Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM
10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,September 30, 2022

or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to

Commission file number 

1-8491

Commission file
number 1-8491
HECLA MINING COMPANY

(Exact name of registrant as specified in its Charter)

Delaware

 

77-0664171

State or Other Jurisdiction of

Incorporation or Organization
 

I.R.S. Employer

Identification No.

Incorporation or Organization

Identification No.

6500 N. Mineral Drive, Suite 200

Coeur d’Alene, Idaho
 
83815-9408

Coeur d'Alene, Idaho

83815-9408

Address of Principal Executive Offices

 

Zip Code

208-769-4100

Registrant's Telephone Number, Including Area Code

208-769-4100
Registrant’s Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Trading
Symbol(s)
Name of each exchange

on which registered

Common Stock, par value $0.25 per share

HL

HL
New York Stock Exchange

Series B Cumulative Convertible Preferred Stock, par value $0.25 per share

HL-PB

HL-PB
New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  ☒    No  ☐

Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act:

Act.

Large accelerated filer ☒

☒Accelerated filer☐

Non-accelerated filer ☐

Non-accelerated
filer		☐Smaller reporting company☐

Emerging growth company ☐

 ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

 

Shares Outstanding May 5,November 4, 2022

Common stock, par value

$0.25 per share

 539,049,637

606,270,618
 
Table of Contents

Hecla Mining Company and Subsidiaries

Form 10-Q

10 – Q

For the Quarter Ended March 31,September 30, 2022

INDEX
*

Page

PART I - Financial Information 

   Page

PART I – Financial Information
Item 1 – Condensed Consolidated Financial Statements (Unaudited)

  

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income -– Three Months Ended March 31,and Nine Months Ended – September 30, 2022 and 2021

3

 4 

Condensed Consolidated Statements of Cash Flows - Three– Nine Months Ended March 31,September 30, 2022 and 2021

4

 5 

Condensed Consolidated Balance Sheets - March 31,– September 30, 2022 and December 31, 2021

5

 6 

Condensed Consolidated Statements of Changes in Stockholders'Stockholders’ Equity -– Three Months Ended March 31,and Nine Months Ended – September 30, 2022 and 2021

6

 7 

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

 9 

Forward-Looking Statements

20

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

21

 23 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

47

 60 

Item 4. Controls and Procedures

49

 61 

PART II -– Other Information

  

Item 1 – Legal Proceedings

49

 61 

Item 1A – Risk Factors

49

 61 

Item 4 – Mine Safety Disclosures

49

 62 

Item 6 – Exhibits

49

 62 

Signatures

51

Signatures
64
*
Items 2, 3 and 5 of Part II are omitted as they are not applicable.

2
Table of Contents
Part I – Financial Information

Part I - Financial Information

Item 1. Financial Statements

3
Table of Contents
Hecla Mining Company and Subsidiaries

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

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

  

Three Months Ended

 
  

March 31, 2022

  

March 31, 2021

 

Sales of products

 $186,499  $210,852 

Cost of sales and other direct production costs

  105,772   96,382 

Depreciation, depletion and amortization

  35,298   47,069 

Total cost of sales

  141,070   143,451 

Gross profit

  45,429   67,401 

Other operating expenses:

        

General and administrative

  8,294   8,007 

Exploration and pre-development

  12,808   6,690 

Care and maintenance

  6,205   4,318 

Provision for closed operations and reclamation

  901   3,709 

Other operating expense

  2,463   3,648 

Total other operating expense

  30,671   26,372 

Income from operations

  14,758   41,029 

Other income (expense):

        

Interest expense

  (10,406)  (10,744)

Fair value adjustments, net

  5,965   (1,875)

Net foreign exchange loss

  (2,038)  (2,064)

Other non-operating income (expense)

  1,505   (152)

Total other expense

  (4,974)  (14,835)

Income before income and mining taxes

  9,784   26,194 

Income and mining tax provision

  (5,631)  (4,743)

Net income

  4,153   21,451 

Preferred stock dividends

  (138)  (138)

Income applicable to common stockholders

 $4,015  $21,313 

Comprehensive income:

        

Net income

 $4,153  $21,451 

Change in fair value of derivative contracts designated as hedge transactions

  (33,165)  1,832 

Comprehensive (loss) income

 $(29,012) $23,283 

Basic income per common share after preferred dividends

 $0.01  $0.04 

Diluted income per common share after preferred dividends

 $0.01  $0.04 

Weighted average number of common shares outstanding - basic

  538,490   534,101 

Weighted average number of common shares outstanding - diluted

  544,061   540,527 

Cash dividends per common share

 $0.00625  $0.00875 

   Three Months Ended  Nine Months Ended 
   September 30,
2022		  September 30,
2021		  September 30,
2022		  September 30,
2021		 
Sales
  $ 146,339  $ 193,560  $ 524,080  $ 622,395 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cost of sales and other direct production costs
   104,900   112,542   326,579   318,917 
Depreciation, depletion and amortization
   32,992   45,790   106,362   138,918 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   137,892   158,332   432,941   457,835 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
   8,447   35,228   91,139   164,560 
   
 
 
  
 
 
  
 
 
  
 
 
 
Other operating expenses:
                 
General and administrative
   11,003   8,874   28,989   27,985 
Exploration and
pre-development
   15,128   17,108   39,136   35,039 
Care and maintenance costs
   5,092   6,910   16,539   17,014 
Provision for closed operations and environmental matters
   1,781   7,564   4,154   12,297 
Other operating expense
   902   3,344   5,310   10,626 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total other operating expenses
   33,906   43,800   94,128   102,961 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Loss) income from operations
   (25,459)   (8,572)   (2,989)   61,599 
   
 
 
  
 
 
  
 
 
  
 
 
 
Other income (expense):
                 
Interest expense
   (10,874)   (10,469)   (31,785)   (31,484) 
Fair value adjustments, net
   (4,240)   9,287   (14,703)   (10,651) 
Net foreign exchange gain
   5,667   3,995   8,111   24 
Other income (expense)
   1,853   247   4,828   (192) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total other (expense) income

   (7,594)   3,060   (33,549)   (42,303) 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Loss) income before income and mining taxes
   (33,053)   (5,512)   (36,538)   19,296 
Income and mining tax benefit
   9,527   4,533   3,642   3,924 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net (loss) income
   (23,526)   (979)   (32,896)   23,220 
Preferred stock dividends
   (138)   (138)   (414)   (414) 
   
 
 
  
 
 
  
 
 
  
 
 
 
(Loss) income applicable to common stockholders

  $ (23,664)  $(1,117)  $ (33,310)  $22,806 
   
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive income (loss):
                 
Net (loss) income
  $ (23,526)  $(979)  $ (32,896)  $23,220 
Change in fair value of derivative contracts designated as hedge transactions
   (12,692)   (6,267)   19,491   (2,815) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive (loss) income
  $ (36,218)  $(7,246)  $ (13,405)  $20,405 
   
 
 
  
 
 
  
 
 
  
 
 
 
Basic (loss) income per common share after preferred dividends
  $(0.04)  $—    $(0.06)  $0.04 
   
 
 
  
 
 
  
 
 
  
 
 
 
Diluted (loss) income per common share after preferred dividends
  $(0.04)  $—    $(0.06)  $0.04 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted average number of common shares outstanding – basic
   554,531   536,966   544,000   535,542 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted average number of common shares outstanding – diluted
   554,531   536,966   544,000   541,769 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cash dividends declared per common share
  $0.00625  $0.01  $0.0125  $0.02 
   
 
 
  
 
 
  
 
 
  
 
 
 
The accompanying notes are an integral part of the interim condensed consolidated financial statements.

34
Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

  

Three Months Ended

 
  

March 31, 2022

  

March 31, 2021

 

Operating activities:

        

Net income

 $4,153  $21,451 

Non-cash elements included in net income:

        

Depreciation, depletion and amortization

  35,456   46,957 

Provision for reclamation and closure costs

  1,643   4,529 

Stock-based compensation expense

  1,271   500 

Deferred taxes

  2,234   141 

Fair value adjustments, net

  (2,245)  (8,623)

Foreign exchange loss

  2,280   1,755 

Other non-cash items, net

  483   556 

Change in assets and liabilities:

        

Accounts receivable

  2,779   (2,664)

Inventories

  (5,081)  2,120 

Other current and non-current assets

  1,696   1,528 

Accounts payable and accrued liabilities

  (13,907)  (24,545)

Accrued payroll and related benefits

  6,909   (7,995)

Accrued taxes

  3,754   2,031 

Accrued reclamation and closure costs and other non-current liabilities

  (3,516)  195 

Cash provided by operating activities

  37,909   37,936 

Investing activities:

        

Additions to properties, plants, equipment and mineral interests

  (21,478)  (21,413)

Proceeds from sale of investments

  2,487   0 

Proceeds from disposition of properties, plants and equipment

  617   19 

Purchases of investments

  (10,868)  0 

Net cash used in investing activities

  (29,242)  (21,394)

Financing activities:

        

Acquisition of treasury shares

  (1,921)  0 

Dividends paid to common and preferred stockholders

  (3,509)  (4,826)

Credit facility fees paid

  (54)  (82)

Repayments of finance leases

  (1,695)  (1,881)

Net cash used in financing activities

  (7,179)  (6,789)

Effect of exchange rates on cash

  519   167 

Net increase in cash, cash equivalents and restricted cash and cash equivalents

  2,007   9,920 

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period

  211,063   130,883 

Cash, cash equivalents and restricted cash and cash equivalents at end of period

 $213,070  $140,803 

Supplemental disclosure of cash flow information:

        

Cash paid for interest

 $18,603  $18,406 

Cash paid for income and mining taxes

 $679  $1,980 

Significant non-cash investing and financing activities:

        

Addition of finance lease obligations and right-of-use assets

 $2,864  $3,120 

Accounts receivable for proceeds on exchange of investments

 $0  $1,832 

   Nine Months Ended 
   September 30,
2022		  September 30,
2021		 
Operating activities:
         
Net (loss) income
  $ (32,896)  $23,220 
Non-cash
elements included in net (loss) income:
         
Depreciation, depletion and amortization
   106,743   139,800 
Write-down of inventory
   2,159   6,524 
Fair value adjustments, net
   3,486   (7,978) 
Provision for reclamation and closure costs
   4,789   7,821 
Stock compensation
   4,298   4,774 
Deferred income taxes
   (17,828)   (17,886) 
Foreign exchange (gain) loss

   (8,353)   615 
Other
non-cash
items, net
   2,454   1,167 
Change in assets and liabilities:
         
Accounts receivable
   34,788   (3,798) 
Inventories
   (19,472)   22,372 
Other current and
non-current
assets
   (3,420)   1,650 
Accounts payable, accrued and other current liabilities

   (21,708)   (14,689) 
Accrued payroll and related benefits
   1,679   (1,829) 
Accrued taxes
   (2,652)   2,730 
Accrued reclamation and closure costs and other
non-current
liabilities
   (297)   2,489 
   
 
 
  
 
 
 
Cash provided by operating activities
   53,770   166,982 
Investing activities:
         
Additions to properties, plants, equipment and mineral interests
   (93,237)  (80,210) 
Change in restricted cash
   2,011   —   
Proceeds from sale of investments
   9,375   1,811 
Proceeds from disposition of properties, plants and equipment
   748   562 
Purchases of investments
   (30,540)   —   
Acquisitions, net
   8,952   —   
Pre-acquisition
advance to Alexco
   (25,000)   —   
Purchase of carbon credits
   —     (200) 
   
 
 
  
 
 
 
Net cash used in investing activities
   (127,691)   (78,037) 
Financing activities:
         
Proceeds from sale of common stock, net
   4,542   —   
Acquisition of treasury stock

   (3,677)   (4,525) 
Dividends paid to common and preferred stockholders
   (10,549)   (17,169) 
Credit facility fees paid
   (517)   (108) 
Draw on revolving credit facility
   25,000   
—
 
 
 
Repayments of finance leases
   (5,222)   (5,598) 
   
 
 
  
 
 
 
Net cash provided by (used in) financing activities
   9,577   (27,400) 
Effect of exchange rates on cash
   (804)   (471) 
Net (decrease) increase in cash, cash equivalents and restricted cash 

   (65,148)   61,074 
Cash, cash equivalents and restricted cash at beginning of period   211,063   130,883 
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash at end of period  $ 145,915  $ 191,957 
   
 
 
  
 
 
 
Supplemental disclosure of cash flow information:
         
Cash paid for interest
  $37,179  $37,173 
Cash paid for income and mining taxes, net

  $13,061  $10,299 
Significant
non-cash
investing and financing activities:
         
Addition of finance lease obligations and
right-of-use
assets
  $9,692  $4,006 
Common stock issued to Alexco Resource Corp. shareholders

  $68,733  $—   
Common stock issued to settle acquired silver stream
  $135,000  $—   
Common stock issued to pension plans
  $5,570  $22,250 
The accompanying notes are an integral part of the interim condensed consolidated financial statements.

45
Table of Contents

Hecla Mining Company and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except shares)

  

March 31,
2022

  

December 31,

2021

 

ASSETS

 

Current assets:

        

Cash and cash equivalents

 $212,029  $210,010 

Accounts receivable:

        

Trade

  33,324   36,437 

Other, net

  8,586   8,149 

Inventories:

        

Concentrates, doré, and stockpiled ore

  29,852   25,906 

Materials and supplies

  43,238   41,859 

Other current assets

  16,927   19,266 

Total current assets

  343,956   341,627 

Investments

  29,204   10,844 

Restricted cash and investments

  1,041   1,053 

Properties, plants, equipment and mineral interests, net

  2,298,858   2,310,810 

Operating lease right-of-use assets

  12,342   12,435 

Deferred taxes

  45,562   45,562 

Other non-current assets

  7,936   6,477 

Total assets

 $2,738,899  $2,728,808 

LIABILITIES

 

Current liabilities:

        

Accounts payable and accrued liabilities

 $73,786  $68,100 

Accrued payroll and related benefits

  34,864   28,714 

Accrued taxes

  16,128   12,306 

Finance and operating leases

  8,535   8,098 

Accrued reclamation and closure costs

  10,594   9,259 

Accrued interest

  5,232   14,454 

Derivatives liabilities

  38,992   19,353 

Other current liabilities

  109   99 

Total current liabilities

  188,240   160,383 

Finance and operating leases

  18,385   17,726 

Accrued reclamation and closure costs

  103,612   103,972 

Long-term debt

  508,852   508,095 

Deferred tax liability

  140,810   149,706 

Derivatives liabilities

  43,402   18,528 

Other non-current liabilities

  7,055   9,611 

Total liabilities

  1,010,356   968,021 

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, 2022 — 546,635,233 shares and December 31, 2021 — 545,534,760 shares

  136,657   136,391 

Capital surplus

  2,036,417   2,034,485 

Accumulated deficit

  (353,007)  (353,651)

Accumulated other comprehensive loss

  (61,621)  (28,456)

Less treasury stock, at cost; March 31, 2022 — 7,728,800 shares and December 31, 2021 - 7,395,295 shares issued and held in treasury

  (29,942)  (28,021)

Total stockholders’ equity

  1,728,543   1,760,787 

Total liabilities and stockholders’ equity

 $2,738,899  $2,728,808 

   
September 30,
2022
  
December 31,
2021
 
ASSETS
 
Current assets:
         
Cash and cash equivalents
  $144,669  $210,010 
Accounts receivable:
         
Trade
   12,477   36,437 
Other, net
   12,846   8,149 
Inventories:
         
Concentrates, doré, and stockpiled ore
   40,985   25,906 
Materials and supplies
   51,020   41,859 
Derivatives assets
   7,190   2,709 
Other current assets
   14,733   16,557 
   
 
 
  
 
 
 
Total current assets
   283,920   341,627 
Investments
   13,299   10,844 
Restricted cash
   1,246   1,053 
Properties, plants, equipment and mineral interests, net
   2,553,974   2,310,810 
Operating lease
right-of-use
assets
   11,632   12,435 
Deferred income taxes
   45,562   45,562 
Derivatives assets
   20,794   2,503 
Other
non-current
assets
   4,202   3,974 
   
 
 
  
 
 
 
Total assets
  $2,934,629  $2,728,808 
   
 
 
  
 
 
 
LIABILITIES
 
Current liabilities:
         
Accounts payable and accrued liabilities
  $87,850  $68,100 
Accrued payroll and related benefits
   26,385   28,714 
Accrued taxes
   7,344   12,306 
Finance and operating leases
   12,489   8,098 
Accrued interest
   5,184   14,454 
Derivatives liabilities
   5,774   19,353 
Other current liabilities
   5,765   99 
Accrued reclamation and closure costs
   10,594   9,259 
   
 
 
  
 
 
 
Total current liabilities
   161,385   160,383 
Finance and operating leases
   20,242   17,726 
Accrued reclamation and closure costs
   105,717   103,972 
Long-term debt
   530,745   508,095 
Deferred tax liability
   154,225   149,706 
Derivatives liabilities
   5,560   18,528 
Other
non-current
liabilities
   1,987   9,611 
   
 
 
  
 
 
 
Total liabilities
   979,861   968,021 
   
 
 
  
 
 
 
Commitments and contingencies (
Notes 4
,
7
,
8,
and
10
)
      
STOCKHOLDERS’ EQUITY
 
Preferred stock, 5,000,000 shares authorized:
         
Series B preferred stock, 25 cent par value, 157,776 shares issued and outstanding, liquidation
preference – $7,891
   39   39 
Common stock, 25 cent par value, 750,000,000 authorized shares; issued September 30,
2022 – 603,702,910 shares and December 31, 2021 – 545,534,760 shares
   150,839   136,391 
Capital surplus
   2,241,649   2,034,485 
Accumulated deficit
   (397,096)   (353,651) 
Accumulated other comprehensive income (loss)
   (8,965)   (28,456) 
Less treasury stock, at cost; September 30, 2022 – 8,132,553 shares and December 31, 2021 – 7,395,295 shares issued and held in treasury
   (31,698)   (28,021) 
   
 
 
  
 
 
 
Total stockholders’ equity
   1,954,768   1,760,787 
   
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  $ 2,934,629  $ 2,728,808 
   
 
 
  
 
 
 
The accompanying notes are an integral part of the interim condensed consolidated financial statements.

56
Table of Contents

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 March 31, 2022

 
  

Series B

Preferred

Stock

  

Common

Stock

  

Additional

Paid-In

Capital

  

Accumulated

Deficit

  

Accumulated

Other

Comprehensive

Loss, net

  

Treasury

Stock

  

Total

 

Balances, January 1, 2022

 $39  $136,391  $2,034,485  $(353,651) $(28,456) $(28,021) $1,760,787 

Net income

  0   0   0   4,153   0   0   4,153 

Stock-based compensation expense

  0   0   1,271   0   0   0   1,271 

Incentive compensation units distributed (888,000 shares)

  0   222   (222)  0   0   (1,921)  (1,921)

Common stock ($0.00625 per share) and Series B Preferred Stock ($0.875 per share) dividends declared

  0   0   0   (3,509)  0   0   (3,509)

Common stock issued for 401(k) match (180,000 shares)

  0   44   883   0   0   0   927 

Other comprehensive income

  0   0   0   0   (33,165)  0   (33,165)

Balances, March 31, 2022

 $39  $136,657  $2,036,417  $(353,007) $(61,621) $(29,942) $1,728,543 

   Three Months Ended September 30, 2022 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		   Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, July 1, 2022
  $39   $137,241   $2,043,621   $(370,048)  $3,727  $(31,698)  $1,782,882 
Net loss
   —      —      —      (23,526)   —     —     (23,526) 
Common stock issued to Alexco Resource Corp. shareholders
 (17,992,875 shares)
   —      4,498    64,235    —     —     —     68,733 
Common stock issued to settle the acquired silver
stream (34,800,990 shares)
   —      8,700    126,300    —     —     —     135,000 
Common stock issued for 401(k) match (422,860

shares)
   —    106    1,472    —   —   —   1,578 
Common stock issued under ATM program, net 
(1,176,861 shares)		   —      294    4,248    —   —   —   4,542 
Common stock dividends declared (0.0625 cents per
common share)		   —      —      —      (3,384)   —     —     (3,384) 
Series B Preferred Stock dividends declared (87.5 cents
per share)		   —    —    —    (138)   —   —   (138) 
Restricted stock units granted
    —    —    1,773    —   —   —   1,773 
Other comprehensive loss
   —      —      —      —     (12,692)   —     (12,692) 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2022
  $39   $150,839   $2,241,649   $(397,096)  $(8,965)  $(31,698)  $1,954,768 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
  

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  $(368,074) $(32,889) $(23,496) $1,713,785 

Net income

  0   0   0   21,451   0   0   21,451 

Stock-based compensation expense

  0   0   483   0   0   0   483 

Common stock ($0.00875 per share) and Series B Preferred Stock ($0.875 per share) dividends declared

  0   0   0   (4,826)  0   0   (4,826)

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  $(351,449) $(31,057) $(23,496) $1,750,655 

   Three Months Ended September 3
0
, 2021		 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		   Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, July 1, 2021
  $39   $136,065   $2,024,645   $(354,866)  $(29,437)  $(28,021)  $1,748,425 
Net loss
   —      —      —      (979)   —     —     (979) 
Restricted stock units granted
   —      —      1,472    —     —     —     1,472 
Common stock dividends declared (1.125 cents per common share)
   —      —      —      (6,040)   —     —     (6,040) 
Series B Preferred Stock dividends declared (87.5 cents per share)
   —      —      —      (138)   —     —     (138) 
Common stock issued for 401(k) match (141,000 shares)
   —      35    1,017    —     —     —     1,052 
Common stock issued to pension plans (1,000,000 shares)
   —      250    5,200    —     —     —     5,450 
Other comprehensive loss
   —      —      —      —     (6,267)   —     (6,267) 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2021
  $39   $136,350   $2,032,334   $(362,023)  $(35,704)  $(28,021)  $1,742,975 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
7
Table of Contents
   Nine Months Ended September 30, 2022 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		  Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, January 1, 2022
  $39   $136,391   $2,034,485  $(353,651)  $(28,456)  $(28,021)  $1,760,787 
Net loss
   —      —      —     (32,896)   —     —     (32,896) 
Restricted stock units granted
   —      —      3,881   —     —     —     3,881 
Restricted stock units and performance stock units distributed (1,789,042 shares)
   —      447    (447)   —     —     (3,677)   (3,677) 
Common stock issued for 401(k) match (321,110
shares)
   —      186    3,283   —     —     —     3,469 
Common stock issued to directors (98,310 shares)
   —      25    392   —     —     —     417 
Common stock issued to pension plans (1,190,000 shares)
   —      298    5,272   —     —     —     5,570 
Common stock issued to Alexco Resource Corp. shareholders (17,992,875 shares)
   —      4,498    64,235   —     —     —     68,733 
Common stock issued to settle the acquired silver
stream (34,800,990)
   —      8,700    126,300   —     —     —     135,000 
Common stock issued under ATM program, net

(1,176,861 shares)
    ——
—
    294    4,248   —   —   —   4,542 
Common stock dividends declared (1.25 cents per common share)
   —      —      —     (10,135)   —     —     (10,135) 
Series B Preferred Stock dividends declared ($2.625
per share)
   —      —      —     (414)   —     —     (414) 
Other comprehensive income
   —      —      —     —     19,491   —     19,491 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2022
  $39   $150,839   $2,241,649  $(397,096)  $(8,965)  $(31,698)  $1,954,768 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
   Nine Months Ended September 30, 2021 
   Series B
Preferred
Stock		   Common
Stock		   Capital
Surplus		  Accumulated
Deficit		  Accumulated
Other
Comprehensive
Income (Loss),
net		  Treasury
Stock		  Total 
Balances, January 1, 2021
  $39   $134,629   $2,003,576  $(368,074)  $(32,889)  $(23,496)  $1,713,785 
Net income
   —      —      —     23,220   —     —     23,220 
Restricted stock units granted
   —      —      2,930   —     —     —     2,930 
Restricted stock units distributed (1,653,000 shares)
   —      413    (413)   —     —     (4,525)   (4,525) 
Common stock dividends declared (3.125 cents per common share)
   —      —      —     (16,755)   —     —     (16,755) 
Series B Preferred Stock dividends declared ($2.625
per share)
   —      —      —     (414)   —     —     (414) 
Common stock issued for 401(k) match (524,000
shares)
   —      131    3,324   —     —     —     3,455 
Common stock issued to pension plans (4,500,000 shares)
   —      1,125    21,125   —     —     —     22,250 
Common stock issued to directors (207,000 shares)
   —      52    1,792   —     —     —     1,844 
Other comprehensive loss
   —      —      —     —     (2,815)   —     (2,815) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balances, September 30, 2021
  $39   $136,350   $2,032,334  $(362,023)  $(35,704)  $(28,021)  $1,742,975 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
The accompanying notes are an integral part of the interim condensed consolidated financial statements.

