results. ~~Those risk factors continue to be relevant to an understanding of our business, financial condition and operating results.~~

Item 2. Unregistered Sales of Securities and Use of Proceeds

On ~~April 9, 2020,~~January 27, 2021, we issued ~~119,048~~3,500,000 unregistered shares of our common stock ~~in private placements to the Lucky Friday Pension Plan Trust and 47,619 shares~~ to the Hecla Mining Company Pre-2005 Supplemental Excess Retirement Plan ~~Trust~~and the Hecla Mining Company Post-2004 Supplemental Excess Retirement Plan (together, the "SERP") in private placements in order to ~~satisfy the funding~~fund future benefit payment requirements for ~~those defined benefit pension plans.~~the SERP. The private placements were exempt from registration under the Securities Act of 1933 pursuant to section 4(a)(2) of that Act. The shares were subsequently registered for resale on a registration statement on Form S-3 filed with the SEC on ~~April 9, 2020.~~February 18, 2021. We did not receive any cash proceeds from the issuance of the shares. The shares had a value of approximately ~~$0.4~~$16.8 million at the time of issuance.

Item 4. Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in exhibit 95 to this Quarterly Report.

7256

~~Restated Certificate~~Equity Distribution Agreement, dated as of ~~Incorporation of~~February 18, 2021, by and among Hecla Mining Company and the ~~Registrant.~~sales agents party thereto. Filed as exhibit ~~3.1~~1.1 to Registrant’s ~~Quarterly Report~~Form 8-K filed on ~~Form 10-Q for the quarter ended March 31, 2018~~February 18, 2021 (File No. 1-8491) and incorporated herein by reference.

Item 6.Exhibits

Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-Q ~~– June 30, 2020~~- March 31, 2021

Index to Exhibits

~~3.1~~1.1

~~3.2~~3.1

Bylaws of ~~the Registrant~~Hecla Mining Company, as amended ~~to date.~~February 26, 2021. Filed as exhibit ~~3.1~~3.2 to ~~Registrant's Current Report on~~Registrant’s Form 8-K filed on ~~December 13, 2019~~March 1, 2021 (File No. 1-8491) and incorporated herein by reference.

~~4.1~~10.1

~~Designations, Preferences~~Form of Indemnification Agreement, dated February 26, 2021, between Registrant and ~~Rights of Series B Cumulative Convertible Preferred Stock of~~Alice Wong, and dated March 1, 2021, between Registrant and Russell D. Lawlar, incorporated by reference to Exhibit 10.7 to the ~~Registrant. Included as Annex II to Restated Certificate of Incorporation of Registrant filed as exhibit 3.1 to Registrant’s~~Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31, 2018 (File No. 1-8491)~~September 30, 2006, and ~~incorporated herein by reference.~~filed on November 9, 2006.

~~4.2~~10.2

~~Registration Rights~~Form of Change of Control Agreement dated as of April 9, 2020 among Hecla Mining Company, as Issuer, and the Hecla Mining Company Retirement Plan Trust, which is the funding vehicle for the Hecla Mining Company Retirement Plan, a tax-qualified employee benefit pension plan sponsored bybetween Hecla Mining Company and Russell D. Lawlar, incorporated by reference to Exhibit 10.2 to the ~~Lucky Friday Pension Plan Trust, which is the funding vehicle~~Company’s Annual Report on Form 10-K for the ~~Lucky Friday Pension Plan. Filed as exhibit 4.1 to Registrant’s registration statement on Form S-3ASR~~year ended December 31, 2015, and filed on ~~April 10, 2020 (Registration No. 333-237631) and incorporated herein by reference.~~February 23, 2016.

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

32.1

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

32.2

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

Mine safety information listed in Section 1503 of the Dodd-Frank Act. *

~~99.1~~

Contribution Agreement, dated as of April 9, 2020, among Hecla Mining Company, as sponsor of the Hecla Mining Company Retirement Plan, the Retirement Committee, as the named fiduciary of the Hecla Mining company Retirement Plan, and U.S. Bank National Association, as trustee of the Hecla Mining Company Retirement Plan Trust. Filed as exhibit 99.1 to Registrant’s registration statement on Form S-3ASR filed on April 10, 2020 (Registration No. 333-237631) and incorporated herein by reference.

~~99.2~~

Contribution Agreement, dated as of April 9, 2020, among Hecla Mining Company, Hecla Limited as sponsor of the Lucky Friday Pension Plan, the Pension Committee, as the named fiduciary of the Lucky Friday Pension Plan, and U.S. Bank National Association, as trustee of the Hecla Mining Company Retirement Plan Trust. Filed as exhibit 99.2 to Registrant’s registration statement on Form S-3ASR filed on April 10, 2020 (Registration No. 333-237631) and incorporated herein by reference.

101.INS

Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.** **

101.SCH

Inline XBRL Taxonomy Extension Schema.**

101.CAL

Inline XBRL Taxonomy Extension Calculation.**

101.DEF

Inline XBRL Taxonomy Extension Definition.**

101.LAB

Inline XBRL Taxonomy Extension Labels.**

101.PRE

Inline XBRL Taxonomy Extension Presentation.**

104

Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~___________________~~

* Filed herewith.

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Items 3 and 5 of Part II are not applicable and are omitted from this report.

7357