Quarterly Report for Quarter Ending March 31, 2024 (Form 10-Q)

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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 Form 10-Q and do not include all information and disclosures required annually by accounting principles generally accepted in the United States of America ("GAAP"). Therefore, this information should be read in conjunction with the Company's consolidated financial statements and notes contained in our annual report on Form 10-K for the year ended December 31, 2023 ("2023 Form 10-K"). The consolidated December 31, 2023 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 months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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 foursegments: Greens Creek, Lucky Friday, Keno Hill and Casa Berardi.

Effective January 2024 we revised our internal reporting provided to our Chief Operating Decision Maker to no longer include any financial performance information for our Nevada Operations, reflecting the current status of the Nevada Operations being on care and maintenance. General corporate activities not associated with operating mines and their various exploration activities, as well as idle properties and environmental remediation services in the Yukon, Canada, and the previously separately reported Nevada Operations are presented as "Other." The presentation of the prior period information disclosed below has been revised to reflect this change.

Other sales for the three months ended March 31, 2024 and 2023 is comprised of revenue from our environmental remediation services subsidiary in the Yukon for both periods presented and Nevada Operations metal sales in the prior period.

Lucky Friday's income from operations for the three months ended March 31, 2024, includes $17.4million of business interruption insurance proceeds received during the quarter related to the fire which suspended Lucky Friday's operations from August 2023 through January 8, 2024.

Sales of metals for the three months ended March 31, 2024 and 2023 include net gains of $3.1million and $0.9million, respectively, on financially-settled forward contracts for silver, gold, lead and zinc. See Note 8for more information.

Note 3. Income and Mining Taxes

The income and mining tax provision for the three months ended March 31, 2024 and 2023 varies from the amounts that would have resulted from applying the statutory tax rates to pre-tax loss due primarily to the impact of taxation in foreign jurisdictions, non-recognition of net operating losses and foreign exchange gains and losses in certain jurisdictions.

For the three months ended March 31, 2024, we used the annual effective tax rate method to calculate the tax provision. Valuation allowances on Nevada, Mexico and certain Canadian net operating losses were treated as discrete adjustments to the tax provision.

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Note 4. Employee Benefit Plans

For the three months ended March 31, 2024 and 2023, the service cost component of net periodic pension cost is included in the same line items of our condensed consolidated financial statements as other employee compensation costs. The net benefit related to all other components of net periodic pension cost of $1.0millionfor each of the three months ended March 31, 2024, and 2023, is included in other income on our condensed consolidated statements of operations and comprehensive loss.

Note 5. Loss Per Common Share

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

Potential dilutive shares of common stock include outstanding unvested restricted stock awards, 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.

For the three months ended March 31, 2024 and 2023, all outstanding unvested restricted stock units, deferred restricted stock units, warrants and convertible preferred stock were excluded from the computation of diluted loss per share, as our reported net loss would cause their conversion and exercise to have an anti-dilutive effect on the calculation of diluted loss per share.

Note 6. Stockholders' Equity

At-The-Market Equity Distribution Agreement

Pursuant to an equity distribution agreement dated February 18, 2021, we may offer and sell up to 60million shares of our common stock from time to time to or through sales agents. Sales of the shares, if any, will be made by means of ordinary brokers transactions or as otherwise agreed between the Company and the agents as principals. Whether or not we engage in sales from time to time may depend on a variety of factors, including our 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 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. Under the agreement we have sold 14,753,958shares for total proceeds of $76.7million, net of commissions and fees of $1.2 million from September 2022 through March 31, 2024. During the three months ended March 31, 2024, we sold 248,561shares under the agreement for proceeds of $1.1million, net of commissions and fees of $0.04 million.

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 totaled$1.2million forthe three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, there was $5.2million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.3 years.

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 three months ended March 31, 2024, we withheld 277,966shares valued at approximately $1.2 million, or approximately $4.31per share.