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Table of Contents
Note 1.
Basis of Preparation of Financial Statements

Note 1.Basis of Preparation of Financial Statements

The accompanying unaudited interim condensed consolidated financial statements of Hecla Mining Company and its subsidiaries (collectively, “Hecla,” “the Company,” “we,” “our,” or “us,” except where the context requires otherwise) have been prepared in accordance with the instructions to Form10-Q
10-Q
and do not include all information and disclosures required annually by generally accepted accounting principles in the United States (“GAAP”). Therefore, this information should be read in conjunction with Hecla’sHecla Mining Company’s consolidated financial statements and notes contained in our annual report on Form10-K
10-K
for the year ended December 31,2021 (“ (“2021 Form10-K”
10-K”).
The consolidated December 31,2021 balance sheet data was derived from our audited consolidated financial statements. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three-month periodthree- and nine-month periods ended March 31,September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31,2022.

On September 7, 2022, the Company completed the acquisition of the remaining 90.1%
of Alexco Resource Corp. (“Alexco”) for non-cash consideration of
17,992,875
shares of Company common stock valued at $
68.7
 million.
Total consideration for the acquisition, deemed to be an asset acquisition under GAAP, was
 $
81.5
million of which $76.4 million was non cash including the fair value of the Company’s common stock issued and the fair value of the
9.9
%
Alexco investment held by the Company prior to the completion of the acquisition and previously accounted for as marketable equity securities of $7.7 million. Acquisition costs also included transaction costs of $5.1 million. The total consideration was allocated to the acquired assets and assumed liabilities based on their estimated fair values on the acquisition date, which primarily consisted of mineral interests of

$
236.6
million, a related deferred tax liability of
$
12.9
million, net liabilities of $7.2 million, and a silver stream liability
 of
$
135
million. Immediately following the closure of the acquisition, we settled the silver stream liability with the stream holder for
34,800,990
shares of Company common stock.
The 2019 novel strain of coronavirus
(“COVID-19”COVID-19”)
was characterized as a global pandemic by the World Health Organization on March 11, 2020. We continue to take precautionary measures to mitigate the impact of COVID-19,
COVID-19,
including implementing operational plans and practices. As long as they are required, the operational practices implemented could continue to have an adverse impact on our operating results due to deferred production and revenues or additional costs. We incurred $0.4 million and $1.6$3.1 million in COVID-19
COVID-19
mitigation costs during the threenine months ended March 31,September 30, 2022 and 2021, respectively. 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
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 and the related impact on prices, demand, creditworthiness and other market conditions and governmental reactions, all of which are highly
uncertain.

Certain amounts

During the three months ended September 30, 2022, the Company recorded an out-of-period adjustment to correct an immaterial error related to the period ended June 30, 2022. This adjustment increased income taxes related to other comprehensive loss
by $12,649 for the three months ended September 30, 2022 to correct the previously recorded tax effect of changes in the prior year have been reclassifiedfair value of derivative contracts designated as hedge transactions. This adjustment is non-cash, had no impact on net loss applicable to conform tocommon shareholders and increased accumulated other comprehensive loss for the current year presentation.

three months ended September 30, 2022 by $12,649.
 

Note 2.Business Segments and Sales of Products

Note 2.
Business Segments and Sales of Products
We discover, acquire and develop mines and other mineral interests and produce and market (i) concentrates, containing silver, gold, lead and zinc, (ii) carbon material containing silver and gold, and (iii) doré containing silver and gold. We are currently organized and managed in four segments: Greens Creek, Lucky Friday, Casa Berardi and Nevada Operations.

General corporate activities not associated with operating mines and their various exploration activities, as well as discontinued operations, exploration and development projects 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.

7
Table of Contents

The following tables present information about our reportable segments for the three and nine months ended March 31,September 30, 2022 and 2021 (in thousands):

  

Three Months Ended
March 31,

 
  

2022

  

2021

 

Sales of products:

        

Greens Creek

 $86,090  $98,409 

Lucky Friday

  38,040   29,122 

Casa Berardi

  62,101   72,911 

Nevada Operations

  268   10,237 

Other

  0   173 
  $186,499  $210,852 

Income (loss) from operations:

        

Greens Creek

 $34,586  $44,600 

Lucky Friday

  8,771   6,323 

Casa Berardi

  (2,699)  11,706 

Nevada Operations

  (12,231)  (3,140)

Other

  (13,669)  (18,460)
  $14,758  $41,029 

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Table of Contents
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Net sales to unaffiliated customers:
                    
Greens Creek
  $60,875   $84,806   $239,688   $296,978 
Lucky Friday
   28,460    29,783    102,380    98,550 
Casa Berardi
   56,939    56,065    181,679    185,098 
Nevada Operations
   —    22,906    268    41,593 
Other
   65    —    65    176 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $146,339   $193,560   $524,080   $622,395 
   
 
 
   
 
 
   
 
 
   
 
 
 
Income (loss) from operations:
                    
Greens Creek
  $1,378   $26,572   $63,768   $127,605 
Lucky Friday
   4,269    6,187    18,568    24,247 
Casa Berardi
   (5,226)    (6,233)    (8,497)    4,944 
Nevada Operations
   (8,917)    (12,077)    (30,879)    (35,558) 
Other
   (16,963)    (23,021)    (45,949)    (59,639) 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $(25,459)   $(8,572)   $(2,989)   $61,599 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table presents identifiable assets by reportable segment as of March 31,September 30, 2022 and December 31,2021 (in thousands):

  

March 31,

2022

  

December 31,

2021

 

Identifiable assets:

        

Greens Creek

 $578,565  $589,944 

Lucky Friday

  526,971   516,545 

Casa Berardi

  710,374   701,868 

Nevada Operations

  467,092   468,985 

Other

  455,897   451,466 
  $2,738,899  $2,728,808 

Sales

   September 30,
2022		   December 31,
2021		 
Identifiable assets:
          
Greens Creek
  $594,811   $589,944 
Lucky Friday
   534,114    516,545 
Casa Berardi
   692,833    701,868 
Nevada Operations
   467,532    468,985 
Other
   645,339    451,466 
   
 
 
   
 
 
 
   $2,934,629   $2,728,808 
   
 
 
   
 
 
 
Following the acquisition of productsAlexco (see
Note 1
), our sales for the three and nine month periods ended September 30, 2022 are comprised of metal sales as described below and $65,000 of environmental services revenue.
Sales by metal for the three-monththree- and nine-month periods ended March 31,September 30, 2022 and 2021 were as follows (in thousands):

  

Three Months Ended

March 31,

 
  

2022

  

2021

 
         

Silver

 $66,332  $77,760 

Gold

  77,168   101,408 

Lead

  19,564   15,893 

Zinc

  35,638   29,191 

Less: Smelter and refining charges

  (12,203)  (13,400)

Sales of products

 $186,499  $210,852 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Silver
  $45,924   $61,890   $182,306   $232,414 
Gold
   69,289    94,984    228,475    282,471 
Lead
   16,033    18,082    56,912    56,198 
Zinc
   28,051    30,273    94,865    89,501 
Less: Smelter and refining charges
   (13,023)    (11,669)    (38,543)    (38,189) 
   
 
 
   
 
 
   
 
 
   
 
 
 
   $146,274   $193,560   $524,015   $622,395 
   
 
 
   
 
 
   
 
 
   
 
 
 
Sales included net gains of products$1.6 million and $8.1 million for thefirstthree months of
three-and
nine-month periods ended September 30, 2022, and 2021 included a net loss of $4.8 million and net gain of $2.8 million, respectively, on financially-settled forward option contracts for silver, gold, lead and zinc contained in our sales. Sales included net gains of $5.0 million and $4.5 million for the
three-and
nine-month periods ended September 30, 2021, respectively, on such contracts. See
Note 8
for more information.

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Table of Contents
Note 3.
Income and Mining Taxes

Note 3.Income and Mining Taxes

Major components of our income and mining tax benefit (provision) benefit for the three and nine months ended March 31,September 30, 2022 and 2021 are as follows (in thousands):

  

Three Months Ended

 
  

March 31,

 
  

2022

  

2021

 

Current:

        

Domestic

 $(2,103) $(2,277)

Foreign

  (1,741)  (2,286)

Total current income and mining tax provision

  (3,844)  (4,563)
         

Deferred:

        

Domestic

  (5,091)  896 

Foreign

  3,304   (1,076)

Total deferred income and mining tax provision

  (1,787)  (180)

Total income and mining tax provision

 $(5,631) $(4,743)


   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Current:                    
Domestic
  $253   $(2,176)   $(2,296)   $(7,489) 
Foreign
   (1,085)   (1,578)    (4,172)   (4,690) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total current income and mining tax provision
   (832)    (3,754)    (6,468)   (12,179) 
Deferred:                    
Domestic
   8,156    3,213    915    8,226 
Foreign
   2,203    5,074    9,195    7,877 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total deferred income and mining tax benefit
   10,359    8,287    10,110    16,103 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total income and mining tax benefit (provision)
  $9,527   $4,533   $3,642   $3,924 
   
 
 
   
 
 
   
 
 
   
 
 
 
The income and mining tax provisionbenefit (provision) for the three-month periods and nine months ended March 31,September 30, 2022 and 2021 varies from the amounts that would have resulted from applying the statutory tax rates to
pre-tax
income due primarily to the impact of taxation in foreign jurisdictions and
non-recognition
of net operating losses and foreign exchange gains and losses in certain jurisdictions.

For the three-month periodthree-month and nine-month periods ended March 31,September 30, 2022, we used the annual effective tax rate method to calculate the tax provision, a change from the discrete method used for the three-month periodthree- and nine-month periods ended March 31,September 30, 2021, due to reversal of a valuation allowance in the fourth quarter of 2021. Valuation allowances on Nevada, Mexico and certain Canadian net operating losses were treated as discrete adjustments to the annual effective tax rate method calculation, partially causing the increase in the income tax rate for the three-month period and nine months ended March 31,September 30, 2022, as compared to March 31,the three and nine months ended September 30, 2021.

 

Note 4.Employee Benefit Plans

Note 4.
Employee Benefit Plans
We sponsor three defined benefit pension plans covering substantially all U.S. employees. Net periodic pension cost for the plans consisted of the following for the three-month and nine months ended September 30, 2022 and 2021 (in thousands):
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Service cost
  $1,566   $1,455   $4,697   $4,365 
Interest cost
   1,369    1,248    4,107    3,744 
Expected return on plan assets
   (3,363)    (2,313)    (10,089)    (6,939) 
Amortization of prior service cost
   128    99    384    297 
Amortization of net loss
   512    1,125    1,537    3,375 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net periodic pension cost
  $212   $1,614   $636   $4,842 
   
 
 
   
 
 
   
 
 
   
 
 
 
For the three- and nine-month periods ended March 31,September 30, 2022 and 2021, (in thousands):

  

Three Months Ended

March 31,

 
  

2022

  

2021

 

Service cost

 $1,566  $1,455 

Interest cost

  1,369   1,248 

Expected return on plan assets

  (3,363)  (2,313)

Amortization of prior service cost

  128   99 

Amortization of net loss

  512   1,125 

Net periodic pension cost

 $212  $1,614 

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Table of Contents

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, and thecosts. The net gain of $1.4 million and net expense of $0.2 million for the three-month periods ended March 31,2022 and 2021, respectively,benefit related to all other components of net periodic pension cost of $1.4 million and $4.1 million, respectively, for the three- and nine-month periods ended September 30, 2022, and net expense of $0.2 million and $0.5 million for the three- and nine-month periods ended September 30, 2021, respectively, is included in other (expense) income on our condensed consolidated statements of operations and comprehensive income (loss) income.

.

11
Table of Contents
In May 2022 and October 2022, we contributed $5.6 million and $4.2 
million, respectively, in shares of our common stock to two of our defined benefit plans. In January 2021 and September 2021, we contributed
$16.8 
million and $5.4 million, respectively, in shares of our common stock to three of our defined benefit plans. We do not expect to be required to contributemake additional contributions to our defined benefit pension plans in 2022, but may elect to do so.

 

Note 5.Income Per Common Share

Note 5.
(Loss) Income Per Common Share
We calculate basic (loss) income 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,deferred restricted 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 (loss) income per common share – basic and diluted (in thousands, except income (loss) per share):

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Numerator

        

Net income

 $4,153  $21,451 

Preferred stock dividends

  (138)  (138)

Net income applicable to common shares

 $4,015  $21,313 
         

Denominator

        

Basic weighted average common shares

  538,490   534,101 

Dilutive incentive compensation units, warrants and deferred shares

  5,571   6,426 

Diluted weighted average common shares

  544,061   540,527 
         

Basic income per common share

 $0.01  $0.04 

Diluted income per common share

 $0.01  $0.04 

Diluted income per common share for

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2022
   
2021
   
2022
   
2021
 
Numerator
                    
Net (loss) income
  $(23,526)   $(979)   $(32,896)   $23,220 
Preferred stock dividends
   (138)    (138)    (414)    (414) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net (loss) income applicable to common shares
  $(23,664)   $(1,117)   $(33,310)   $22,806 
   
 
 
   
 
 
   
 
 
   
 
 
 
Denominator
                    
Basic weighted average common shares
   554,531    536,966    544,000    535,542 
Dilutive restricted stock units, warrants and deferred shares
   —      —      —      6,227 
   
 
 
   
 
 
   
 
 
   
 
 
 
Diluted weighted average common shares
   554,531    536,966    544,000    541,769 
   
 
 
   
 
 
   
 
 
   
 
 
 
Basic (loss) income per common share
  
$
(0.04
) 
  
$
—  
 
  
$
(0.06
) 
  
$
0.04
 
Diluted (loss) income per common share
  
$
(0.04
) 
  
$
—  
 
  
$
(0.06
) 
  
$
0.04
 
For the three-month month periods ended March 31,September 30, 2022 and 2021, excludes respectively, and the potential effectsnine month period ended September 30, 2022, all outstanding restricted stock units, warrants and deferred shares were excluded from the computation of outstanding shares ofdiluted loss per share, as our convertible preferred stock, asreported net losses for those periods would cause their conversion wouldand exercise to have no effect on the calculation of dilutive shares.

loss per share. For the threenine months ended March 31,2022,September 30, 2021, the calculation of diluted income per common share included (i) 1,954,773 incentive compensation2,496,622 restricted stock units, that were unvested during the period, (ii) 1,506,9501,578,293 warrants to purchase one share of common stock and (iii) 2,109,0562,152,578 deferred sharescompensation stock units that were dilutive.  For the three months ended March 31,

Note 6.
Stockholders’ Equity
At-The-Market
Equity Distribution Agreement
Pursuant to an equity distribution agreement dated February 18, 2021, the calculation we may offer and sell up to 60 million shares of diluted income per common share included (i) 2,863,038 incentive compensation units that were unvested during the period, (ii) 1,536,615 warrants to purchase one share ofour 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 (iii) 2,026,440 deferredthe 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 sales of shares that were dilutive.

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.
As of September 30, 2022 we had sold 1,176,861 shares under the agreement for proceeds of $4.5 million, net of commissions and fees of approximately $0.1 million. All of the sales occurred during September 2022.
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Note 6.Stockholders’ Equity

Stock-based Compensation Plans

The Company has stock incentive plans for executives, directors and eligible employees, comprised of performance shares and restricted stock. Stock-based compensation expense for restricted stock unit and performance-based grants (collectively “incentive compensation”) to employees and shares issued to
non-employee
directors totaled $1.3$1.8 million and $0.5$4.3 million for the three and nine months ended September 30, 2022, respectively, and $1.5 million and $4.8 million for the three and nine months ended September 30, 2021, respectively. At September 30, 2022, there was $8.4 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.8 years.
The following table summarizes the grants awarded during the nine months ended September 30, 2022:
Grant date Award type Number granted Grant date fair value
June 21, 2022 Restricted stock 1,103,801 $ 4.43
June 21, 2022 Performance based 322,799 $ 3.78
June 28, 2022 Directors retainer 98,310 $ 4.24
September 30, 2022 Restricted stock 121,826 $ 3.94
In connection with the vesting of incentive compensation, 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 firstthree nine months of 2022, and we withheld 737,258 shares valued at approximately $3.7 million, or approximately $4.99 per share. In the first nine months of 2021, respectively.

we withheld 574,251 shares valued at approximately $4.5 million, or approximately $7.88 per share.

Common Stock Dividends

On February 21, 2022,

The following table summarizes the dividends our Board of Directors have declared a quarterly cashand we have paid during 2022 pursuant to our dividend of $0.00625 per share of common stock, consisting of $0.00375 per share for the minimum dividend component of our common stock dividend policy and $0.0025 per share for the silver-linked dividend component of the policy, for a total dividend of $3.4 million paid in March 2022. The realized silver price of $23.49 in the fourth quarter of 2021 satisfied the criterion for the silver-linked dividend component of our common stock dividend policy.

policy:
 

Note 7.Debt, Credit Facility and Leases

Quarter Realized Silver Price Silver-linked component Minimum component Total dividend per share
First
 $24.68 $0.0025 $0.00375 $0.00625
Second
 $20.68 $0.0025 $0.00375 $0.00625
Note 7.
Debt, Credit Facility and Leases
Our debt as of March 31,September 30, 2022 and December 31,2021 consisted of our 7.25% Senior Notes due February 15, 2028 (“(“Senior Notes”) and our Series2020-A
2020-A
Senior Notes due July 9, 2025 (the(the “IQ Notes”). and any drawn amounts on the New Credit Agreement, which is described separately below. The following tables summarize our long-term debt balances, excluding interest and borrowings under the New Credit Agreement, as of March 31,September 30, 2022 and December 31,2021 (in thousands):

  

March 31, 2022

 
  

Senior Notes

  

IQ Notes

  

Total

 

Principal

 $475,000  $38,605  $513,605 

Unamortized discount/premium and issuance costs

  (5,324)  571   (4,753)

Long-term debt balance

 $469,676  $39,176  $508,852 

  

December 31, 2021

 
  

Senior Notes

  

IQ Notes

  

Total

 

Principal

 $475,000  $38,051  $513,051 

Unamortized discount/premium and issuance costs

  (5,552)  596   (4,956)

Long-term debt balance

 $469,448  $38,647  $508,095 

   
September 30, 2022
 
   
Senior Notes
   
IQ Notes
   
Total
 
Principal
  $475,000   $35,194   $510,194 
Unamortized discount/premium and issuance costs
   (4,868)    419    (4,449) 
   
 
 
   
 
 
   
 
 
 
Long-term debt balance
  $470,132   $35,613   $505,745 
   
 
 
   
 
 
   
 
 
 
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December 31, 2021
 
   
Senior Notes
   
IQ Notes
   
Total
 
Principal
  $475,000   $38,051   $513,051 
Unamortized discount/premium and issuance costs
   (5,552)    596    (4,956) 
   
 
 
   
 
 
   
 
 
 
Long-term debt balance
  $469,448   $38,647   $508,095 
   
 
 
   
 
 
   
 
 
 
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,September 30, 2022 (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,September 30, 2022.

Twelve-month period ending March 31,

 

Senior Notes

  

IQ Notes

  

Finance Leases

  

Operating Leases

 

2023

 $34,438  $2,515  $6,365  $3,057 

2024

  34,438   2,515   4,881   2,528 

2025

  34,438   2,515   3,313   1,079 

2026

  34,438   39,295   943   1,059 

2027

  34,438   0   0   1,041 

Thereafter

  505,130   0   0   6,174 

Total

 $677,320  $46,840  $15,502  $14,938 

Twelve-month period ending September 30,
  
Senior Notes
   
IQ Notes
   
Finance Leases
   
Operating Leases
 
2023
  $34,438   $2,293   $9,296   $3,101 
2024
   34,438    2,293    7,206    1,565 
2025
   34,438    36,964    3,779    1,065 
2026
   34,438         1,980    1,060 
2027
   34,438    —      37
    979 
Thereafter
   487,914    —      —      5,878 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $660,104   $41,550   $22,298   $13,648 
   
 
 
   
 
 
   
 
 
   
 
 
 
Credit Facility

In

New $150 million facility
On July 2018, 21, 2022, we entered into a Credit Agreement (“New Credit Agreement”) with the various financial institutions (the “Lenders”), Bank of Montreal and Bank of America, N.A. as letters of credit issuers, and Bank of America, N.A., as administrative agent for the Lenders and as swingline lender, to replace our prior credit agreement. The New Credit Agreement is a $150 million senior secured revolving facility, with an option to be increased in an aggregate amount not to exceed $75 million. The revolving loans under the New Credit Agreement will have a maturity date of July 21, 2026. Proceeds of the revolving loans under the New Credit Agreement may be used for general corporate purposes. The interest rate on the outstanding loans under the New Credit Agreement is based on the Company’s net leverage ratio and is calculated at (i) Term Secured Overnight Financing Rate (“SOFR”) plus 2% to 3.5%; or (ii) Bank of America’s Base Rate plus 1% to 2.5% with Base Rate being the highest of (i) the Bank of America prime rate, (ii) the Federal Funds rate plus .50% or (iii) Term SOFR plus 1.00%. For each amount drawn, we elect whether we draw on a one, three or six month basis or annual basis for SOFR. If we elect to draw for greater than six months, we pay interest quarterly on the outstanding amount.
We are also required to pay a commitment fee of between 0.45% to 0.78750%, depending on our net leverage ratio. Letters of credit issued under the New Credit Agreement bear a fee between 2.00% and 3.50% based on our net leverage ratio, as well as a fronting fee to each issuing bank at an agreed upon rate per annum on the average daily dollar amount of our letter of credit exposure.
Hecla Mining Company and certain of our subsidiaries are the borrowers under the New Credit Agreement, while certain of our other subsidiaries are guarantors of the borrowers’ obligations under the New Credit Agreement. As further security, the credit facility is collateralized by a mortgage on the Greens Creek mine, the equity interests of subsidiaries that own the Greens Creek mine or are part of the Greens Creek Joint Venture and our subsidiary Hecla Admiralty Company (the “Greens Creek Group”), and by all of the Green Creek Group’s rights and interests in the Greens Creek Joint Venture Agreement, and in all assets of the joint venture and of any member of the Greens Creek Group.
At September 30, 2022, we had drawn $25 million at an interest rate of 7.5% and had $7.8 million in outstanding letters of credit under the New Credit Agreement. Letters of credit that are outstanding reduce availability under the New Credit Agreement.
We believe we were in compliance with all covenants under the New Credit Agreement as of September 30, 2022.
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Table of Contents
Prior $250 million facility
In July 2018, we entered into a credit agreement (as amended, the “Prior Credit Agreement”) providing for a $250 million senior secured revolving credit facility which hashad a term ending on February 7, 2023.    As of March 31,2022 and December 31,2021, 0 borrowings no amounts were outstanding under the facility.

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We arewere also able to obtain letters of credit under the facility, and for any such letters we arewere 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 $17.3 million in letters of credit outstanding as of March 31,

In connection with our entry into the New Credit Agreement, the Prior Credit Agreement was terminated on July 21, 2022.

We believe we were in compliance with all covenants under the credit agreementPrior Credit Agreement as of March 31,July 21, 2022.

 

Note 8.Derivative Instruments

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 of five years into the future may be hedged;

•

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; and

•

our planned silver and gold metals price exposure for five years into the future, with certain other limitations, may be covered under derivatives programs that would establish a floor, but not a ceiling, for prices to be realized on future metals sales. We currently do not utilize this program.

In addition, our risk management policy provides for (i) potential additional programs to manage other foreign currency, exposures and (ii) that price exposure between the time of shipment and final settlement on silver, gold, lead and zinc contained in our concentrate shipments metals price and silver and gold price exposure may be covered under a derivatives programs that wouldprogram with certain other limitations. The silver and gold price program can only establish pricesa floor (puts). We are not currently utilizing this silver and gold program. Our program also utilizes derivatives to be realized on those sales.

manage price risk exposure created from when revenue is recognized from a shipment of concentrate until final settlement.

These instruments 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 operationsoperation as well as the recently acquired Keno Hill development property which Alexco owned are
USD-functional
entities which routinely incur expenses denominated in CAD and Mexican pesos (“MXN”), respectively.CAD. Such expenses expose us to exchange rate fluctuations between the USD and CAD and MXN.CAD. We utilizehave a program to manage our exposure to fluctuations in the USD exchange rate between the USDfor these subsidiaries’ future operating and CAD and the impact on our future operatingcapital costs denominated in CAD. In November 2021, we initiated a similarThe program related to future development costs denominated in CAD, and have used a similar program, on a limited basis, related to interest payments on our IQ Notes (see Note 7). The programs utilizeutilizes forward contracts to buy CAD. Each contract related to operating costs isCAD, some of which are designated as a cash flow hedge, while contracts related to development and interest costs have not been designated as hedges as of March 31,2022.hedges. As of March 31,September 30, 2022, we have 146
296
forward contracts outstanding to buy a total of CAD$276.7
539.9
 million having a notional amount of USD$213.3
408.7
 million. The CAD contracts that are related to forecasted cash operating and development costs at Casa Berardi to be incurred from
2022
through2025
2026
have a total notional value of CAD$
430.3
 million and have
CAD-to-USD
exchange rates ranging between
1.2702
and 1.3333.

1.3714
.
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As of March 31,September 30, 2022 and December 31,2021, we recorded the following balances for the fair value of the contracts (in millions):

  

March 31,

  

December 31,

 

Balance sheet line item:

 

2022

  

2021

 

Other current assets

 $3.9  $2.7 

Other non-current assets

  3.9   2.5 

   
September 30,
   
December 31,
 
Balance sheet line item:
  
2022
   
2021
 
Current derivatives assets
  $ 0.3   $ 2.7 
Non-current
derivatives assets
   0.3    2.5 
Current derivatives liabilities
   5.8    —   
Non-current
derivatives liabilities
   5.6    —   
Net unrealized gainslosses of approximately $7.8$10.8 million related to the effective portion of the hedges were included in accumulated other comprehensive lossincome (loss) as of March 31,September 30, 2022. Unrealized gains and losses will be transferred from accumulated other comprehensive lossincome (loss) to current earnings as the underlying operating expenses are recognized. We estimate approximately $3.7$5.1 million in net unrealized gainslosses included in accumulated other comprehensive lossincome (loss) as of March 31,September 30, 2022 will be reclassified to current earnings in the next twelve months. Net realized gains of approximately $1.1$0.2 million and $2.0 million on contracts related to underlying operating expenses which have been recognized were transferred from accumulated other comprehensive lossincome (loss) and included in cost of sales and other direct production costs for the three and nine months ended March 31,2022. Net gains of approximately $0.4 million related to contracts not designated as hedges and 0September 30, 2022, respectively. No net unrealized gains or losses related to ineffectivenessineffective hedges were included in current earnings for the nine months ended September 30, 2022. Net losses of approximately $0.8 million and $1.1 million for the three and nine months ended September 30, 2022, respectively, related to contracts not designated as hedges were included in fair value adjustments, net on our consolidated statements of operations and comprehensive income for the three and nine months ended March 31,September 30, 2022.

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Table of Contents
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.

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,September 30, 2022 and December 31,2021:

March 31, 2022

 

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

                                

2022 settlements

  1,573   5   16,976   5,732  $24.73  $1,912  $1.27  $0.97 

Contracts on forecasted sales

                                

2022 settlements

  0   0   37,644   46,517   N/A   N/A  $1.31  $0.98 

2023 settlements

  0   0   78,264   75,618   N/A   N/A  $1.30  $1.00 

2024 settlements

  0   0   64,650   23,149   N/A   N/A  $1.32  $1.01 

December 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

                                

2022 settlements

  1,814   6   13,371   4,575  $23.02  $1,812  $1.39  $0.96 

Contracts on forecasted sales

                                

2022 settlements

  0   0   57,706   59,194   N/A   N/A  $1.28  $0.98 

2023 settlements

  0   0   76,280   71,650   N/A   N/A  $1.29  $1.00 

September 30, 2022
  
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
                                        
2022 settlements
   2,235    1,840    18,739    14,991   $ 19.54   $ 1,760   $ 1.30   $ 0.96 
Contracts on forecasted sales
                                        
2022 settlements
   2,235    1,840    8,763    1,984    N/A    N/A   $1.32   $0.97 
2023 settlements
   —      —      71,209    75,618    N/A    N/A   $1.30   $1.00 
2024 settlements
   —      —      78,760    31,526    N/A    N/A   $1.34   $1.00 
2025 settlements
   —      —      2,480    —      N/A    N/A   $1.33    N/A 
December 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
                                        
2022 settlements
   1,814    6    13,371    4,575   $ 23.02   $ 1,812   $ 1.39   $ 0.96 
Contracts on forecasted sales
                                        
2022 settlements
   —      —      57,706    59,194    N/A    N/A   $1.28   $0.98 
2023 settlements
   —      —      76,280    71,650    N/A    N/A   $1.29   $1.00 
Effective November 1, 2021, we designated the contracts for lead and zinc contained in our forecasted future shipments as hedges for accounting purposes, with gains and losses deferred to accumulated other comprehensive loss until the hedged product ships. Prior to November 1, 2021, these contracts had not been designated as hedges for hedge accounting and were therefore
marked-to-market
through earnings each period. The forward contracts for silver and gold contained in our concentrate shipments have not been designated as hedges and are
marked-to-market
through earnings each period.

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We recorded the following balances for the fair value of the forward contracts as of March 31,September 30, 2022 and forward and put option contracts as of December 31,2021 (in millions):

  

March 31, 2022

  

December 31, 2021

 

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)

 

Other current assets

 $0.3  $(0.2) $0.1  $0  $0  $0 

Current derivatives liability

  0.5   (39.5)  (39.0)  0.7   (20.1)  (19.4)

Other non-current liabilities

  0.1   (43.5)  (43.4)  0.4   (18.9)  (18.5)

   
September 30, 2022
   
December 31, 2021
 
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
  $6.9   $ —     $6.9   $ —     $—    $—   
Non-current
derivatives assets
  $ 20.5   $—      20.5   $—     $—    $—   
Current derivatives liabilities
   —      —      —      0.7    (20.1)   (19.4) 
Non-current
derivatives liabilities
   —      —      —      0.4    (18.9)   (18.5) 
Net unrealized lossesgains of approximately $63.0$28.3 million related to the effective portion of the contracts designated as hedges were included in accumulated other comprehensive lossincome (loss) as of March 31,September 30, 2022, and are net of related deferred taxes. Unrealized gains and losses will be transferred from accumulated other comprehensive lossincome (loss) to current
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earnings as the underlying operating expensessales are recognized. We estimate approximately $28.0$6.0 million in net unrealized lossesgains included in accumulated other comprehensive lossincome (loss) as of March 31,September 30, 2022 would be reclassified to current earnings in the next twelve months. We recognized a net lossgain of $4.8$1.6 million, including a $0.3$4.2 million gainloss transferred from accumulated other comprehensive loss, andincome (loss), during the three months ended September 30, 2022. For the nine months ended September 30, 2022, we recognized a net gain of $2.8$8.1 million, during the first quarters of 2022 and 2021, respectively,including a $8.1 million loss transferred from accumulated other comprehensive income (loss). These losses were recognized on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales of products.sales. The net losses and gains recognized on the contracts offset gains and 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 $0.6a net gain of $12.1 million inand a net losses and $0.5loss of $4.7 million in net gains during the first quarters of 2022three and nine months ended September 30, 2021, respectively, on the contracts utilized to manage exposure to prices for forecasted future sales.sales, which were not designated as hedges. The net losses and gainsgain or loss 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.  Increases in zinc and lead prices resulted in the net loss for the first quarter of 2022.

Credit-risk-related Contingent Features

Certain of our derivative contracts contain cross default provisions which provide that a default under our revolving credit agreementNew Credit Agreement would cause a default under the derivative contract. As of March 31,September 30, 2022, we have not posted any separate collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was $83.2$14.2 million as of March 31,September 30, 2022, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of the cross defaultthese provisions at March 31,September 30, 2022, we could have been required to settle our obligations under the agreements at their termination value of $83.2$14.2 million.

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Note 9.Fair Value Measurement

Note 9.
Fair Value Measurement
Fair value adjustments, net is comprised of the following:

  

Three Months Ended

March 31,

 
  

2022

  

2021

 

(Loss) gain on derivative contracts

 $(201) $473 

Unrealized gain (loss) on investments in equity securities

  6,100   (3,506)

Gain on disposition or exchange of investments

  66   1,158 

Total fair value adjustments, net

 $5,965  $(1,875)

   
Three Months Ended
September 30,
  
Nine Months Ended

September 30,
 
   
2022
   
2021
  
2022
   
2021
 
(Loss) gain on derivative contracts
  $873   $ 12,148  $(20)   $(4,692) 
Unrealized loss on investments in equity securities
   (5,110)    (2,861)   (14,749)    (7,117) 
(Loss) gain on disposition or exchange of investments
   (3)    —     66    1,158 
   
 
 
   
 
 
  
 
 
   
 
 
 
Total fair value adjustments, net
  $(4,240)   $9,287  $(14,703)   $(10,651) 
   
 
 
   
 
 
  
 
 
   
 
 
 
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, 2022

  

Balance at

December 31, 2021

 

Input

Hierarchy Level

Assets:

         

Cash and cash equivalents:

         

Money market funds and other bank deposits

 $212,029  $210,010 

Level 1

Current and non-current investments:

         

Equity securities – mining industry

  29,204   14,470 

Level 1

Trade accounts receivable:

         

Receivables from provisional concentrate sales

  33,324   36,437 

Level 2

Restricted cash balances:

         

Certificates of deposit and other bank deposits

  1,041   1,053 

Level 1

Derivative contracts - other current assets and other non-current assets:

         

Metal forward contracts

  74   0 

Level 2

Foreign exchange contracts

  7,829   5,207 

Level 2

Total assets

 $283,501  $267,177  
          

Liabilities:

         

Derivative contracts - current and non-current derivatives liabilities:

         

Metal forward contracts

 $82,394  $37,873 

Level 2

Foreign exchange contracts

  0   8 

Level 2

Total Liabilities

 $82,394  $37,881  

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Description
  Balance at
September 30, 2022		   Balance at
December 31, 2021		   Input
Hierarchy Level		 
Assets:
               
Cash and cash equivalents:
               
Money market funds and other bank deposits
  $ 144,669   $ 210,010    Level 1 
Current and
non-current
investments
               
Equity securities
   13,299    14,470    Level 1 
Trade accounts receivable:
               
Receivables from provisional concentrate sales
   12,477    36,437    Level 2 
Restricted cash balances:
               
Certificates of deposit and other deposits
   1,246    1,053    Level 1 
Derivative contracts – current and
non-current
derivatives assets:
               
Foreign exchange contracts
   591    5,207    Level 2 
Metal forward and put option contracts
   27,393    —      Level 2 
   
 
 
   
 
 
      
Total assets
  $199,675   $267,177      
   
 
 
   
 
 
      
Liabilities:
               
Derivative contracts – current derivatives liabilities and other
non-current
liabilities:
               
Foreign exchange contracts
  $11,334   $8    Level 2 
Metal forward and put option contracts
   —      37,873    Level 2 
   
 
 
   
 
 
      
Total liabilities
  $11,334   $37,881      
   
 
 
   
 
 
      
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
15non-current
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Non-current investmentsavailable for sale securities consist of marketable equity securities of companies in the mining companiesindustry which are valued using quoted market prices for each security. During the first quarter of 2022, we acquired equity securities of various mining companies for a total cost of $10.9 million, and disposed of mining company equity securities acquired for $2.4 million for proceeds of $2.5 million. NaN such activity occurred during the first quarter of 2021.

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.  

metals. 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 the impact on
CAD-denominated
operating and capital costs incurred at our Casa Berardi unit and the Keno Hill mine (see
Note 8
for more information). 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 settlementsettlement. We also use financially-settled forward 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.

At March 31,September 30, 2022, our Senior Notes and IQ Notes were recorded at their carrying value of $469.7$470.1 million and $39.2$35.6 million, respectively, net of unamortized initial purchaser discount/premium and issuance costs. The estimated fair values of our Senior Notes and IQ Notes were $498.5$442.2 million and $40.5$32.7 million, respectively, at March 31,September 30, 2022. Quoted market prices, which we consider to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. Unobservable inputs which we consider to be Level 3, including an assumed current annual yield of 6%8.7%, are utilized to estimate the fair value of the IQ Notes. See
Note 7
for more information.

 

Note 10.Commitments, Contingencies and Obligations

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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.

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

In August 2012, Hecla Limited and the EPAU.S. Environmental Protection Agency (the “EPA”) entered into a Settlement Agreement and Administrative Order on Consent for Removal Action (“Consent Order”) regarding the Johnny M Mine Area near San Mateo, McKinley County, New Mexico. Mining at the Johnny M Mine was conducted for a limited period of time by a predecessor of Hecla Limited, and the EPA had previously asserted that Hecla Limited may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) for environmental remediation and past costs incurred by the EPA at the site. Under the Consent Order, 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. In December 2014, Hecla Limited submitted to the 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 parties began negotiating 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 increased our accrual by $2.9 million to $9.0 million in the first quarter of 2021, primarily representing estimated costs to begin design and implementation of 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 Hecla Limited’s or our results of operations or financial position.

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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$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. On May 2, 2022, Hecla Limited received a letter from an attorney representing a PRP notifying Hecla Limited that three PRPs will seek cost recovery and contribution from Hecla Limited under CERCLA for certain investigatory work performed by the PRPs at the SMCB site. 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 for information regarding the Carpenter Snow Creek Superfund site located in Cascade County, Montana. The Carpenter Snow Creek site is located in a historichistorical 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.

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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 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.

17Greens Creek and Lucky Friday Environmental Issues
On June 30, 2022, our Greens Creek mine received a Notice of Violation (“NOV”) from the EPA alleging that the mine treated, stored, and disposed of certain hazardous waste without a permit in violation of the Resource Conservation and Recovery Act (“RCRA”), relating to the alleged presence of lead outside the concentrate storage building and the alleged improper reuse/recycling of certain materials produced from the
on-site
laboratories. The NOV contained two other less significant alleged violations. We disagree with several of the EPA’s allegations on a factual and legal basis.
Currently, the EPA has not initiated any formal enforcement proceeding against our Greens Creek subsidiary. In civil judicial cases, EPA can seek statutory penalties up to $81,540 per day per violation and, in administrative settlements, the EPA can seek administrative penalties of up to $47,423 per day per violation plus the economic benefit of noncompliance. The EPA typically pursues administrative penalties and assesses lower penalties on a per day basis. At this time, we cannot reasonably assess the amount of penalties the EPA may seek, or predict the terms of any potential settlement with the EPA.
On July 12, 2022, our Lucky Friday mine received a NOV from the EPA alleging violations of the Clean Water Act (“CWA”) between 2018 and 2021 relating primarily to concentration levels of zinc and lead in the mine’s permitted water discharges. Currently, the EPA has not initiated any formal enforcement proceeding against our Lucky Friday subsidiary. In civil judicial cases, the EPA can seek statutory penalties up to $59,973 per day per violation and, in administrative actions, EPA can seek administrative penalties up to $23,989 per day per violation with a maximum administrative penalty of $299,989 for all alleged violations. The EPA typically pursues administrative penalties. At this time, we cannot reasonably assess the amount of penalties the EPA may seek, or predict the terms of any potential settlement with the EPA.
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Litigation Related to Klondex Acquisition

On May 24, 2019, a purported Hecla stockholder filed a putative class action lawsuit in the 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)10(b) and 20(a)20(a) of the Securities Exchange Act of 1934 and Rule10b-5
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. 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 this lawsuit or estimate damages if plaintiffs were to prevail. We believe that these claims are without merit and intend to defend them vigorously.

Related to this class action lawsuit, Hecla has been named as a nominal defendant in a shareholder derivative lawsuit which also names as defendants certain current and past (i) members of Hecla’s board of directors and (ii) officers of Hecla. The case was filed on May 4, 2022 in the Delaware Chancery Court. In general terms, the suit alleges breaches of fiduciary duties by the individual defendants, waste of corporate assets and unjust enrichment, and seeks damages, purportedly on behalf of Hecla.

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Debt


See
Note 7
for information on the commitments related to our debt arrangements as of March 31,September 30, 2022.

Other Commitments

Our contractual obligations as of March 31,September 30, 2022 included open purchase orders and commitments of approximately $7.7$9.0 million, $10.1$20.4 million, $0.2$1.2 million
,
$2.6 million
and $4.6
$0.3 million 
for various capital and
non-capital
items at Greens Creek, Lucky Friday, Casa Berardi
,
Nevada
Operations and Nevada Operations,Keno Hill, respectively.
We also have total commitments of approximately $15.5$22.3 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 $14.9$13.6 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,September 30, 2022, we had surety bonds totaling $183.5$193.8 million and letters of credit totaling $17.3$7.8 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 11.Developments in Accounting Pronouncements

Note
 11. Developments in Accounting Pronouncements
Accounting Standards Updates Adopted

In August 2020, the Financial Accounting Standards Board ("FASB"(“FASB”) issued ASU
No.2020-06 2020-06
Debt -– Debt with Conversion and Other Options (Subtopic470-20)
470-20)
and Derivatives and Hedging—Hedging – Contracts in Entity’s Own Equity (Subtopic815-40)
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 principlesGAAP to 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 adopted the update as of January 1, 2022, which did not have a material impact on our consolidated financial statements or disclosures.

18
21
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In October 2021, the FASB issued ASU2021-08,
2021-08,
Business Combinations (Topic 805)805): Accounting for Contract Assets and Contract
Liabilities from Contracts with Customers
, which requires entities to recognize and measure contract assets and contract liabilities acquired in
a business combination in accordance with ASC2014-09,
2014-09,
Revenue from Contracts with Customers (Topic 606)606)
. The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The update is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. We adopted the new standard effective January 1, 2022, which did not have a material impact on our consolidated financial statements or disclosures.

Accounting Standards Updates to Become Effective in Future Periods

In 2017, the United Kingdom’s Financial Conduct Authority ("FCA"(“FCA”) announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate ("LIBOR"(“LIBOR”), which have been widely used as reference rates for various securities and financial contracts, including loans, debt and derivatives. This announcement indicated that the continuation of LIBOR on the current basis would not be guaranteed after 2021. Subsequently in March 2021, the FCA announced some USD LIBOR tenors (overnight, 1 month, 3 month, 6 month and 12 month) will continue to be published until June 30, 2023. Regulators in the U.S. and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as the Secured Overnight Financing Rate ("SOFR"). Currently,SOFR. Our New Credit Agreement references SOFR-based rates, compared to our prior credit facility and certainwhich referenced LIBOR based- rates. Certain of our derivative instruments reference LIBOR-based rates. Our credit facility contains provisions specifying alternative interestrates and are in the process of being amended to eliminate the LIBOR-based rate calculationsreferences prior to be employed when LIBOR ceases to be available as a benchmark and we have adhered to the ISDA 2020 IBOR Fallbacks Protocol, which will govern our derivatives upon the final cessation of USD LIBOR. ASU 2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects ofReference Rate Reform on Financial Reporting, as amended, helps limit the accounting impact from contract modifications, includinghedging relationships, due to the transition from LIBOR to alternative reference rates that are completed by December 31, 2022. January 1, 2023. We do not expect a significant impact to our financial results, financial position or cash flows from the transition from LIBOR to alternative reference interest rates, but we will continue to monitor the impact of this transition until it is completed.


 

Note 12. Subsequent Events

During April 2022, we invested approximately $10 million in mining company securities.

1922
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Forward-Looking Statements

Forward-Looking Statements

Certain statements contained in this Form

10-Q,
including in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures 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,” “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 filed2021 Form
10-K,
as updated in
Part II, Item 1.A. – Risk Factors
in our Quarterly Report on Form 10-K
10-Q
for the yearquarter ended December 31, 2021 (“2021 Form 10-K”).June 30, 2022. 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'sManagement’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 2021 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

Established in 1891, we believe we are the oldest operating precious metals mining company in the United States. We are the largest silver producer in the United States, producing over 40% of the United StatesU.S. silver production at our Greens Creek and Lucky Friday operations. We produce gold at our Casa Berardi operation in Quebec, Canada, and Greens Creek, and produced gold at our Nevada Operations segment prior to suspension of operations during 2021. We are developing the Keno Hill mine in the Yukon, Canada which we acquired on September 7, 2022, and which we believe could become Canada’s largest silver producer. Based upon our operational footprint, we believe we have low political and economic risk compared to other mines located in other parts of the world. Our exploration interests are located in the United States, Canada and Mexico. Our operating and strategic framework is based on expanding our production and locating and developing new resource potential in a safe and responsible manner.

First

Acquisition of Alexco
We completed the acquisition of Alexco on September 7, 2022, for consideration of $81.5 million, which we have accounted for as an asset acquisition, and are continuing to advance the development of Keno Hill which we believe could become Canada’s largest silver producer. See
Note 1
of
Notes to Condensed Consolidated Financial Statements (unaudited)
23
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regarding our acquisition of Alexco. Immediately following the acquisition of Alexco, we terminated the acquired silver stream on the Keno Hill property for $135 million, through the issuance of 34,800,990 Hecla common shares to Wheaton Precious Metals, the silver stream holder.
Third Quarter 2022 Highlights

Operational:

•

Produced 3.3 million ounces of silver and 41,642 ounces of gold.  See Consolidated Results of Operations below for information on total cost of sales and cash costs and AISC, after by-product credits, per silver and gold ounce for the three-month periods ended March 31, 2022 and 2021.

•

Continued our trend of strong safety performance, as our All Injury Frequency Rate (“AIFR”) for the first quarter of 2022 was 1.48, 30% below the U.S. national average for MSHA's “metal and nonmetal” category and within 3% of our AIFR of 1.45 for the full year of 2021.

•

Continued mitigation of the impacts of COVID-19 through refinement of our operational plans and procedures to protect our workforce, operations and communities while maintaining liquidity.

Produced 3.6 million ounces of silver and 44,747 ounces of gold. See
Consolidated Results of Operations
below for information on total cost of sales and cash costs and all in sustaining costs (“AISC”), after
by-product
credits, per silver and gold ounce for the three-month periods ended September 30, 2022 and 2021.
Continued mitigation of the impacts of
COVID-19
through refinement of our operational plans and procedures to protect our workforce, operations and communities while maintaining liquidity.
Financial:

•

Reported sales of products of $186.5 million.

•

Generated $37.9 million in net cash provided by operating activities after bi-annual interest payments totaling $18.5 million on the Senior Notes and IQ Notes. See the Financial Liquidity and Capital Resources section below for further discussion.

•

Made capital expenditures (excluding lease additions and other non-cash items) of approximately $21.5 million, including $3.1 million at Greens Creek, $9.7 million at Lucky Friday, $7.8 million at Casa Berardi and $0.9 million at the Nevada Operations.

•

Generated $16.4 million in free cash flow. A reconciliation of the non-GAAP measure free cash flow to net cash provided by operating activities, the nearest GAAP measure, is included in the Reconciliation of Cash Flows From Operating Activities (GAAP) to Free Cash Flow (Non-GAAP) section below.

•

Returned $3.5 million, or 21% of free cash flows, to our shareholders through payment of dividends.

•

Spent $12.8 million on exploration and pre-development activities.

•

Achieved the above while increasing our cash balance to $212.0 million, which was $2.0 million higher than at December 31, 2021, with no borrowings on our revolving credit facility, as of March 31, 2022.

Reported sales of $146.3 million.
Made capital expenditures (excluding lease additions and other
non-cash
items) of approximately $37.4 million, including $7.0 million at Greens Creek, $16.1 million at Lucky Friday, $10.8 million at Casa Berardi.
Returned $3.5 million to our stockholders through payment of dividends.
Spent $15.1 million on exploration and
pre-development
activities.
Year to date 2022 Highlights
Operational:
Produced 10.5 million ounces of silver and 132,108 ounces of gold. See
Consolidated Results of Operations
below for information on total cost of sales and cash costs and AISC, after
by-product
credits, per silver and gold ounce for the nine-month periods ended September 30, 2022 and 2021.
Continued our trend of strong safety performance, as our All Injury Frequency Rate (“AIFR”) for the year to date was 1.3, 38% below the U.S. national average for MSHA’s “metal and nonmetal” category and 10% below our AIFR of 1.45 for the full year of 2021.
Continued mitigation of the impacts of
COVID-19
through refinement of our operational plans and procedures to protect our workforce, operations and communities while maintaining liquidity.
Financial:
Reported sales of $524.1 million.
Generated $53.8 million in net cash provided by operating activities. See the
Financial Liquidity and Capital Resources
section below for further discussion.
Made capital expenditures (excluding lease additions and other
non-cash
items) of approximately $93.2 million, including $24.7 million at Greens Creek, $37.3 million at Lucky Friday, $26.7 million at Casa Berardi, $3.8 million at Corporate and Other.
Returned $10.5 million to our stockholders through payment of dividends.
Spent $39.1 million on exploration and
pre-development
activities.
Our current business strategy is to focus our financial and human resources in the following areas:

executing value enhancing transactions, such as with the recently consummated Alexco acquisition;
advancing the development of the Keno Hill mine with the anticipation of commencement of production before the end of 2023;
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 and cost-effective manner;
maintaining and investing in exploration and
pre-development
projects in the vicinities of eleven mining districts and projects we believe to be under-explored and under-invested: Greens Creek on Alaska’s Admiralty Island located near
24
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•

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 and cost-effective manner;

•

maintaining and investing in exploration and pre-development projects in the vicinities of eleven mining districts and projects we believe to be under-explored and under-invested: Greens Creek on Alaska's Admiralty Island located near

Juneau; North Idaho'sIdaho’s Silver Valley in the historic Coeur d'Alened’Alene Mining District; the silver-producing district near Durango, Mexico; in the vicinity of our Casa Berardi mine and the Heva-Hosco project in the Abitibi region of northwestern Quebec, Canada; our projects located in two districts in Nevada; our projects in northwestern Montana; the Creede district of southwestern Colorado; the Kinskuch project in British Columbia, Canada; and the Republic mining district in Washington state;

•

improving operations at each of our mines, which includes incurring costs for new technologies and equipment;

•

expanding our proven and probable reserves, mineral resources and production capacity at our properties;

•

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

•

advancing permitting of one or both of our Montana projects; and

•

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

improving operations at each of our mines, which includes incurring costs for new technologies and equipment;
expanding our proven and probable reserves, mineral resources and production capacity at our properties;
conducting our business with financial stewardship to preserve our financial position in varying metals price and operational environments;
advancing permitting of our Montana assets; and
continuing to seek opportunities to acquire and invest in mining and exploration properties and companies.
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 seek to implement reasonable best practices with respect to mine safety and emergency preparedness. We respond to issues outlined in investigations and inspections by MSHA, the Commission of Labor Standards, Pay Equity and Occupational Health and Safety in Quebec, and the Mexico Ministry of Economy and Mining and continue to evaluate our safety practices. There can be no assurance that our practices will mitigate or eliminate all safety risks. Achieving and maintaining compliance with 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 2021 Form
10-K.

21.
Table of Contents

Since its outbreak in 2020, the

COVID-19
pandemic continues to impact our operational practices and we continue to incur incremental costs and modify our operational plans to keep our workforce safe. In 2020, the pandemic adversely impacted our expected production of gold at Casa Berardi and exploration drilling at Greens Creek. We incurred $0.4 million and $1.6$3.1 million in
COVID-19
mitigation costs during the threenine months ended March 31,September 30, 2022 and 2021, respectively. To mitigate the impact of
COVID-19,
we have taken precautionary measures, including implementing operational plans and practices and increasing our cash reserves. 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. There is uncertainty related to the potential additional impacts
COVID-19
and any subsequent variants could have on our operations and financial results for the rest of 2022. In our 2021 Form
10-K,
see
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
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, metals prices and metals prices.inflationary pressures on input costs. Metals prices can be very volatile and are influenced by a number of factors beyond our control (except on a limited basis through the use of derivative contracts). including recent central bank actions to raise interest rates which have negatively impacted precious metals prices. See
Item 7.
Critical Accounting Estimates
in our 2021 Form
10-K
and above in
Note 8
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
. The average realized prices of gold, lead and zincfor all metals sold by us were higher, with the average realized price for silver lower in the first three months ofended September 30, 2022, than in the comparable period last year. The average realized prices for all metals sold by us were lower, except for zinc and gold, in the nine months ended September 30, 2022 than 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.

We have also experienced significant cost inflation compared to 2021 across our operations, principally associated with higher energy prices, increased costs for other consumables such as reagents, explosives and steel, and labor and contractor costs.

Volatility in global financial markets and other factors can pose a significant challenge to our ability to access credit and equity markets, should we need to do so, and to predict sales prices for our products. To help mitigate this challenge, we utilize forward contracts to manage exposure to declines in the prices of (i) silver, gold, zinc and lead contained in our concentrates that have been shipped but have not yet settled, and (ii) zinc and lead that we forecast for future concentrate shipments. In addition, we have in place a $250$150 million revolving credit agreement, of which $17.3we had drawn $25.0 million as of September 30, 2022, and an additional $7.8 million was used as of March 31,September 30, 2022 for letters of credit, leaving approximately $232.7$117.2 million available for borrowing.

Another challenge for us is the risk associated with environmental litigation and ongoing reclamation activities. As described in
Item 1A. Risk Factors
in our 2021 Form
10-K
and above in
Note 10
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
25
Table of Contents
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.

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Table of Contents
Consolidated Results of Operations

Sales of products by metal for the three-monththree- and nine-month periods ended March 31,September 30, 2022 and 2021 were as follows:
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
(in thousands)  2022   2021   2022   2021 
Silver
  $45,924   $61,890   $182,306   $232,414 
Gold
   69,289    94,984    228,475    282,471 
Lead
   16,033    18,082    56,912    56,198 
Zinc
   28,051    30,273    94,865    89,501 
Less: smelter charges
   (13,023)    (11,669)    (38,543)    (38,189) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Sales of products
  $146,274   $193,560   $524,015   $622,395 
  
 
 
   
 
 
   
 
 
   
 
 
 
Sales by metal for the three- and nine-month periods ended September 30, 2022 and 2021, and the approximate variances attributed to differences in metals prices, sales volumes and smelter terms, were as follows:

(in thousands)

 

Silver

  

Gold

  

Base metals

  

Less: smelter

and refining

charges

  

Total sales

of products

 

Three months ended March 31, 2021

 $77,760  $101,408  $45,084  $(13,400) $210,852 

Variances - 2022 versus 2021:

                    

Price

  (2,613)  4,298   12,316   (76)  13,925 

Volume

  (8,726)  (28,453)  (2,198)  1,369   (38,008)

Smelter terms

  (89)  (85)  —   (96)  (270)

Three months ended March 31, 2022

 $66,332  $77,168  $55,202  $(12,203) $186,499 

(in thousands)  
Silver
  
Gold
  
Base metals
  
Less: smelter
and refining
charges
  
Total sales
of products
 
Three months ended September 30, 2021
  $61,890  $94,984  $48,355  $(11,669)  $193,560 
Variances - 2022 versus 2021:
      
Price
   (13,459)   (3,125)   (3,637)   (1,475)   (21,696) 
Volume
   (2,134)   (22,570)   (634)   162   (25,176) 
Smelter terms
   (373)   —     —     (41)   (414) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Three months ended September 30, 2022
  $45,924  $69,289  $44,084  $(13,023)  $146,274 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
(in thousands)  
Silver
  
Gold
  
Base metals
  
Less: smelter
and refining
charges
  
Total sales
of products
 
Nine months ended September 30, 2021
  $232,414  $282,471  $145,699  $(38,189)  $622,395 
Variances - 2022 versus 2021:
      
Price
   (37,682)   2,557   7,748   (3,381)   (30,758) 
Volume
   (12,335)   (56,468)   (1,670)   1,567   (68,906) 
Smelter terms
   (91)   (85)   —     1,460   1,284 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Nine months ended September 30, 2022
  $182,306  $228,475  $151,777  $(38,543)  $524,015 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
The fluctuations in sales for the third quarter and first nine months of 2022 compared to the same periods of 2021 were primarily due to the following two reasons:
22Lower average realized prices for all metals sold during the third quarter and first nine months of 2022, except for gold and zinc for which the average realized price was higher during the nine months ended September 30, 2022 all compared to the same periods of 2021. These price variances are illustrated in the following table:
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Table of Contents
      Three Months Ended
September 30,		   Nine Months Ended
September 30,		   
      2022   2021   2022   2021 
Silver –  London PM Fix ($/ounce)  $19.22   $24.36   $21.94   $25.78 
  Realized price per ounce  $18.30   $23.97   $21.25   $25.75 
Gold –  London PM Fix ($/ounce)  $1,728   $1,789   $1,825   $1,801 
  Realized price per ounce  $1,713   $1,792   $1,817   $1,794 
Lead –  LME Final Cash Buyer ($/pound)  $0.90   $1.06   $0.98   $0.98 
  Realized price per pound  $0.95   $1.02   $0.98   $1.00 
Zinc –  LME Final Cash Buyer ($/pound)  $1.48   $1.36   $1.65   $1.31 
  Realized price per pound  $1.23   $1.35   $1.47   $1.34 

Average market and realized metals prices for the three-month periods ended March 31, 2022 and 2021 were as follows:

   

Three months ended March 31,

 
   

2022

  

2021

 

Silver –

London PM Fix ($/ounce)

 $23.95  $26.29 
 

Realized price per ounce

 $24.68  $25.66 

Gold –

London PM Fix ($/ounce)

 $1,874  $1,798 
 

Realized price per ounce

 $1,880  $1,770 

Lead –

LME Final Cash Buyer ($/pound)

 $1.06  $0.92 
 

Realized price per pound

 $1.08  $0.92 

Zinc –

LME Final Cash Buyer ($/pound)

 $1.70  $1.25 
 

Realized price per pound

 $1.79  $1.32 

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 first quartersthree- and nine-month periods ended September 30, 2022, we recorded net negative price adjustments to provisional settlements of 2022$6.6 million and 2021, we recorded$21.5 million, respectively, compared to net positive price adjustments to provisional settlements of $1.0$0.1 million and $0.6$3.7 million, respectively.respectively, in the three and nine months ended September 31, 2021. The price adjustments related to silver, gold, leadzinc and zinclead contained in our concentrate shipments were largelypartially offset by gains and losses on forward contracts for those metals. See
Note 8
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 dorécarbon material shipped during the period.

Lower quantities of all metals sold in the third quarter and first nine months of 2022 compared to 2021 (except for lead in the nine months and zinc in the three months ended September 30, 2022, respectively, due to higher production at Lucky Friday during the first nine months of 2022), primarily due to the decision to defer a silver concentrate shipment at Greens Creek to October 2022 to ensure adequate concentrate volumes for cost-effective shipping, and the
non-recurrence
of Nevada refractory ore processing at a third-party facility in 2021. See
The Greens Creek Segment,
The Lucky Friday Segment, The Casa Berardi Segment
and
The Nevada Operations Segment
sections below for more information on metal 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

March 31,

 
   

2022

  

2021

 

Silver -

Ounces produced

  3,324,708   3,459,446 
 

Payable ounces sold

  2,687,261   3,030,026 

Gold -

Ounces produced

  41,642   52,004 
 

Payable ounces sold

  41,053   57,286 

Lead -

Tons produced

  10,863   10,704 
 

Payable tons sold

  9,054   8,668 

Zinc -

Tons produced

  14,946   16,107 
 

Payable tons sold

  9,947   11,027 

      Three Months Ended
September 30,		   Nine Months Ended
September 30,		   
      2022   2021   2022   2021 
Silver -
  Ounces produced   3,549,392    2,676,084    10,525,917    9,660,313 
  Payable ounces sold   2,479,724    2,581,690    8,554,894    9,027,180 
Gold -
  Ounces produced   44,747    42,207    132,173    153,350 
  Payable ounces sold   40,443    53,000    125,721    157,454 
Lead -
  Tons produced   11,600    9,904    35,794    32,148 
  Payable tons sold   8,049    8,835    28,788    28,166 
Zinc -
  Tons produced   15,859    15,546    47,571    48,864 
  Payable tons sold   11,523    11,174    32,328    33,344 
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 our productsthe concentrates we produce versus the portion of those metals actually paid for by our customers pursuantaccording 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.

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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 operationsoperating units for the three-month periodsthree- and nine -months ended March 31,September 30, 2022 and 2021 were as follows (in thousands, except for Cash Cost and AISC):

  

Silver

  

Gold

 
  

Greens

Creek

  

Lucky

Friday

  

Other (2)

  

Total

Silver (3)

  

Casa

Berardi

  

Nevada

Operations

  

Total

Gold

 

Three Months Ended March 31, 2022:

                            

Sales

 $86,090  $38,040  $—  $124,130  $62,101  $268  $62,369 

Total cost of sales

  (49,638)  (29,264)  —   (78,902)  (62,168)  —   (62,168)

Gross profit (loss)

 $36,452  $8,776  $—  $45,228  $(67) $268  $201 

Cash Cost After By-product Credits, per Silver or Gold Ounce (1)

 $(0.90) $6.57  $—  $1.09  $1,516  $—  $1,516 

AISC, After By-product Credits, per Silver or Gold ounce (1)

 $1.90  $13.15  $—  $7.64  $1,810  $—  $1,810 

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)  (59,927)  (7,455)  (67,382)

Gross profit

 $45,228  $6,328  $79  $51,635  $12,984  $2,782  $15,766 

Cash Cost After By-product Credits, per Silver or Gold Ounce (1)

 $(0.67) $7.62  $—  $1.40  $1,027  $1,416  $1,052 

AISC, After By-product Credits, per Silver or Gold ounce (1)

 $1.59  $14.24  $—  $7.21  $1,272  $1,461  $1,284 

   Silver  Gold 
   Greens
Creek		  Lucky
Friday		  Other   Total
Silver
(2)
  Casa
Berardi		  Nevada
Operations		  Total
Gold		 
Three Months Ended September 30, 2022:
         
Sales
  $60,875  $28,460  $ —     $89,335  $56,939  $—    $56,939 
Total cost of sales
   (52,502)   (24,164)   —      (76,666)   (59,532)   (1,623)   (61,155) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit (loss)
  $8,373  $4,296  $—     $12,669  $(2,593)  $(1,623)  $(4,216) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $2.65  $5.23  $—     $3.43  $1,349  $—    $1,349 
AISC per silver or gold ounce
(1)
  $8.61  $15.98  $—     $14.20  $1,738  $—    $1,738 
Three Months Ended September 30, 2021:
         
Sales
  $84,806  $29,783  $—     $114,589  $56,065  $22,906  $78,971 
Total cost of sales
   (55,193)   (23,591)     (78,784)   (58,164)   (21,384)   (79,548) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit (loss)
  $29,613  $6,192  $—     $35,805  $(2,099)  $1,522  $(577) 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $0.74  $6.35  $—     $2.49  $1,175  $1,038  $1,163 
AISC per silver or gold ounce
(1)
  $5.94  $16.79  $—     $12.82  $1,476  $1,167  $1,450 
   Silver  Gold 
   Greens
Creek		  Lucky
Friday		  Other  Total
Silver
(2)
  Casa
Berardi		  Nevada
Operations		  Total
Gold		 
Nine Months Ended September 30, 2022:
        
Sales
  $239,688  $102,380  $ —    $342,068  $181,679  $268  $181,947 
Total cost of sales
   (162,644)   (83,779)   —     (246,423)   (183,570)   (2,878)   (186,448) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $77,044  $18,601  $—    $95,645  $(1,891)  $(2,610)  $(4,501) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $(0.49)  $4.77  $—    $1.11  $1,409  $—    $1,409 
AISC per silver or gold ounce
(1)
  $4.69  $12.86  $—    $10.17  $1,729  $—    $1,729 
Nine Months Ended September 30, 2021:
        
Sales
  $296,978  $98,550  $176  $395,704  $185,098  $41,593  $226,691 
Total cost of sales
   (163,861)   (74,287)   (95)   (238,243)   (172,760)   (46,832)   (219,592) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $133,117  $24,263  $81  $157,461  $12,338  $(5,239)  $7,099 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Cash Cost per silver or gold ounce
(1)
  $(1.03)  $7.37  $—    $1.26  $1,127  $1,124  $1,127 
AISC per silver or gold ounce
(1)
  $2.40  $15.00  $—    $8.88  $1,387  $1,167  $1,349 
(1)

(1)

A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales (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)
.

(2)

(2)

Includes results for San Sebastian, which was an operating segment prior to 2021.

(3)

The calculation of AISC, After
By-product
Credits, perPer Ounce for our consolidated silver properties includes corporate costs for general and administrative expense and sustaining exploration and capital costs.

While revenue from zinc, lead and gold
by-products
is significant, we believe that identification of silver as the primary product of Greens Creek and Lucky Friday 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 each of these operations 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 and Lucky Friday deposits are massive sulfide deposits containing an unusually high proportion of silver; and

•

in most of their working areas, Greens Creek and Lucky Friday utilize selective mining methods in which silver is the metal targeted for highest recovery.

Likewise,

silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;
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Table of Contents
we have historically presented these units as a primary silver producer, 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 and Lucky Friday deposits are massive sulfide deposits containing an unusually high proportion of silver; and
in most of their working areas, Greens Creek and Lucky Friday utilize selective mining methods in which silver is the metal targeted for highest recovery.
Accordingly, we believe the identification of gold, lead and zinc as
by-product
credits at Greens Creek and Lucky Friday 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, and 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.

24
Table of Contents

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 and 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 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 third quarter we recorded loss applicable to common stockholders of $23.7 million (($0.04) per basic common share) compared to $1.1 million ($Nil) per basic common share) in the third quarter of 2021. The variances in gross profit (loss) at our operating units as illustrated in the table above contributed to the results for the third quarter of 2022 compared to the same period in 2021. See
The Greens Creek Segment,
The Lucky Friday Segment, The Casa Berardi Segment
and
The Nevada Operations Segment
sections below.
In addition to the impact of lower gross profit on loss applicable to common stockholders, the following were the other significant drivers of changes in loss applicable to common stockholders compared to the prior period in 2021:
General and administrative costs increased by $2.1 million primarily due to the impact of the Alexco acquisition closed on September 7, 2022 and compensation adjustments effective July 1, 2022.
Fair value adjustments, net were losses of $4.2 million versus a gain of $9.3 million in 2021 primarily due to the accounting for our base metals contracts as accounting hedges effective November 1, 2021, which resulted in unrealized gains/losses on these contracts being deferred on the balance sheet, versus them being recognized in the statement of operations in the 2021 comparable quarter (see
Notes 8 and 9
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information).
Exploration and
pre-development
decreased by $2.0 million primarily due to lower expenditures at the Hatter Graben project in Nevada.
Provision for closed operations and environmental matters decreased by $5.8 million primarily due to the settlement in 2021 of a lawsuit for $6.5 million related to a 1989 agreement entered into by our subsidiary, CoCa Mines, Inc. and its subsidiary, Creede Resources, Inc.
Other operating expense decreased by $2.4 million primarily due to the receipt of $2.5 million in insurance proceeds related to a coverage lawsuit received during September 2022 and the completion of projects to identify and implement potential operational improvements at our operating sites.
Net foreign exchange gains increased by $1.7 million reflecting the continued depreciation of the CAD against the USD in 2022. The change is primarily related to the impact of changes in the
CAD-to-USD
exchange rate on the remeasurement of our net monetary liabilities in Quebec.
For the first quarternine months of 2022, we recorded loss applicable to common stockholders of $33.3 million (($0.06) per basic common share) compared to income applicable to common stockholders of $4.0 million ($0.01 per basic common share), compared to income of $21.3$22.8 million ($0.04 per basic common share) duringin the first quarternine months of 2021. The following factorsvariances in gross profit (loss) at our operating units as illustrated in the table above contributed to the results for the first threenine months of 2022 compared to the first quarter of 2021:

•

Variances in gross profit (loss) at our operations as illustrated in the table above. See the Greens Creek,Lucky Friday, Casa Berardi and Nevada Operations sections below.

•

Exploration and pre-development expense increased by $6.1 million in the first quarter of 2022 compared to the first quarter of 2021. In the first quarter of 2022, exploration was primarily at San Sebastian, Casa Berardi, Nevada Operations and Greens Creek. Pre-development expense for the first quarter of 2022 totaled $3.1 million compared to $0.7 million in the first quarter of 2021, with the increase for development of a decline to the Hatter Graben area at the Hollister mine in Nevada.

•

Care and maintenance costs increased by $1.9 million in the first quarter of 2022 compared to the first quarter of 2021 due to suspension of production at Nevada Operations. See the Nevada Operations section below.

same period in 2021. See

The impact of these factors was partially offset by the following:

•

Fair value adjustments, net resulted in a gain of $6.0 million in the first quarter of 2022 compared to a loss of $1.9 million the first quarter of 2021 (see Note 9 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).

•

Provision for closed operations and environmental matters decreased by $2.8 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to a $2.9 million increase in the accrual for estimated costs at the Johnny M site in New Mexico in the first quarter of 2021 (see Note 10 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).

•

Lower other operating expense by $1.2 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to project costs incurred to identify and implement potential operational improvements at Casa Berardi in the first quarter 2021, partially offset by similar project costs incurred at Greens Creek in the first quarter of 2022.

•

An income and mining tax provision of $5.6 million in the first quarter of 2022 compared to a provision of $4.7 million in the first quarter of 2021 (see Note 3 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).

Greens Creek Segment,
The Lucky Friday Segment, The Casa Berardi Segment
and
25The Nevada Operations Segment
sections below.
30
Table of Contents
In addition to the impact of lower gross profit on loss applicable to common stockholders, the following were the other significant drivers of changes in loss applicable to common stockholders compared to the prior period in 2021:
Exploration and
pre-development
expense increased by $4.1 million reflecting increased exploration spending across the Company’s exploration portfolio primarily at San Sebastian, Casa Berardi, Greens Creek and the Nevada Operations.
Pre-development
expense was for the development of a decline to the Hatter Graben area at the Hollister mine in Nevada.
Fair value adjustments, net losses increased by $4.1 million due to unrealized losses on our equity securities portfolio increasing by $7.6 million offset by a lower loss of $4.7 million on our derivative contracts primarily due to the accounting for our base metals contracts as accounting hedges effective November 1, 2021, which resulted in unrealized gains/losses on these contracts being deferred on the balance sheet, versus them being recognized in the income statement in 2021 the comparable quarter (see
Notes 8 and 9
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information).
Net foreign exchange gains increased by $8.1 million reflecting the continued depreciation of the CAD against the USD in 2022. The change is primarily related to the impact of changes in the
CAD-to-USD
exchange rate on the remeasurement of our net monetary liabilities in Quebec.
Provision for closed operations and environmental matters decreased by $8.1 million primarily due to the settlement in 2021 of a lawsuit for $6.5 million related to a 1989 agreement entered into by our subsidiary, CoCa Mines, Inc. and its subsidiary, Creede Resources, Inc and an increase in the estimated costs accrual for the Johnny M. site in New Mexico of $2.9 million in 2021(see
Note 10
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information).
Other operating expense decreased by $5.3 million primarily due to the receipt of $4.2 million in insurance proceeds related to a coverage lawsuit received during June and September 2022 and the completion of projects to identify and implement potential operation improvements at our operating sites.

31
Table of Contents
Greens Creek

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

 

Three months ended March 31,

 
  

2022

  

2021

 

Sales

 $86,090  $98,409 

Cost of sales and other direct production costs

  (38,218)  (38,360)

Depreciation, depletion and amortization

  (11,420)  (14,821)

Total cost of sales

  (49,638)  (53,181)

Gross profit

 $36,452  $45,228 

Tons of ore milled

  211,687   194,080 

Production:

        

Silver (ounces)

  2,429,782   2,584,870 

Gold (ounces)

  11,402   13,266 

Zinc (tons)

  12,494   13,354 

Lead (tons)

  4,883   4,924 

Payable metal quantities sold:

        

Silver (ounces)

  1,772,391   2,247,274 

Gold (ounces)

  7,922   10,547 

Zinc (tons)

  8,092   9,097 

Lead (tons)

  3,063   3,645 

Ore grades:

        

Silver ounces per ton

  13.84   16.01 

Gold ounces per ton

  0.07   0.09 

Zinc percent

  6.56   7.62 

Lead percent

  2.76   3.06 

Total production cost per ton

 $192.16  $182.61 

Cash Cost, After By-product Credits, per Silver Ounce (1)

 $(0.90) $(0.67)

AISC, After By-product Credits, per Silver Ounce (1)

 $1.90  $1.59 

Capital additions

 $3,092  $1,772 

Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
   2022  2021  2022  2021 
Sales
  $60,875  $84,806  $239,688  $296,978 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cost of sales and other direct production costs
   (42,197)   (42,096)   (127,290)   (121,451) 
Depreciation, depletion and amortization
   (10,305)   (13,097)   (35,354)   (42,410) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   (52,502)   (55,193)   (162,644)   (163,861) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $8,373  $29,613  $77,044  $133,117 
   
 
 
  
 
 
  
 
 
  
 
 
 
Tons of ore milled
   229,975   211,142   651,220   620,153 
Production:
                 
Silver (ounces)
   2,468,280   1,837,270   7,308,660   6,980,587 
Gold (ounces)
   11,412   9,734   35,227   35,859 
Zinc (tons)
   12,580   13,227   38,470   41,191 
Lead (tons)
   4,428   4,591   14,495   15,142 
Payable metal quantities sold:
                 
Silver (ounces)
   1,663,909   1,774,421   5,702,301   6,493,528 
Gold (ounces)
   7,478   9,232   25,952   31,599 
Zinc (tons)
   9,138   9,472   25,725   27,783 
Lead (tons)
   2,755   3,834   10,069   12,098 
Ore grades:
                 
Silver ounces per ton
   13.63   11.14   13.83   13.84 
Gold ounces per ton
   0.07   0.07   0.07   0.08 
Zinc percent
   6.3%   7.1%   6.7%   7.4% 
Lead percent
   2.4%   2.7%   2.7%   3.0% 
Total production cost per ton
  $185.34  $181.60  $191.58  $178.29 
Cash Cost, After
By-product
Credits, Per Silver Ounce
(1)
  $2.65  $0.74  $(0.49)  $(1.03) 
AISC, After
By-Product
Credits, per Silver Ounce
(1)
  $8.61  $5.94  $4.69  $2.40 
Capital additions
  $6,988  $6,228  $24,748  $14,339 
(1)

(1)

A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales (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 $8.8$21.2 million decreaseand $56.1 million decreases in gross profit duringfor the third quarter and first quarternine months of 2022, respectively, compared to the same periods of 2021 were primarily due to: (i) lower payable metals sold for all metals produced reflecting the decision to defer a silver concentrate shipment to October to ensure adequate concentrate volumes for cost-effective shipment, (ii) lower realized prices for all metals in both the three and nine month periods respectively, with the exception of zinc in the nine month period wasended September 30, 2022, and (iii) higher production costs reflecting the resultimpact of lower sales volumes, as a result of lower ore gradesinflationary cost increases in consumables, labor and the timing of concentrate shipments, and lower average silver prices, partially offset by higher average gold, zinc and lead prices.

26contractor costs.
Table of Contents

The chartcharts below illustratesillustrate the factors contributing to the variances in Cash Cost, After

By-product
Credits, perPer Silver Ounce for the third quarter and first quarternine months of 2022 compared to the first quartersame periods of 2021:

2021.
c01.jpg

The following table summarizes the components of Cash Cost, After

By-product
Credits, per Silver Ounce:

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Cash Cost, Before By-product Credits, per Silver Ounce

 $21.82  $18.98 

By-product credits

  (22.72)  (19.65)

Cash Cost, After By-product Credits, per Silver Ounce

 $(0.90) $(0.67)

32
Table of Contents

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Cash Cost, Before
By-product
Credits, per Silver Ounce
  $22.69   $26.76   $22.24   $21.05 
By-product
credits
   (20.04)    (26.02)    (22.73)    (22.08) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Silver Ounce
  $2.65   $0.74   $(0.49)   $(1.03) 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the components of AISC, After
By-product
Credits, per Silver Ounce:

  

Three Months Ended March 31,

 
  

2022

  

2021

 

AISC, Before By-product Credits, per Silver Ounce

 $24.62  $21.24 

By-product credits

  (22.72)  (19.65)

AISC, After By-product Credits, per Silver Ounce

 $1.90  $1.59 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
AISC, Before
By-product
Credits, per Silver Ounce
  $28.65   $31.96   $27.42   $24.48 
By-product
credits
   (20.04)    (26.02)    (22.73)    (22.08) 
   
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Silver Ounce
  $8.61   $5.94   $4.69   $2.40 
   
 
 
   
 
 
   
 
 
   
 
 
 
33
Table of Contents
The decreaseincrease in Cash Costs,Cost, After By-Product
By-product
Credits, per Silver Ounce for the third quarter and first quarternine months of 2022 compared to 2021 was primarily due to higher cash costs reflecting inflationary cost pressures and lower
by-product
credits for the higher by-product credits, partially offset by higher mining and milling costs. three months ended September 30, 2022.
The net impact of these factors was outweighed by higher sustaining capital spending, resulting in the increase in AISC, After By-Product
By-product
Credits, per Silver Ounce for the third quarter and first quarternine months of 2022 compared to 2021 was primarily due to higher sustaining capital of $10.2 million and $30.8 million for the third quarter and first nine months of 2022, respectively, compared to $6.2 million and $17.5 million, respectively, in 2021, reflecting the costs being incurred on camp construction and higher definition and development drilling during 2022 compared to 2021.

27
Table of ContentsLucky Friday

Lucky Friday

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

 

Three Months Ended March 31,

 
  

2022

  

2021

 

Sales

 $38,040  $29,122 

Cost of sales and other direct production costs

  (21,232)  (16,458)

Depreciation, depletion and amortization

  (8,032)  (6,336)

Total cost of sales

  (29,264)  (22,794)

Gross profit (loss)

 $8,776  $6,328 

Tons of ore milled

  77,725   81,071 

Production:

        

Silver (ounces)

  887,858   863,901 

Lead (tons)

  5,980   5,780 

Zinc (tons)

  2,452   2,753 

Payable metal quantities sold:

        

Silver (ounces)

  899,454   763,823 

Lead (tons)

  5,991   5,023 

Zinc (tons)

  1,855   1,930 

Ore grades:

        

Silver ounces per ton

  12.04   11.18 

Lead percent

  8.16   7.51 

Zinc percent

  3.61   3.70 

Total production cost per ton

 $247.17  $190.54 

Cash Cost, After By-product Credits, per Silver Ounce (1)

 $6.57  $7.62 

AISC, After By-product Credits, per Silver Ounce (1)

 $13.15   14.24 

Capital additions

 $9,652  $5,912 

Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
   2022  2021  2022  2021 
Sales
  $28,460  $29,783  $102,380  $98,550 
   
 
 
  
 
 
  
 
 
  
 
 
 
Cost of sales and other direct production costs
   (16,903)   (17,001)   (59,624)   (53,959) 
Depreciation, depletion and amortization
   (7,261)   (6,590)   (24,155)   (20,328) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total cost of sales
   (24,164)   (23,591)   (83,779)   (74,287) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross profit
  $4,296  $6,192  $18,601  $24,263 
   
 
 
  
 
 
  
 
 
  
 
 
 
Tons of ore milled
   90,749   78,227   265,971   241,740 
Production:
                 
Silver (ounces)
   1,074,230   831,532   3,188,565   2,608,727 
Lead (tons)
   7,172   5,313   21,299   17,006 
Zinc (tons)
   3,279   2,319   9,101   7,673 
Payable metal quantities sold:
                 
Silver (ounces)
   801,115   783,672   2,822,281   2,481,753 
Lead (tons)
   5,295   5,001   18,720   16,068 
Zinc (tons)
   2,385   1,702   6,602   5,561 
Ore grades:
                 
Silver ounces per ton
   12.50   11.21   12.67   11.34 
Lead percent
   8.5%   7.2%   8.5%   7.4% 
Zinc percent
   4.2%   3.3%   3.9%   3.5% 
Total production cost per ton
  $207.1  $190.66  $220.41  $189.06 
Cash Cost, After
By-product
Credits, per Silver Ounce
(1)
  $5.23  $6.35  $4.77  $7.37 
AISC, After
By-product
Credits, per Silver Ounce
(1)
  $15.98  $16.79  $12.86  $15.00 
Capital additions
  $16,125  $9,133  $37,278  $20,776 
(1)

(1)

A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales (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 increase in gross

Gross profit infor the first quarter ofthree months ended September 30, 2022 decreased by $1.9 million compared to the first quartersame period in 2021, as the impact of 2021 wasincreased sales quantities from mining and processing more high grade material and in higher volumes, did not offset the resultcombination of higher sales volume andlower realized silver, lead and zinc prices partially offsetcompared to 2021, and increased production costs from more ore mined and processed and inflationary cost increases in consumables and contractor maintenance costs. Gross profit for the nine month period September 30, 2022 decreased by lower average silver prices.

Total production cost per ton increased by approximately 30% in the first quarter of 2022$5.7 million compared to the first quartersame period in 2021, as increased sales from a combination of 2021 primarily due tomining and processing more high grade material and in higher volumes did not offset the impact of lower silver and lead realized prices and higher production costs for labor, equipment maintenance, contractors and consumables and lower mill throughput.

28which were the result of the same factors experienced in the three months ended September 30, 2022.    
Table of Contents

The chartcharts below illustratesillustrate the factors contributing to Cash Cost, After

By-product
Credits, perPer Silver Ounce for the third quarter and first quartersnine months of 2022 andcompared to the same periods of 2021.

c02.jpg

34
Table of Contents
The following table summarizes the components of Cash Cost, After
By-product
Credits, per Silver Ounce:

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Cash Cost, Before By-product Credits, per Silver Ounce

 $26.63  $24.43 

By-product credits

  (20.06)  (16.81)

Cash Cost, After By-product Credits, per Silver Ounce

 $6.57  $7.62 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Cash Cost, Before
By-product
Credits, per Silver Ounce
  $22.87   $24.14   $23.44   $24.70 
By-product
credits
   (17.64)    (17.79)    (18.67)    (17.33) 
   
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Silver Ounce
  $5.23   $6.35   $4.77   $7.37 
   
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the components of AISC, After
By-product
Credits, per Silver Ounce:

  

Three Months Ended March 31,

 
  

2022

  

2021

 

AISC, Before By-product Credits, per Silver Ounce

 $33.21  $31.05 

By-product credits

  (20.06)  (16.81)

AISC, After By-product Credits, per Silver Ounce

 $13.15  $14.24 

35
Table of Contents
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
AISC, Before
By-product
Credits, per Silver Ounce
  $33.62   $34.58   $31.53   $32.33 
By-product
credits
   (17.64)    (17.79)    (18.67)    (17.33) 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Silver Ounce
  $15.98   $16.79    12.86   $15.00 
  
 
 
   
 
 
   
 
 
   
 
 
 
The decrease in Cash Cost and AISC, After
By-product
Credits, per Silver Ounce for the first quarter ofthree and nine month periods ended September 30, 2022 compared to the first quarter ofthree and nine month periods ended September 30, 2021 was due to higher silver production resulting from increased grades and volumes processed, higher
by-product
credits (for the nine months ended September 30, 2022) due to increasedhigher realized zinc prices, and concentrate quality improvement resulting in higher lead and zinc prices, and improved quality of concentrates. 

production, with the decrease in AISC, After
By-product
Credits, per Silver Ounce partially offset by higher sustaining capital spending.
29
Table of ContentsThe Casa Berardi Segment

Casa Berardi

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

 

Three Months Ended March 31,

 
  

2022

  

2021

 

Sales

 $62,101  $72,911 

Cost of sales and other direct production costs

  (46,322)  (36,975)

Depreciation, depletion and amortization

  (15,846)  (22,952)

Total cost of sales

  (62,168)  (59,927)

Gross profit (loss)

 $(67) $12,984 

Tons of ore milled

  386,150   368,403 

Production:

        

Gold (ounces)

  30,240   36,190 

Silver (ounces)

  7,068   10,675 

Payable metal quantities sold:

        

Gold (ounces)

  33,066   40,869 

Silver (ounces)

  9,054   8,715 

Ore grades:

        

Gold ounces per ton

  0.091   0.120 

Silver ounces per ton

  0.02   0.04 

Total production cost per ton

 $117.96  $99.67 

Cash Cost, After By-product Credits, per Gold Ounce (1)

 $1,516  $1,027 

AISC, After By-product Credits, per Gold Ounce (1)

 $1,810  $1,272 

Capital additions

 $7,808  $13,847 

Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Sales
  $56,939   $56,065   $181,679   $185,098 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cost of sales and other direct production costs
   (44,443)    (38,196)    (137,176)    (111,601) 
Depreciation, depletion and amortization
   (15,089)    (19,968)    (46,394)    (61,159) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of sales
   (59,532)    (58,164)    (183,570)    (172,760) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
  $(2,593)   $(2,099)   $(1,891)   $12,338 
  
 
 
   
 
 
   
 
 
   
 
 
 
Tons of ore milled
   389,941    398,143    1,177,709    1,141,229 
Production:
        
Gold (ounces)
   33,335    29,722    96,881    97,245 
Silver (ounces)
   6,882    7,012    22,329    25,604 
Payable metal quantities sold:
        
Gold (ounces)
   32,965    31,227    99,703    102,711 
Silver (ounces)
   14,700    7,764    23,950    24,538 
Ore grades:
        
Gold ounces per ton
   0.10    0.09    0.09    0.10 
Silver ounces per ton
   0.02    0.02    0.02    0.02 
Total production cost per ton
  $114.52   $86.95   $115.15   $95.13 
Cash Cost, After
By-product
Credits, per Gold Ounce
(1)
  $1,349   $1,175   $1,409   $1,127 
AISC, After
By-product
Credits, per Gold Ounce
(1)
  $1,738   $1,476   $1,729   $1,387 
Capital additions
  $10,771   $11,488   $26,672   $37,488 
(1)

(1)

A reconciliation of these
non-GAAP
measures to total cost of sales, the most comparable GAAP measure, can be found below in
Reconciliation of Total Cost of Sales(GAAP)Sales (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)
.

Gross profit decreased by $13.1$0.5 million and $14.2 million for the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021. The decrease for the third quarter and first nine months of 2022 was due to lower realized prices and higher cost of sales resulting from increased production costs due to: (i) higher ore tonnage for the nine month period only, (ii) mill contractor costs related to maintenance and optimization activities, (iii) higher underground maintenance costs resulting from repairs and replacements of major components for the production fleet and (iv) higher fuel and other consumables costs which have been negatively impacted by current inflationary pressures. The impact of higher costs of sales and lower realized prices was partially offset by increased sales volume in the third quarter of 2022. Lower sales volume in the first nine months of 2022 compared to the first quarter of 2021 primarily due to lower gold production, due to lower ore grades accompaniedmined and processed, was partially offset by higher mining costs for labor, contractorsrealized gold price.
36
Table of Contents
Total capital additions decreased by $0.7 million and consumables. The increase$10.8 million in mining costs is partially attributablethe third quarter of 2022 and first nine months of 2022 respectively, compared to inflation and a higher portionthe same periods of 2021, reflecting lower development costs forfollowing commissioning of the new 160 zone open pit mine being included in expense, as production from the pit commenced in the fourth quarter of 2021.

Total capital additions decreased by $6.0 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to growth capital costs incurred in the 2021 period for development of the 160 zone open pit mine.

30
Table of Contents

The chartcharts below illustratesillustrate the factors contributing to Cash Cost, After

By-product
Credits, perPer Gold Ounce for the third quarter and first quarternine months of 2022 compared to the first quarter ofand 2021:

c03.jpg

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

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Cash Cost, Before By-product Credits, per Gold Ounce

 $1,521  $1,035 

By-product credits

  (5)  (8)

Cash Cost, After By-product Credits, per Gold Ounce

 $1,516  $1,027 

37
Table of Contents
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Cash Cost, Before
By-product
Credits, per Gold Ounce
  $1,353   $1,181   $1,415   $1,134 
By-product
credits
   (4)    (6)    (6)    (7) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Gold Ounce
  $1,349   $1,175   $1,409   $1,127 
  
 
 
   
 
 
   
 
 
   
 
 
 
The following table summarizes the components of AISC, After
By-product
Credits, per Gold Ounce:

  

Three Months Ended March 31,

 
  

2022

  

2021

 

AISC, Before By-product Credits, per Gold Ounce

 $1,815  $1,280 

By-product credits

  (5)  (8)

AISC, After By-product Credits, per Gold Ounce

 $1,810  $1,272 

   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
AISC, Before
By-product
Credits, per Gold Ounce
  $1,742   $1,482   $1,735   $ 1,394 
By-product
credits
   (4)    (6)    (6)    (7) 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Gold Ounce
  $ 1,738   $ 1,476   $ 1,729   $1,387 
  
 
 
   
 
 
   
 
 
   
 
 
 
The increase in Cash Cost and AISC, After
By-product
Credits, per Gold Ounce for the third quarter and first quarternine months of 2022 compared to the same periods in 2021 was primarily due to higher production costs, as discussed above, partially offset by higher gold production in the third quarter of 2022 compared with the same period in 2021. The lower production in 2022 also negatively impacted AISC, After
By-product
Credits, per Gold Ounce, however this was partially offset by lower sustaining capital spent in 2022 compared to 2021.
The Nevada Operations Segment
Dollars are in thousands (except per ounce and per ton amounts)
  Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2022   2021   2022   2021 
Sales
  $—     $22,906   $268   $41,593 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cost of sales and other direct production costs
   (1,285)    (15,249)    (2,418)    (31,811) 
Depreciation, depletion and amortization
   (338)    (6,135)    (460)    (15,021) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of sales
   (1,623)    (21,384)    (2,878)    (46,832) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Gross (loss) profit
  $(1,623)   $1,522   $ (2,610)   $ (5,239) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Payable metal quantities sold:
        
Gold (ounces)
   —      12,542    65    23,097 
Silver (ounces)
   —      15,833    6,363    23,868 
The gross loss of $1.6 million for the three months ended September 30, 2022, was attributable to write downs of stockpiled material to net realizable value reflecting a lower spot gold price, versus the gross profit realized in the comparable period in 2021, due to processing and sale of refractory ore at a third party facility.
The decrease in gross loss for the first quarternine months of 2022 compared to the same period of 2021 was primarily the result of lower gold productionsales volumes and higher mining costs. These factors along with higher exploration spending, partially offset by lower sustaining capital, resulted in the increase in AISC, After By-product Credits, per Gold Ounce.

31
Tablewrite-downs of Contents

Nevada Operations

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

 

Three Months Ended March 31,

 
  

2022

  

2021

 

Sales

 $268  $10,237 

Cost of sales and other direct production costs

  —   (4,495)

Depreciation, depletion and amortization

  —   (2,960)

Total cost of sales

  —   (7,455)

Gross profit

 $268  $2,782 

Tons of ore milled

  —   16,459 

Production:

        

Gold (ounces)

  —   2,548 

Silver (ounces)

  —   — 

Payable metal quantities sold:

        

Gold (ounces)

  65   5,823 

Silver (ounces)

  6,363   6,821 

Ore grades:

        

Gold ounces per ton

  —   0.185 

Silver ounces per ton

  —   — 

Total production cost per ton

 $—  $360.72 

Cash Cost, After By-product Credits, per Gold Ounce (1)

 $—  $1,416 

AISC, After By-product Credits, per Gold Ounce (1)

 $—  $1,461 

Capital additions

 $876  $89 

(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).

The decrease in gross profit for the first quarter of 2022 comparedore stockpiled to the first quarter of 2021 is a result of sales volume, with the final sale of 2021 production occurring in the first quarter of 2022. Development ceased at Fire Creek 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 of non-refractory ore at Fire Creek in areas where development had already been performed was completed in the fourth quarter of 2020.estimated net realizable value. During 2021, production and revenue were generated from processing of the stockpiled

non-refractory
ore at the Midas mill and third-party processing of refractory ore in a roaster and autoclave facility, respectively. Fire Creek was placed on
care-and-maintenance
in the second quarter of 2021 after processing of the remaining
non-refractory
ore stockpile.

Exploration activities and pre-development activities related to the Hatter Graben area at Hollister are ongoing. Care and maintenance costs 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, total production costs per tonamortization.

Exploration activities and Cash Cost
pre-development
activities continued in 2022 and AISC, After By-product Credits, per Gold Ounce.

was focused on drill testing targets at Aurora, Midas and the Hatter Graben in addition to target generation through detailed mapping, sampling and geological mapping.

See
Item 1A. Risk Factors -– Operation, Development, Exploration and Acquisition Risks
in our 2021 Form
10-K
for a discussion of certain risks relating to our recent and ongoing analysis of the carrying value of the Nevada assets.

3238
Table of Contents
Corporate Matters

Corporate Matters

Employee Benefit Plans

Our three defined benefit pension plans while providing(the “DB plans”) provide a significant benefit to our employees, but represent a liability to us. The liability recorded for the underfunded status of our plans was $5.9$4.8 million and $6.0 million as of March 31,September 30, 2022 and December 31, 2021, respectively. During May 2022, we contributed an aggregate of $5.6 million in shares of our common stock to two of our DB plans. We contributed an additional $4.2 million in shares of our common stock to one of our DB plans in October 2022 and do not expect to be required to contributemake additional contributions to our defined benefit pensionDB plans in 2022, 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 defined benefit pension planthe provisions of two DB plans, and we periodically examine the plans for affordability and competitiveness. See
Note 6
of
Notes to Consolidated Financial Statements
in our 2021 Form
10-K
for more information.

Income and Mining Taxes

During the third quarter and first quarternine months of 2022, an income and mining tax provisionbenefit of approximately $5.6$9.5 million and $3.6 million resulted in an effective tax rate of 57.6%29% and 10% for that period.the respective periods. This compares to an income and mining tax provisionbenefit of $4.7$4.5 million and $3.9 million for the third quarter and first nine months of 2021, or an effective tax rate of 18.1%,82.2% and (20.3)% for the first quarter of 2021.respective periods. 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 including
non-recognition
of foreign exchange gains and losses; (v) percentage depletion; and (vi) the
non-recognition
of tax assets. Therefore, theThe effective tax rate will fluctuate, sometimes significantly, period to period. ForBeginning with the period ended March 31, 2022 and including the period September 30, 2022, we used the annual effective tax rate method to calculate the quarterly tax provision, a change from the discrete method used for the period ended March 31,September 30, 2021, due to reversal of valuation allowance in the fourth quarter of 2021.

Each reporting period we assess our deferred tax balances based on a review of long-range forecasts and quarterly activity. A valuation allowance is provided for deferred tax assets for which it is more likely than not the related tax benefits will not be realized. We analyze our deferred tax assets and, if it is determined that we will not realize all or a portion of our deferred tax assets, we will record or increase a valuation allowance. Conversely, if it is determined we will ultimately more likely than not be able to realize all or a portion of the 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. Valuation allowances are provided on deferred tax assets in our Nevada, Mexico, and certain Canadian jurisdictions. For additional information, please see
Item 1A -– Risk Factors
in our 2021 Form
10-K.

Reconciliation of Total Cost of Sales (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 total cost of sales 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 and for the Company for the three-monththree- and nine-month periods ended March 31,September 30, 2022 and 2021.

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.

33
Table of Contents

Cash Cost, After

By-product
Credits, per Ounce is an important operating statistic that we utilize to measure each mine'smine’s operating performance. We use AISC, After
By-product
Credits, per Ounce as a measure of our mines'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
39
Table of Contents
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 and Lucky Friday 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 royalties.mining production taxes. 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 and sustaining exploration and capital costs.
By-product
credits include revenues earned from all metals other than the primary metal produced at each operation.unit. As depicted in the tables below,
by-product
credits comprise an essential element of our silver operations'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.

34
Table of Contents

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 operationsunits 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 and Lucky Friday, and San Sebastian, our combined silver properties. Similarly, the silver produced at our other two operationsunits is not included as a
by-product
credit when calculating the gold metrics for Casa Berardi and Nevada Operations.

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2022

 
  

Greens

Creek

  

Lucky

Friday

  

Corporate(2)

  

Total

Silver

 

Total cost of sales

 $49,638  $29,264      $78,902 

Depreciation, depletion and amortization

  (11,420)  (8,032)      (19,452)

Treatment costs

  9,096   3,677       12,773 

Change in product inventory

  6,538   (905)      5,633 

Reclamation and other costs

  (850)  (361)      (1,211)

Cash Cost, Before By-product Credits (1)

  53,002   23,643       76,645 

Reclamation and other costs

  705   282       987 

Exploration

  165   —   716   881 

Sustaining capital

  5,956   5,562   48   11,566 

General and administrative

          8,294   8,294 

AISC, Before By-product Credits (1)

  59,828   29,487       98,373 

By-product credits:

                

Zinc

  (28,651)  (5,977)      (34,628)

Gold

  (18,583)  —       (18,583)

Lead

  (7,966)  (11,836)      (19,802)

Total By-product credits

  (55,200)  (17,813)      (73,013)

Cash Cost, After By-product Credits

 $(2,198) $5,830      $3,632 

AISC, After By-product Credits

 $4,628  $11,674      $25,360 

Divided by ounces produced

  2,430   888       3,318 

Cash Cost, Before By-product Credits, per Ounce

 $21.82  $26.63      $23.10 

By-product credits per ounce

  (22.72)  (20.06)      (22.01)

Cash Cost, After By-product Credits, per Ounce

 $(0.90) $6.57      $1.09 

AISC, Before By-product Credits, per Ounce

 $24.62  $33.21      $29.65 

By-product credits per ounce

  (22.72)  (20.06)      (22.01)

AISC, After By-product Credits, per Ounce

 $1.90  $13.15      $7.64 

3540
Table of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2022 
   Greens
Creek		   Lucky
Friday		   Corporate
(2)
   Total
Silver		 
Total cost of sales
  $52,502   $24,164   $—     $76,666 
Depreciation, depletion and amortization
   (10,305)    (7,261)    —      (17,566) 
Treatment costs
   9,477    4,791    —      14,268 
Change in product inventory
   4,464    3,022    —      7,486 
Reclamation and other costs
   (118)    (152)    —      (270) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   56,020    24,564      80,584 
Reclamation and other costs
   705    282    —      987 
Sustaining exploration
   3,776    —      722    4,498 
Sustaining capital
   10,219    11,264    187    21,670 
General and administrative
   —      —      11,003    11,003 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   70,720    36,110    11,912    118,742 
By-product
credits:
        
Zinc
   (26,244)    (7,155)    —      (33,399) 
Gold
   (17,019)    —      —      (17,019) 
Lead
   (6,212)    (11,796)    —      (18,008) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (49,475)    (18,951)    —      (68,426) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $6,545   $5,613   $—     $12,158 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $21,245   $17,159    11,912   $50,316 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   2,469    1,075      3,544 
Cash Cost, Before
By-product
Credits, per Ounce
  $22.69   $22.87     $22.74 
By-product
credits per ounce
   (20.04)    (17.64)      (19.31) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $2.65   $5.23     $3.43 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $28.65   $33.62     $33.51 
By-product
credits per ounce
   (20.04)    (17.64)      (19.31) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $8.61   $15.98     $14.20 
  
 
 
   
 
 
     
 
 
 
41

In thousands (except per ounce amounts)

 

Three Months Ended

March 31, 2022

 
  

Casa

Berardi

  

Total

Gold

 

Total cost of sales

 $62,168  $62,168 

Depreciation, depletion and amortization

  (15,846)  (15,846)

Treatment costs

  458   458 

Change in product inventory

  (563)  (563)

Reclamation and other costs

  (210)  (210)

Cash Cost, Before By-product Credits (1)

  46,007   46,007 

Reclamation and other costs

  210   210 

Exploration

  1,394   1,394 

Sustaining capital

  7,281   7,281 

General and administrative

      — 

AISC, Before By-product Credits (1)

  54,892   54,892 

By-product credits:

        

Silver

  (166)  (166)

Total By-product credits

  (166)  (166)

Cash Cost, After By-product Credits

 $45,841  $45,841 

AISC, After By-product Credits

 $54,726  $54,726 

Divided by ounces produced

  30   30 

Cash Cost, Before By-product Credits, per Ounce

 $1,521  $1,521 

By-product credits per ounce

  (5)  (5)

Cash Cost, After By-product Credits, per Ounce

 $1,516  $1,516 

AISC, Before By-product Credits, per Ounce

 $1,815  $1,815 

By-product credits per ounce

  (5)  (5)

AISC, After By-product Credits, per Ounce

 $1,810  $1,810 

36
Table of Contents
In thousands (except per ounce amounts)
  Three Months ended
September 30, 2022		 
   Casa
Berardi		   Total Gold 
Total cost of sales
  $59,532   $59,532 
Depreciation, depletion and amortization
   (15,089)    (15,089) 
Treatment costs
   429    429 
Change in product inventory
   420    420 
Reclamation and other costs
   (203)    (203) 
  
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   45,089    45,089 
Reclamation and other costs
   204    204 
Sustaining exploration
   2,314    2,314 
Sustaining capital
   10,457    10,457 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   58,064    58,064 
By-product
credits:
    
Silver
   (131)    (131) 
  
 
 
   
 
 
 
Total
By-product
credits
   (131)    (131) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $44,958   $44,958 
  
 
 
   
 
 
 
AISC, After
By-product
Credits
  $57,933   $57,933 
  
 
 
   
 
 
 
Divided by ounces produced
   33    33 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,353   $1,353 
By-product
credits per ounce
   (4)    (4) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,349   $1,349 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,742   $1,742 
By-product
credits per ounce
   (4)    (4) 
  
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,738   $1,738 
  
 
 
   
 
 
 
42

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2022

 
  

Total Silver

  

Total Gold

  

Total

 

Total cost of sales

 $78,902  $62,168  $141,070 

Depreciation, depletion and amortization

  (19,452)  (15,846)  (35,298)

Treatment costs

  12,773   458   13,231 

Change in product inventory

  5,633   (563)  5,070 

Reclamation and other costs

  (1,211)  (210)  (1,421)

Cash Cost, Before By-product Credits (1)

  76,645   46,007   122,652 

Reclamation and other costs

  987   210   1,197 

Exploration

  881   1,394   2,275 

Sustaining capital

  11,566   7,281   18,847 

General and administrative

  8,294   —   8,294 

AISC, Before By-product Credits (1)

  98,373   54,892   153,265 

By-product credits:

            

Zinc

  (34,628)  —   (34,628)

Gold

  (18,583)  —   (18,583)

Lead

  (19,802)  —   (19,802)

Silver

      (166)  (166)

Total By-product credits

  (73,013)  (166)  (73,179)

Cash Cost, After By-product Credits

 $3,632  $45,841  $49,473 

AISC, After By-product Credits

 $25,360  $54,726  $80,086 

Divided by ounces produced

  3,318   30     

Cash Cost, Before By-product Credits, per Ounce

 $23.10  $1,521     

By-product credits per ounce

  (22.01)  (5)    

Cash Cost, After By-product Credits, per Ounce

 $1.09  $1,516     

AISC, Before By-product Credits, per Ounce

 $29.65  $1,815     

By-product credits per ounce

  (22.01)  (5)    

AISC, After By-product Credits, per Ounce

 $7.64  $1,810     

37
Table of Contents
In thousands (except per ounce amounts)
  Three Months ended September 30,
2022		 
   Total Silver   Total Gold   Total 
Total cost of sales
  $76,666   $59,532   $136,198 
Depreciation, depletion and amortization
   (17,566)    (15,089)    (32,655) 
Treatment costs
   14,268    429    14,697 
Change in product inventory
   7,486    420    7,906 
Reclamation and other costs
   (270)    (203)    (473) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   80,584    45,089    125,673 
Reclamation and other costs
   987    204    1,191 
Sustaining exploration
   4,498    2,314    6,812 
Sustaining capital
   21,670    10,457    32,127 
General and administrative
   11,003    —      11,003 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   118,742    58,064    176,806 
By-product
credits:
      
Zinc
   (33,399)    —      (33,399) 
Gold
   (17,019)    —      (17,019) 
Lead
   (18,008)    —      (18,008) 
Silver
   —      (131)    (131) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (68,426)    (131)    (68,557) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $12,158   $44,958   $57,116 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $50,316   $57,933   $108,249 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   3,544    33   
Cash Cost, Before
By-product
Credits, per Ounce
  $22.74   $1,353   
By-product
credits per ounce
   (19.31)    (4)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $3.43   $1,349   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $33.51   $1,742   
By-product
credits per ounce
   (19.31)    (4)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $14.20   $1,738   
  
 
 
   
 
 
   
43

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2021

 
  

Greens

Creek

  

Lucky

Friday

  

Corporate

and other(2)

  

Total

Silver

 

Total cost of sales

 $53,181  $22,794  $94  $76,069 

Depreciation, depletion and amortization

  (14,821)  (6,336)  —   (21,157)

Treatment costs

  10,541   4,978   —   15,519 

Change in product inventory

  401   (93)  —   308 

Reclamation and other costs

  (261)  (233)  (94)  (588)

Cash Cost, Before By-product Credits (1)

  49,041   21,110   —   70,151 

Reclamation and other costs

  848   264   —   1,112 

Exploration

  123   —   435   558 

Sustaining capital

  4,892   5,454   —   10,346 

General and administrative

          8,007   8,007 

AISC, Before By-product Credits (1)

  54,904   26,828   8,442   90,174 

By-product credits:

                

Zinc

  (22,767)  (4,753)  —   (27,520)

Gold

  (20,996)  —   —   (20,996)

Lead

  (7,020)  (9,775)  —   (16,795)

Total By-product credits

  (50,783)  (14,528)  —   (65,311)

Cash Cost, After By-product Credits

 $(1,742) $6,582  $—  $4,840 

AISC, After By-product Credits

 $4,121  $12,300  $8,442  $24,863 

Divided by ounces produced

  2,585   864       3,449 

Cash Cost, Before By-product Credits, per Ounce

 $18.98  $24.43      $20.34 

By-product credits per ounce

  (19.65)  (16.81)      (18.94)

Cash Cost, After By-product Credits, per Ounce

 $(0.67) $7.62      $1.40 

AISC, Before By-product Credits, per Ounce

 $21.24  $31.05      $26.15 

By-product credits per ounce

  (19.65)  (16.81)      (18.94)

AISC, After By-product Credits, per Ounce

 $1.59  $14.24       7.21 

38
Table of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2021 
   Greens
Creek		   Lucky
Friday		   Corporate and
other
(2)
   Total
Silver		 
Total cost of sales
  $55,193   $23,591   $—     $78,784 
Depreciation, depletion and amortization
   (13,097)    (6,590)    —      (19,687) 
Treatment costs
   7,979    3,427    —      11,406 
Change in product inventory
   (122)    (68)    —      (190) 
Reclamation and other costs
   (786)    (281)    —      (1,067) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   49,167    20,079    —      69,246 
Reclamation and other costs
   848    264    —      1,112 
Sustaining exploration
   2,472    —      474    2,946 
Sustaining capital
   6,228    8,406    —      14,634 
General and administrative
   —      —      8,874    8,874 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   58,715    28,749    9,348    96,812 
By-product
credits:
        
Zinc
   (25,295)    (4,611)    —      (29,906) 
Gold
   (14,864)    —      —      (14,864) 
Lead
   (7,640)    (10,188)    —      (17,828) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (47,799)    (14,799)    —      (62,598) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $1,368   $5,280    —     $6,648 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $10,916   $13,950    9,348   $34,214 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   1,837    832      2,669 
Cash Cost, Before
By-product
Credits, per Ounce
  $26.76   $24.14     $25.93 
By-product
credits per ounce
   (26.02)    (17.79)      (23.44) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $0.74   $6.35     $2.49 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $31.96   $34.58     $36.26 
By-product
credits per ounce
   (26.02)    (17.79)      (23.44) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $5.94   $16.79     $12.82 
  
 
 
   
 
 
     
 
 
 
44

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2021

 
  

Casa

Berardi

  

Nevada

Operations(3)

  

Total

Gold

 

Total cost of sales

 $59,927  $7,455  $67,382 

Depreciation, depletion and amortization

  (22,952)  (2,960)  (25,912)

Treatment costs

  714   11   725 

Change in product inventory

  (47)  (1,084)  (1,131)

Reclamation and other costs

  (208)  185   (23)

Cash Cost, Before By-product Credits (1)

  37,434   3,607   41,041 

Reclamation and other costs

  208   27   235 

Exploration

  907   —   907 

Sustaining capital

  7,758   89   7,847 

AISC, Before By-product Credits (1)

  46,307   3,723   50,030 

By-product credits:

            

Silver

  (278)  —   (278)

Total By-product credits

  (278)  —   (278)

Cash Cost, After By-product Credits

 $37,156  $3,607  $40,763 

AISC, After By-product Credits

 $46,029  $3,723  $49,752 

Divided by ounces produced

  36   3   39 

Cash Cost, Before By-product Credits, per Ounce

 $1,035  $1,416  $1,059 

By-product credits per ounce

  (8)  —   (7)

Cash Cost, After By-product Credits, per Ounce

 $1,027  $1,416  $1,052 

AISC, Before By-product Credits, per Ounce

 $1,280  $1,461  $1,291 

By-product credits per ounce

  (8)  —   (7)

AISC, After By-product Credits, per Ounce

 $1,272  $1,461  $1,284 

39
Table of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2021 
   Casa
Berardi		   Nevada
Operations		   Total Gold 
Total cost of sales
  $58,164   $21,384   $79,548 
Depreciation, depletion and amortization
   (19,968)    (6,135)    (26,103) 
Treatment costs
   475    1    476 
Change in product inventory
   (3,369)    (12,389)    (15,758) 
Reclamation and other costs
   (210)    —      (210) 
Exclusion of Nevada Operations costs
   —      —      —   
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   35,092    2,861    37,953 
Reclamation and other costs
   209    327    536 
Sustaining exploration
   1,541    —      1,541 
Sustaining capital
   7,208    29    7,237 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   44,050    3,217    47,267 
By-product
credits:
      
Silver
   (169)    (6)    (175) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (169)    (6)    (175) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $34,923   $2,855   $37,778 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $43,881   $3,211   $47,092 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   30    3    33 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,181   $1,040   $1,168 
By-product
credits per ounce
   (6)    (2)    (5) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,175   $1,038   $1,163 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,482   $1,169   $1,455 
By-product
credits per ounce
   (6)    (2)    (5) 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,476   $1,167   $1,450 
  
 
 
   
 
 
   
 
 
 
45

In thousands (except per ounce amounts)

 

Three Months Ended March 31, 2021

 
  

Total

Silver

  

Total Gold

  

Total

 

Total cost of sales

 $76,069  $67,382  $143,451 

Depreciation, depletion and amortization

  (21,157)  (25,912)  (47,069)

Treatment costs

  15,519   725   16,244 

Change in product inventory

  308   (1,131)  (823)

Reclamation and other costs

  (588)  (23)  (611)

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     

Table of Contents
In thousands (except per ounce amounts)
  Three Months Ended September 30, 2021 
   Total
Silver		   Total Gold   Total 
Total cost of sales
  $78,784   $79,548   $ 158,332 
Depreciation, depletion and amortization
   (19,687)    (26,103)    (45,790) 
Treatment costs
   11,406    476    11,882 
Change in product inventory
   (190)    (15,758)    (15,948) 
Reclamation and other costs
   (1,067)    (210)    (1,277) 
Exclusion of Nevada Operations costs
   —       
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   69,246    37,953    107,199 
Reclamation and other costs
   1,112    536    1,648 
Sustaining exploration
   2,946    1,541    4,487 
Sustaining capital
   14,634    7,237    21,871 
General and administrative
   8,874    —      8,874 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   96,812    47,267    144,079 
By-product
credits:
      
Zinc
   (29,906)    —      (29,906) 
Gold
   (14,864)    —      (14,864) 
Lead
   (17,828)    —      (17,828) 
Silver
   —      (175)    (175) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (62,598)    (175)    (62,773) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $6,648   $37,778   $44,426 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $34,214   $47,092   $81,306 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   2,669    33   
Cash Cost, Before
By-product
Credits, per Ounce
  $25.93   $1,168   
By-product
credits per ounce
   (23.44)    (5)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $2.49   $1,163   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $36.26   $1,455   
By-product
credits per ounce
   (23.44)    (5)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $12.82   $1,450   
  
 
 
   
 
 
   
46
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2022 
   Greens
Creek		   Lucky
Friday		   Corporate
(1)
   Total Silver 
Total cost of sales
  $162,644   $83,779   $—     $246,423 
Depreciation, depletion and amortization
   (35,354)    (24,155)    —      (59,509) 
Treatment costs
   27,369    13,271    —      40,640 
Change in product inventory
   9,899    2,620    —      12,519 
Reclamation and other costs
   (1,988)    (769)    —      (2,757) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   162,570    74,746    —      237,316 
Reclamation and other costs
   2,115    846    —      2,961 
Sustaining exploration
   4,870    —      2,207    7,077 
Sustaining capital
   30,843    24,937    334    56,114 
General and administrative
   —      —      28,989    28,989 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   200,398    100,529    31,530    332,457 
By-product
credits:
        
Zinc
   (87,723)    (21,358)    —      (109,081) 
Gold
   (55,966)    —      —      (55,966) 
Lead
   (22,449)    (38,175)    —      (60,624) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (166,138)    (59,533)    —      (225,671) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $(3,568)   $15,213    —     $11,645 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $34,260   $40,996   $ 31,530   $106,786 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   7,309    3,189      10,498 
Cash Cost, Before
By-product
Credits, per Ounce
  $22.24   $23.44     $22.61 
By-product
credits per ounce
   (22.73)    (18.67)      (21.50) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $(0.49)   $4.77     $1.11 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $27.42   $31.53     $31.67 
By-product
credits per ounce
   (22.73)    (18.67)      (21.50) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $4.69   $12.86     $10.17 
  
 
 
   
 
 
     
 
 
 
47
Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended
September 30, 2022		 
   Casa
Berardi		   Total
Gold		 
Total cost of sales
  $ 183,570   $ 183,570 
Depreciation, depletion and amortization
   (46,394)    (46,394) 
Treatment costs
   1,345    1,345 
Change in product inventory
   (936)    (936) 
Reclamation and other costs
   (623)    (623) 
  
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   136,962    136,962 
Reclamation and other costs
   623    623 
Sustaining exploration
   4,886    4,886 
Sustaining capital
   25,587    25,587 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   168,058    168,058 
By-product
credits:
    
Silver
   (485)    (485) 
  
 
 
   
 
 
 
Total
By-product
credits
   (485)    (485) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $136,477   $136,477 
  
 
 
   
 
 
 
AISC, After
By-product
Credits
  $167,573   $167,573 
  
 
 
   
 
 
 
Divided by ounces produced
   97    97 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,415   $1,415 
By-product
credits per ounce
   (6)    (6) 
  
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,409   $1,409 
  
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,735   $1,735 
By-product
credits per ounce
   (6)    (6) 
  
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,729   $1,729 
  
 
 
   
 
 
 
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Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2022 
   Total Silver   Total Gold   Total 
Total cost of sales
  $246,423   $ 183,570   $429,993 
Depreciation, depletion and amortization
   (59,509)    (46,394)    (105,903) 
Treatment costs
   40,640    1,345    41,985 
Change in product inventory
   12,519    (936)    11,583 
Reclamation and other costs
   (2,757)    (623)    (3,380) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   237,316    136,962    374,278 
Reclamation and other costs
   2,961    623    3,584 
Sustaining exploration
   7,077    4,886    11,963 
Sustaining capital
   56,114    25,587    81,701 
General and administrative
   28,989    —      28,989 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   332,457    168,058    500,515 
By-product
credits:
      
Zinc
   (109,081)    —      (109,081) 
Gold
   (55,966)    —      (55,966) 
Lead
   (60,624)    —      (60,624) 
Silver
     (485)    (485) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (225,671)    (485)    (226,156) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $11,645   $136,477   $148,122 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $106,786   $167,573   $274,359 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   10,498    97   
Cash Cost, Before
By-product
Credits, per Ounce
  $22.61   $1,415   
By-product
credits per ounce
   (21.50)    (6)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $1.11   $1,409   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $31.67   $1,735   
By-product
credits per ounce
   (21.50)    (6)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $10.17   $1,729   
  
 
 
   
 
 
   
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Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2021 
   Greens
Creek		   Lucky
Friday		   Corporate
and other
 (2)
   Total Silver 
Total cost of sales
  $163,861   $74,287   $95   $238,243 
Depreciation, depletion and amortization
   (42,410)    (20,328)    —      (62,738) 
Treatment costs
   27,444    13,087    —      40,531 
Change in product inventory
   (156)    (1,757)    —      (1,913) 
Reclamation and other costs
   (1,777)    (840)    (95)    (2,712) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   146,962    64,449      211,411 
Reclamation and other costs
   2,543    792      3,335 
Sustaining exploration
   3,895    —      1,359    5,254 
Sustaining capital
   17,459    19,104    —      36,563 
General and administrative
   —      —      27,985    27,985 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   170,859    84,345    29,344    284,548 
By-product
credits:
        
Zinc
   (74,571)    (14,457)    —      (89,028) 
Gold
   (56,299)    —        (56,299) 
Lead
   (23,265)    (30,762)    —      (54,027) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (154,135)    (45,219)    —      (199,354) 
  
 
 
   
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $(7,173)   $19,230   $—     $12,057 
  
 
 
   
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $16,724   $39,126   $ 29,344   $85,194 
  
 
 
   
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   6,981    2,609      9,590 
Cash Cost, Before
By-product
Credits, per Ounce
  $21.05   $24.70     $22.05 
By-product
credits per ounce
   (22.08)    (17.33)      (20.79) 
  
 
 
   
 
 
     
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $(1.03)   $7.37     $1.26 
  
 
 
   
 
 
     
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $24.48   $32.33     $29.67 
By-product
credits per ounce
   (22.08)    (17.33)      (20.79) 
  
 
 
   
 
 
     
 
 
 
AISC, After
By-product
Credits, per Ounce
  $2.40   $15.00     $8.88 
  
 
 
   
 
 
     
 
 
 
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Table of Contents
In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2021 
   Casa
Berardi		   Nevada
Operations		   Total
Gold		 
Total cost of sales
  $ 172,760   $46,832   $ 219,592 
Depreciation, depletion and amortization
   (61,159)    (15,021)    (76,180) 
Treatment costs
   1,723    1,731    3,454 
Change in product inventory
   (2,401)    (9,951)    (12,352) 
Reclamation and other costs
   (632)    299    (333) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   110,291    23,890    134,181 
Reclamation and other costs
   632    681    1,313 
Sustaining exploration
   3,551    —      3,551 
Sustaining capital
   21,030    195    21,225 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   135,504    24,766    160,270 
By-product
credits:
      
Silver
   (656)    (1,131)    (1,787) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (656)    (1,131)    (1,787) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $109,635   $22,759   $132,394 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $134,848   $23,635   $158,483 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   97    20    117 
Cash Cost, Before
By-product
Credits, per Ounce
  $1,134   $1,180   $1,142 
By-product
credits per ounce
   (7)    (56)    (15) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits, per Ounce
  $1,127   $1,124   $1,127 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits, per Ounce
  $1,394   $1,223   $1,364 
By-product
credits per ounce
   (7)    (56)    (15) 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits, per Ounce
  $1,387   $1,167   $1,349 
  
 
 
   
 
 
   
 
 
 
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In thousands (except per ounce amounts)
  Nine Months Ended September 30, 2021 
   Total Silver   Total Gold   Total 
Total cost of sales
  $238,243   $ 219,592    457,835 
Depreciation, depletion and amortization
   (62,738)    (76,180)    (138,918) 
Treatment costs
   40,531    3,454    43,985 
Change in product inventory
   (1,913)    (12,352)    (14,265) 
Reclamation and other costs
   (2,712)    (333)    (3,045) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, Before
By-product
Credits
(1)
   211,411    134,181    345,592 
Reclamation and other costs
   3,335    1,313    4,648 
Sustaining exploration
   5,254    3,551    8,805 
Sustaining capital
   36,563    21,225    57,788 
General and administrative
   27,985    —      27,985 
  
 
 
   
 
 
   
 
 
 
AISC, Before
By-product
Credits
(1)
   284,548    160,270    444,818 
By-product
credits:
      
Zinc
   (89,028)    —      (89,028) 
Gold
   (56,299)    —      (56,299) 
Lead
   (54,027)    —      (54,027) 
Silver
   —      (1,787)    (1,787) 
  
 
 
   
 
 
   
 
 
 
Total
By-product
credits
   (199,354)    (1,787)    (201,141) 
  
 
 
   
 
 
   
 
 
 
Cash Cost, After
By-product
Credits
  $12,057   $132,394   $144,451 
  
 
 
   
 
 
   
 
 
 
AISC, After
By-product
Credits
  $85,194   $158,483   $243,677 
  
 
 
   
 
 
   
 
 
 
Divided by ounces produced
   9,590    117   
Cash Cost, Before
By-product
Credits, per Ounce
  $22.05   $1,142   
By-product
credits per ounce
   (20.79)    (15)   
  
 
 
   
 
 
   
Cash Cost, After
By-product
Credits, per Ounce
  $1.26   $1,127   
  
 
 
   
 
 
   
AISC, Before
By-product
Credits, per Ounce
  $29.67   $1,364   
By-product
credits per ounce
   (20.79)    (15)   
  
 
 
   
 
 
   
AISC, After
By-product
Credits, per Ounce
  $8.88   $1,349   
  
 
 
   
 
 
   

(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 and royalties, before
by-product
revenues earned from all metals other than the primary metal produced at each operation. AISC, Before
By-product
Credits also includes
on-site
exploration, reclamation, and sustaining capital costs.

(2)

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

(3)

Production was suspended at the Hollister mine in the third quarter of 2019 and at the Midas mine and Aurora mill in late 2019, and at the Midas mill and Fire Creek mine in mid-2021. Care and maintenance costs at Nevada Operations totaling $5.7 million and $3.6 million for the first quarters of 2022 and 2021, respectively, are reported in a separate line item on our consolidated statements of operations and excluded from the calculations of total cost of sales, Cash Cost, Before By-product Credits, Cash Cost, After By-product Credits, AISC, Before By-product Credits, and AISC, After By-product Credits.

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Reconciliation of Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)

The non-GAAP measure of free cash flow is calculated as net cash provided by operating activities (GAAP) less additions to properties, plants, equipment and mineral interests (GAAP). Management believes that, when presented in conjunction with comparable GAAP measures, free cash flow is useful to investors in evaluating our operating performance. The following table reconciles net cash provided by operating activities to free cash flow:

  

Three Months Ended

March 31,

 
  

2022

  

2021

 

Net cash provided by operating activities (GAAP)

 $37,909  $37,936 

Less: Additions to properties, plants, equipment and mineral interests (GAAP)

  (21,478)  (21,413)

Free cash flow

 $16,431  $16,523 

Financial Liquidity and Capital Resources

Liquidity Overview

We have a disciplined cash management strategy of maintaining financial flexibility to execute our capital priorities and provide long-term value to our shareholders.stockholders. Consistent with that strategy, we aim to maintain an acceptable level of net debt and 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,September 30, 2022, we had $212.0$144.7 million in cash and cash equivalents, of which $23.4$30.8 million was held in foreign subsidiaries'subsidiaries’ local currency that we anticipate utilizing for near-term operating, exploration or capital costs by those foreign subsidiaries. We also have USD cash and cash equivalent balances held by our foreign subsidiaries that, if repatriated,
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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.

As discussed in
Overview
above, we continue to address the
COVID-19
outbreak and face uncertainty related to the potential additional impacts it could have on our operations. The impacts of
COVID-19
and increasing or prolonged restrictions, if required, on our operations could require access to additional sources of liquidity, which may not be available to us.

Pursuant to our common stock dividend policy described in
Note 12
of
Notes to Consolidated Financial Statements
in our 2021 Form
10-K,
our board of directors declared and paid dividends on our common stock totaling $3.4 million in each of the first, quartersecond and third quarters of 2022 and $4.7 million, $6.0 million and $6.0 million in the first quartercomparable periods of 2021.2021, respectively. Our dividend policy has a 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.
For illustrative purposes only, the table below summarizes potential dividend amounts under our dividend policy.

Quarterly

Average Realized

Silver Price ($ per

ounce)

  

Quarterly Silver-

Linked Dividend ($

per share)

  

Annualized

Silver-Linked

Dividend ($ per

share)

  

Annualized

Minimum

Dividend ($

per share)

  

Annualized

Dividends per

Share: Silver-

Linked and

Minimum ($

per share)

 
$20  $0.0025  $0.01  $0.015  $0.025 
$25  $0.0100  $0.04  $0.015  $0.055 
$30  $0.0150  $0.06  $0.015  $0.075 
$35  $0.0250  $0.10  $0.015  $0.115 
$40  $0.0350  $0.14  $0.015  $0.155 
$45  $0.0450  $0.18  $0.015  $0.195 
$50  $0.0550  $0.22  $0.015  $0.235 

Quarterly
Average Realized
Silver Price ($ per
ounce)
  
Quarterly Silver-
Linked Dividend ($
per share)
  
Annualized
Silver-Linked

Dividend ($ per
share)
  
Annualized
Minimum
Dividend ($
per share)
  
Annualized
Dividends per
Share: Silver-
Linked and
Minimum ($
per share)
Less than $20  $—    $—    $0.015  $0.015
$20  $0.0025  $0.01  $0.015  $0.025
$25  $0.0100  $0.04  $0.015  $0.055
$30  $0.0150  $0.06  $0.015  $0.075
$35  $0.0250  $0.10  $0.015  $0.115
$40  $0.0350  $0.14  $0.015  $0.155
$45  $0.0450  $0.18  $0.015  $0.195
$50  $0.0550  $0.22  $0.015  $0.235
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The declaration and payment of dividends on our 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.

Pursuant to our stock repurchase program described in
Note 12
of
Notes to Consolidated Financial Statements
in our2021 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 March 31,September 30, 2022 and December 31, 2021, 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 May 5,November 4, 2022, was $5.08$4.76 per share.

Pursuant

As discussed in
Note 6
of
Notes to our at-the-marketCondensed Consolidated Financial Statements (Unaudited)
, pursuant to an equity distribution agreement (“ATM”) described in Note 12 of Notes to Consolidated Financial Statements in ourdated February 18, 2021, 10-K, we may offer and sell up to 60 million shares of our common stock from time to time to or through sales agents.agents in
“at-the-market”
(ATM) offerings. 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 our share price, andour 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 sales of 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
As of September 30, 2022, we had sold 1,176,861 shares have been sold under the agreement asfor proceeds of March 31,$4.5 million, net of commissions and fees of approximately $0.1 million. All of the sales occurred during September 2022.

We believe as

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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 ofunder our revolving credit facility,New Credit Agreement, 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 NotesNotes; principal and revolving credit facility (if amounts are drawn); interest payments under our New Credit Agreement; deferral of revenues,
care-and-maintenance
and other costs related to addressing the impactimpacts 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 that a totalrange of approximately $135$150 to 165 million will be spent in 2022 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, including $21.5$93.2 million already incurred as of March 31, 2022.September 30, 2022, before any lease financing. We also estimate that exploration and
pre-development
expenditures will total approximately $45$45.0 million in 2022, including $12.8$39.1 million already incurred as of March 31,September 30, 2022. Our expenditures for these items and our related plans for 2022 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. In our 2021 10-K, see Item 1A. Risk Factors - An extended decline in metals prices, an increase in operating or capital costs, mine accidents or closures, increasing regulatory obligations, or our inability to convert resources or exploration targets to reserves may cause us to record write-downs, which could negatively impact our results of operations and We have a substantial amount of debt that could impair our financial health and prevent us from fulfilling our obligations under our existing and future indebtedness.

We may defer some capital expendituresinvestment 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. We cannot assure youThere can be no assurance that such financing will be available to us.

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Table of Contents

Our liquid assets include (in millions):

  

March 31,

2022

  

December 31,

2021

 

Cash and cash equivalents held in U.S. dollars

 $188.6  $196.2 

Cash and cash equivalents held in foreign currency

  23.4   13.8 

Total cash and cash equivalents

  212.0   210.0 

Marketable equity securities, current and non-current

  29.2   14.4 

Total cash, cash equivalents and investments

 $241.2  $224.4 

   
September 30,
2022
   
December 31,
2021
 
Cash and cash equivalents held in U.S. dollars
  $ 113.9   $ 196.2 
Cash and cash equivalents held in foreign currency
   30.8    13.8 
  
 
 
   
 
 
 
Total cash and cash equivalents
   144.7    210.0 
Marketable equity securities –
non-current
   13.3    14.4 
  
 
 
   
 
 
 
Total cash, cash equivalents and investments
  $158.0   $224.4 
  
 
 
   
 
 
 
Cash and cash equivalents increaseddecreased by $2.0$65.3 million in the first threenine months of 2022 as a result of operational performance.2022. Cash held in foreign currencies represents balances in CADCanadian dollars and MXN,Mexican Pesos (“MXN”), with a $9.6the $17.0 million increase in the first quarternine months of 2022 resulting from an increaseincreases in CAD held.held following the Alexco acquisition. The value of
non-current
marketable equity securities increaseddecreased by $14.8 million due to acquisitions of $10.9 million and stock price appreciation during the quarter.

  

Three Months Ended

 
  

March 31,

2022

  

March 31,

2021

 

Cash provided by operating activities (in millions)

 $37.9  $37.9 

$1.1 million.

   
Nine Months Ended
 
   
September 30,
2022
   
September 30,
2021
 
Cash provided by operating activities (in millions)
  
$
 53.8
 
  
$
 167.0
 
Cash provided by operating activities in the first nine months of 2022 of $53.8 million represented a $113.2 million decrease compared to the $167.0 million provided by operating activities in the first nine months of 2021. $93.2 million of the variance was the result of a net loss compared to a net income in 2021, as adjusted for
non-cash
items. Net working capital changes in 2022 resulted in an outflow of $11.0 million versus an inflow of $8.9 million in 2021 reflecting an increase in inventory balances in 2022 due to the deferral of a shipment from Greens Creek to the fourth quarter of 2022 was substantially unchanged compared toand an inventory build at Lucky Friday, changes in fair value of the first quarternet hedge book and collections of 2021, with lower income adjusted for non-cash items offset by the impactaccounts receivable balances.
   
Nine Months Ended
 
   
September 30,
2022
   
September 30,
2021
 
Cash used in investing activities (in millions)
  
$
(127.7
) 
  
$
(78.0
) 
54
Table of working capital changes.

  

Three Months Ended

 
  

March 31,

2022

  

March 31,

2021

 

Cash used in investing activities (in millions)

 $(29.2) $(21.4)

Contents

During the first quarternine months of 2022, we invested $21.5$93.2 million in capital expenditures, excluding $9.7 million in
non-cash
finance lease additions, an increase of $13.0 million compared to $21.4 millionthe same period in the first quarter of 2021, with higher capital2021. The variance was primarily due to increased spending at Lucky Friday and Greens Creek and Lucky Fridaypartially offset by lower spending at Casa Berardi. InAs a result of the Alexco acquisition, we assumed a cash balance of $9.0 million, net of transaction costs of $5.1 million having advanced $25.0 million to Alexco
pre-acquisition,
to enable them to fund development of the Keno Hill mining district prior to the acquisition closing. During the first quarternine months of 2022, we acquired investments in other mining companies and short term investments for a total cost of $10.9$30.5 million, and recognized $2.5 million indisposed of the short-term investments and a mining company investment, generating total proceeds on the sale of investments, with no such activity in$9.4 million.
   Nine Months Ended 
   September 30,
2022		   September 30,
2021		 
Cash provided by (used in) financing activities (in millions)
  
$
 9.5
 
  
$
(27.4
) 
During the first quarternine months of 2021.

  

Three Months Ended

 
  

March 31,

2022

  

March 31,

2021

 

Cash used in financing activities (in millions)

 $(7.2) $(6.8)

We2022 and 2021, we paid total cash dividends on our common and preferred stock of $3.5totaling $10.5 million and $4.8$17.2 million, respectively. Due to lower realized silver prices during 2022 to date, the dividends paid on our common stock were $6.8 million lower than in the prior year, reflecting our dividend policy discussed above. We issued stock under our ATM program described above for net proceeds of $4.5 million in 2022. We made repayments on our finance leases of $5.2 million and $5.6 million in the first quarter ofnine-month periods ended September 30, 2022 and 2021, respectively. We made repayments on our capital leases of $1.7acquired treasury shares for $3.7 million and $1.9$4.5 million in the first quarterhalf of 2022 and 2021, respectively.

Exchange rate fluctuations between the U.S. dollar and the Canadian dollar and Mexican pesorespectively, as a result of employees’ elections to utilize net share settlement to satisfy their tax withholding obligations related to incentive compensation paid in stock.

The effect of changes in foreign exchange rates resulted in a $0.5$0.8 million increasedecrease in cash and cash equivalents in the first quarternine months of 2022 compared to an increasea decrease of $0.2$0.5 million of 2021, with the variance due to depreciation of the CAD and MXN relative to the USD in the first quarter of 2021.

2022 period.
43
Table of Contents

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, and certain capital expenditures and lease arrangements as of March 31,September 30, 2022 (in thousands):

  

Payments Due By Period

 
  

Less than 1

year

  

1-3 years

  

4-5 years

  

More than

5 years

  

Total

 

Purchase and contractual obligations (1)

 $22,645  $—  $—  $—  $22,645 

Commitment fees (2)

  1,496   —   —   —   1,496 

Finance lease commitments (3)

  6,365   8,194   943   —   15,502 

Operating lease commitments (4)

  3,057   3,607   2,100   6,174   14,938 

Senior Notes (5)

  34,438   68,875   68,875   505,132   677,320 

IQ Notes (6)

  2,515   5,030   39,295   —   46,840 

Total contractual cash obligations

 $70,516  $85,706  $111,213  $511,306  $778,741 

   Payments Due By Period 
   Less than 1
year		   1-3 years   
4-5
years		   More than
5 years		   Total 
Purchase obligations
(1)
  $33,514   $—     $—     $—     $33,514 
Credit facility
(2)
   25,722    1,447    583    —      27,752 
Finance lease commitments
(3)
   9,296    10,985    2,017    —      22,298 
Operating lease commitments
(4)
   3,101    2,630    2,039    5,878    13,648 
Senior Notes
(5)
   34,438    68,876    68,876    487,914    660,104 
IQ Notes
(6)
   2,293    39,257    —      —      41,550 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total contractual cash obligations
  $108,364   $123,195   $73,515   $493,792   $798,866 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
(1)

(1)

Consists of open purchase orders and contractual obligationscommitments of approximately $7.7$9.0 million at Greens Creek, $10.1$1.2 million at Casa Berardi, $20.4 million at Lucky Friday, $0.2 million at Casa Berardi and $4.6$2.6 million at the Nevada Operations.  

Operations and $0.3 at Keno Hill.

(2)

(2)

We have

The New Credit Agreement provides for a $250$150 million revolving credit agreementfacility, under which is currently undrawn.$25 million was drawn as of September 30, 2022 and repaid October 4, 2022. We had $17.3$7.8 million in letters of credit outstanding as of March 31,September 30, 2022. The amounts in the table above assume no additional amounts will be drawn in future periods, and include only the standby fee on the current undrawn balance. For more information on our credit facility, see
Note 7
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
.

(3)

(3)

Includes scheduled finance lease payments of $13.9$14.2 million, and $1.6$3.4 million, $1.4 million, $0.049 million (including interest) and $3.3 million, respectively, for equipment at our Greens Creek, andLucky Friday, Casa Berardi, respectively.  

Nevada Operations and Keno Hill.

55
Table of Contents
(4)

(4)

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.

(5)

(5)

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, with interest payable on February 15 and August 15 of each year, commencing August 15, 2020.year. See
Note 7
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information.

(6)

(6)

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 amount. 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.year. See
Note 7
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information.

We record liabilities for estimated costs associated with mine closure, reclamation of land and other environmental matters. At March 31,September 30, 2022, our liabilities for these matters totaled $114.2$116.3 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 10
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
.

Critical Accounting Estimates

There have been no significant changes to the critical accounting estimates disclosed inManagement's
Management’s Discussion and Analysis of Financial Condition and Results of Operations
in our 2021 Form
10-K.

44
Off-Balance
Table of ContentsSheet Arrangements

At September 30, 2022, 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 material to investors.
Guarantor Subsidiaries

Presented below are 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'sHecla’s subsidiaries of the Senior Notes and IQ Notes (see
Note 7
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
for more information). The Guarantors consist of the following of Hecla'sHecla’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;Inc.; and Hecla Quebec, Inc. We completed the offering of the Senior Notes on February 19, 2020 under our shelf registration statement previously filed with the SEC. We issued the IQ Notes in four equal tranches between July and October 2020.

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.

•

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.

4556
Table of Contents
Investments in subsidiaries

•

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.

. 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 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 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.

57
Table of Contents
Unaudited Interim Condensed Consolidating Balance Sheets

  

As of March 31, 2022

 
  

Parent

  

Guarantors

  

Non-

Guarantors

  

Eliminations

  

Consolidated

 
  

(in thousands)

 

Assets

                    

Cash and cash equivalents

 $164,037  $29,638  $18,354  $—  $212,029 

Other current assets

  4,798   125,786   1,343   —   131,927 

Properties, plants, equipment and mineral interests - net

  1,913   2,288,710   8,235   —   2,298,858 

Intercompany receivable (payable)

  (222,013)  (219,670)  214,657   227,026   — 

Investments in subsidiaries

  1,566,919   —   —   (1,566,919)  — 

Other non-current assets

  360,176   32,607   (116,294)  (180,404)  96,085 

Total assets

 $1,875,830  $2,257,071  $126,295  $(1,520,297) $2,738,899 

Liabilities and Stockholders' Equity

                    

Current liabilities

 $(410,590) $251,290  $1,714  $345,826  $188,240 

Long-term debt

  508,852   17,878   507   —   527,237 

Non-current portion of accrued reclamation

  —   99,899   3,713   —   103,612 

Non-current deferred tax liability

  2,937   437,077   —   (299,204)  140,810 

Other non-current liabilities

  46,088   3,661   708   —   50,457 

Stockholders' equity

  1,728,543   1,447,266   119,653   (1,566,919)  1,728,543 

Total liabilities and stockholders' equity

 $1,875,830  $2,257,071  $126,295  $(1,520,297) $2,738,899 

   
As of September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
   
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Assets
       
Cash and cash equivalents
  $100,333  $24,486  $19,850   $—    $144,669 
Other current assets
   11,939   118,657   8,655    —     139,251 
Properties, plants, equipment and mineral interests, net
   1,913   2,288,145   263,916     2,553,974 
Intercompany receivable (payable)
   (195,180)   (188,353)   321,214    62,319   —   
Investments in subsidiaries
   2,110,836   —     —      (2,110,836)   —   
Other
non-current
assets
   378,230   29,860   32,545    (343,900)   96,735 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Total assets
  $2,408,071  $2,272,795  $646,180   $(2,392,417)  $2,934,629 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Liabilities and Stockholders’ Equity
       
Current liabilities
  $(105,320)  $246,660  $12,561   $7,484  $161,385 
Long-term debt
   530,745   20,242   —      —     550,987 
Non-current
portion of accrued reclamation
   —     99,888   5,829    —     105,717 
Non-current
deferred tax liability
   22,098   408,148   13,043    (289,064)   154,225 
Other
non-current
liabilities
   5,780   1,076   691    —     7,547 
Stockholders’ equity
   1,954,768   1,496,781   614,056    (2,110,837)   1,954,768 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  $2,408,071  $2,272,795  $646,180   $(2,392,417)  $2,934,629 
  
 
 
  
 
 
  
 
 
   
 
 
  
 
 
 
46
Table of Contents

Unaudited Interim Condensed Consolidating Statements of Operations

  

Three Months Ended March 31, 2022

 
  

Parent

  

Guarantors

  

Non-

Guarantors

  

Eliminations

  

Consolidated

 
  

(in thousands)

 

Sales

 $(4,770) $191,269  $—  $—  $186,499 

Cost of sales

  1,050   (106,822)  —   —   (105,772)

Depreciation, depletion and amortization

  —   (35,298)  —   —   (35,298)

General and administrative

  (4,393)  (3,764)  (137)  —   (8,294)

Exploration and pre-development

  (146)  (10,646)  (2,016)  —   (12,808)

Fair value adjustments, net

  256   1,939   3,770   —   5,965 

Equity in earnings of subsidiaries

  4,212   —   —   (4,212)  — 

Other income (expense)

  11,351   (21,886)  798   (10,771)  (20,508)

Income (loss) before income and mining taxes

  7,560   14,792   2,415   (14,983)  9,784 

Income and mining tax (provision) benefit

  (3,407)  (13,006)  11   10,771   (5,631)

Net income (loss)

  4,153   1,786   2,426   (4,212)  4,153 

Preferred stock dividends

  (138)  —   —   —   (138)

Income (loss) applicable to common stockholders

  4,015   1,786   2,426   (4,212)  4,015 

Net income (loss)

  4,153   1,786   2,426   (4,212)  4,153 

Changes in comprehensive loss

  (33,165)  —   —   —   (33,165)

Comprehensive (loss) income

 $(29,012) $1,786  $2,426  $(4,212) $(29,012)

   
Three Months Ended September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
  
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Revenues
  $1,640  $144,634  $65  $—    $146,339 
Cost of sales
   204   (105,031)   (73)   —     (104,900) 
Depreciation, depletion, amortization
   —     (32,992)   —     —     (32,992) 
General and administrative
   (3,792)   (5,664)   (1,547)   —     (11,003) 
Exploration and
pre-development
   (292)   (13,143)   (1,693)   —     (15,128) 
Equity in earnings of subsidiaries
   2,871   —     —     (2,871)   —   
Other (expense) income
   (32,300)   12,289   (4,398)   9,040   (15,369) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) before income taxes
   (31,669)   93   (7,646)   6,169   (33,053) 
(Provision) benefit from income taxes
   8,142   10,424   —     (9,039)   9,527 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (23,527)   10,517   (7,646)   (2,870)   (23,526) 
Preferred stock dividends
   (138)   —     —     —     (138) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) applicable to common stockholders
  $(23,665)  $10,517  $(7,646)  $(2,870)  $(23,664) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (23,527)   10,517   (7,646)   (2,870)   (23,526) 
Changes in comprehensive income (loss)
   (12,692)   —     —     —     (12,692) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive income (loss)
  $(36,219)  $10,517  $(7,646)  $(2,870)  $(36,218) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
58
Table of Contents
   
Nine Months Ended September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
  
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Revenues
  $8,193  $515,822  $65  $—    $524,080 
Cost of sales
   2,000   (328,506)   (73)   —     (326,579) 
Depreciation, depletion, amortization
   —     (106,362)   —     —     (106,362) 
General and administrative
   (12,682)   (14,464)   (1,843)   —     (28,989) 
Exploration and
pre-development
   (586)   (32,489)   (6,061)   —     (39,136) 
Equity in earnings of subsidiaries
   (5,476)   —     —     5,476   —   
Other expense
   (25,483)   (13,577)   (11,653)   (8,839)   (59,552) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) before income taxes
   (34,034)   20,424   (19,565)   (3,363)   (36,538) 
(Provision) benefit from income taxes
   1,137   (6,345)   11   8,839   3,642 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (32,897)   14,079   (19,554)   5,476   (32,896) 
Preferred stock dividends
   (414)   —     —     —     (414) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income (loss) applicable to common stockholders
  $(33,311)  $14,079  $(19,554)  $5,476  $(33,310) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income (loss)
   (32,897)   14,079   (19,554)   5,476   (32,896) 
Changes in comprehensive income (loss)
   19,491   —     —     —     19,491 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Comprehensive income (loss)
  $(13,406)  $14,079  $(19,554)  $5,476  $(13,405) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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Unaudited Interim Condensed Consolidating Statements of Cash Flows

  

Three Months Ended March 31, 2022

 
  

Parent

  

Guarantors

  

Non-

Guarantors

  

Eliminations

  

Consolidated

 
  

(in thousands)

 

Cash flows from operating activities

 $1,891  $30,240  $18,489  $(12,711) $37,909 

Cash flows from investing activities:

                    

Additions to properties, plants, equipment and mineral interests

  —   (21,476)  (2)      (21,478)

Other investing activities, net

  (4,213)  (2,173)  (5,591)  4,213   (7,764)

Cash flows from financing activities:

                    

Dividends paid to stockholders

  (3,509)  —   —       (3,509)

Payments on debt

  —   (1,695)  —       (1,695)

Other financing activity

  (5,240)  10,139   (15,372)  8,498   (1,975)

Effect of exchange rate changes on cash

  —   509   10   —   519 

Changes in cash, cash equivalents and restricted cash and cash equivalents

  (11,071)  15,544   (2,466)  —   2,007 

Beginning cash, cash equivalents and restricted cash and cash equivalents

  175,108   15,135   20,820   —   211,063 

Ending cash, cash equivalents and restricted cash and cash equivalents

 $164,037  $30,679  $18,354  $—  $213,070 

Item 3.Quantitative and Qualitative Disclosures About Market Risk

   
Nine Months Ended September 30, 2022
 
   
Parent
  
Guarantors
  
Non-

Guarantors
  
Eliminations
  
Consolidated
 
           
   
(in thousands)
 
Cash flows from operating activities
  $287,919  $145,834  $(153,190)  $(226,793)  $53,770 
Cash flows from investing activities:
      
Additions to properties, plants, and equipment
   —     (90,138)   (3,099)   —     (93,237) 
Acquisition, net
   8,952    
—  
 
   
8,952
 
Other investing activities, net
   (573,131)   (1,880)   (16,525)   548,130   (43,406) 
Cash flows from financing activities:
      
Dividends paid to stockholders
   (10,549)   —     —     —     (10,549) 
Issuance of debt
   25,000   —     —      25,000 
Payments on debt
   —     (5,222)   —     —     (5,222) 
Other financing activity
   187,036   (37,653)   172,302   (321,337)   348 
Effect of exchange rate changes on cash
   —     548   (256)   —     (804) 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Changes in cash, cash equivalents and restricted cash
   (74,773)   10,393   (768)    (65,148) 
Beginning cash, cash equivalents and restricted cash
   175,108   15,135   20,820   —     211,063 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending cash, cash equivalents and restricted cash
  $100,335  $25,528  $20,052  $—    $145,915 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
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 March 31,September 30, 2022, which are sensitive to changes in commodity prices and foreign exchange 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
(See
Item 1A. – Risk Factors
of our 2021 Form
10-K).

,
as updated in
Part II. Item 1A – Risk Factors
in our Quarterly Report on Form
10-Q
for the quarter ended June 30, 2022.
47Metals Prices
Table of Contents

Metals Prices

Changes in the market prices of silver, gold, lead and zinc can significantly affect our profitability and cash flow. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control (see

Item 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us
in our 2021 Form 10-K ).
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
Item 1A – Risk Factors –
A substantial or extended decline in metals prices would have a material adverse effect on us
in our 2021 Form
10-K). At March 31,
September 30, 2022, metals contained in concentrate sales and exposed to future price changes totaled 2.12.235 million ounces of silver, 5,4761,840 ounces of gold, 10,7988,500 tons of zinc, and 5,9406,800 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 $11.7$8.2 million. As discussed in
Note 8
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
, 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.

60
Table of Contents
Commodity-Price Risk Management

See
Note 8
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
and
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
in our 2021 Form
10-K
for a description of our commodity-price risk management program.

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 USD and the CAD and 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 three and nine months ended March 31,September 30, 2022 and 2021, we recognized a net foreign exchange lossgain of $2.0$5.7 million and $2.1$8.1 million respectively.respectively, compared to $4.0 million and $0.02 million, respectively for the comparable periods in 2021. 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 March 31,September 30, 2022 would have resulted in a change of approximately $10.1$7.2 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 March 31,September 30, 2022 would have resulted in a change of approximately $0.1$0.027 million in our net foreign exchange gain or loss.

We do not hedge the remeasurement of monetary assets and liabilities. We do hedge some of our operating and capital costs denominated in foreign currency.

See
Note 8
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
and
Note 11
of
Notes to Consolidated Financial Statements
in our 2021 Form
10-K
for a description of our foreign currency risk management.

48
Item 4.
Controls and Procedures
Table of Contents

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 March 31,September 30, 2022, 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 March 31,September 30, 2022 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

Item 1.
Legal Proceedings
For information concerning certain legal proceedings, refer to
Note 10
of
Notes to Condensed Consolidated Financial Statements (Unaudited)
, which is incorporated by reference into this Item 1.

Item 1A.
Risk Factors
Item 1A. – Risk Factors

Item 1A - Risk Factors

of our annual report filed2021 Form
10-K
and Item 1A. – Risk Factors of Part II of our Quarterly Report on Form 10-K
10-Q
for the yearour fiscal quarter ended December 31, 2021 setsJune 30, 2022 set forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.

61
Table of ContentsItem 4.  Mine Safety Disclosures

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.

Item 6.Exhibits

Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-Q - March 31, 2022

Index to Exhibits

31.1

Hecla Mining Company and Wholly Owned Subsidiaries
Form
10-Q
– September 30, 2022
Index to Exhibits
    2.1(a)Arrangement Agreement dated as of July 4, 2022, by and among Hecla Mining Company, Hecla Canada Ltd., 1080980 B.C. Ltd. And Alexco Resource Corp. Filed as exhibit 2.1 to our Current Report on Form 8-K filed on July 5, 2022 (File No. 1-8491) and incorporated herein by reference. 
  10.1Assignment and Amendment Agreement dated as of July 25, 2022, among Hecla Mining Company, Alexco Resource Corp., and 1080980 B.C. Ltd. Filed as exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (File No. 1-8491) and incorporated herein by reference.
  10.2Credit Agreement dated as of July 21, 2022, by and among Hecla Mining Company, Hecla Limited, Hecla Alaska LLC, Hecla Greens Creek Mining Company, and Hecla Juneau Mining Company, as the Borrowers, Bank of America, N.A., as the Administrative Agent for the Lenders, and various Lenders. Filed as exhibit 10.1 to our Current Report on Form 8-K on July 21, 2022 (File No. 1-8491) and incorporated herein by reference. 
  10.3Stream Termination Agreement dated as of July 4, 2022, by and between Hecla Mining Company and Wheaton Precious Metals Corp. * 
  31.1Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

  31.2

31.2

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

  32.1

32.1

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

  32.2

32.2

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

49
Table of Contents

95

  95Mine safety information listed in Section 1503 of the Dodd-Frank Act. *

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.

___________________

*            Filed herewith.

62
Table of Contents
** 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 2, 3 and 5 of Part II are not applicable and are omitted from this report.

50
63
Table of Contents
SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  

HECLA MINING COMPANY

    (Registrant)
Date:  

(Registrant)

November 9, 2022 
By:
 

Date:

May 10, 2022

By:

/s/ Phillips S. Baker, Jr.

  

Phillips S. Baker, Jr., President,

  

Chief Executive Officer and Director

Date:  November 9, 2022 

Date:

By:

May 10, 2022

By:

/s/ Russell D. Lawlar

  

Russell D. Lawlar, Senior Vice President,

  

Chief Financial Officer

5164