Common Stock Dividends

Accumulated Other Comprehensive Income (Loss), Net

Note 7. Debt, Credit Agreement and Leases

Our debt as of March 31, 2024 and December 31, 2023consisted of our 7.25% Senior Notes due February 15, 2028 ("Senior Notes"), our Series 2020-A Senior Notes due July 9, 2025 (the "IQ Notes") and any drawn amounts on our $150million Credit Agreement, which is described separately below. The following tables summarize our long-term debt balances, excluding interest and borrowings under the Credit Agreement, as of March 31, 2024 and December 31, 2023 (in thousands):

Credit Agreement

On July 21, 2022, we entered into a revolving credit facility (the "Credit Agreement") with 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 Credit Agreement is a $150million senior secured revolving facility, with an option to be increased in an aggregate amount not to exceed $75million. Any revolving loans under the Credit Agreement have a maturity date of July 21, 2026. Proceeds of the revolving loans under the Credit Agreement may be used for general corporate purposes. The interest rate on the outstanding loans under the 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 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 Credit Agreement, while certain of our other subsidiaries are guarantors of the borrowers' obligations under the Credit Agreement. As further security, the Credit Agreement 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 Greens 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 March 31, 2024, we had net draws of $140.0millionoutstanding at an interest rate of 8.0%, and $6.8millionof outstanding letters of credit. Letters of credit that are outstanding reduce availability under the Credit Agreement.

We believe we were in compliance with all covenants under the Credit Agreement as of March 31, 2024.

See Note 13: for updates regarding the Credit Agreement.

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Note 8. Derivative Instruments

General

Our current risk management policy provides that up to 75% of five yearsof our foreign currency, lead and zinc metals price and silver and gold price exposure may be covered under a derivatives program with certain other limitations. Our program also utilizes derivatives to 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 or currency exchange rate 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 operation and Keno Hill operation are USD-functional entities which routinely incur expenses denominated in CAD. Such expenses expose us to exchange rate fluctuations between the USD and CAD. We have a program to manage our exposure to fluctuations in the USD exchange rate for these subsidiaries' future operating and capital costs denominated in CAD. The program related to forecasted cash operating costs at Casa Berardi and Keno Hill utilizes forward contracts to buy CAD, some of which are designated as cash flow hedges. As of March 31, 2024, we have a total of 493 forward contracts outstanding to buy a total of CAD $370.6million having a notional amount of USD$278.6million for Casa Berardi, Keno Hill, and some corporate Canadian expenses. The CAD contracts related to forecasted cash operating costs at Casa Berardi and Keno Hill from 2024-2026 have a total notional value of CAD$299.7million and have CAD-to-USD exchange rates ranging between 1.278 and 1.3665The CAD contracts related to forecasted capital expenditures at Casa Berardi from 2024-2026 have a total notional value of CAD$35.1million at an average CAD-to-USD exchange rate of 1.351. The CAD contracts related to forecasted capital expenditures at Keno Hill from 2024-2026 have a total notional value of CAD$19.2million at an average CAD-to-USD exchange rate of 1.354.

Net unrealized losses of $3.9million related to the effective portion of the foreign currency forward contracts designated as hedges are included in accumulated other comprehensive income (loss) as of March 31, 2024. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying operating expenses are recognized. We estimate $2.9million in net unrealized losses included in accumulated other comprehensive income (loss) as of March 31, 2024will be reclassified to current earnings in the next twelve months. Net realized losses of $0.4million and $0.9million on contracts related to underlying expenses which have been recognized were transferred from accumulated other comprehensive income (loss) and included in cost of sales and other direct production costs for the three months ended March 31, 2024and 2023, respectively. Net losses of $1.9million and net gains of $0.7million for the three months ended March 31, 2024and 2023, respectively, were related to contracts not designated as hedges. Nonet unrealized gains or losses related to ineffectiveness of the hedges are included in fair value adjustments, net on our consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, respectively.

Metals Prices

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

Net realized and unrealized gains of $12.5million related to the effective portion of the forward metals contracts designated as hedges were included in accumulated other comprehensive income (loss) as of March 31, 2024. Unrealized gains and losses will be transferred from accumulated other comprehensive income (loss) to current earnings as the underlying forecasted sales are recognized. We estimate $11.2 million in net realized and unrealized gains included in accumulated other comprehensive income (loss) as of March 31, 2024would be reclassified to current earnings in the next twelve months. The realized gains arose due to cash settlement of zinc contracts prior to maturity in 2022 and zinc and lead contracts during 2023 for net proceeds of $17.4million and $8.5million, respectively. We recognized a net gain of $3.1million, including a $1.9million gain transferred from accumulated other comprehensive income (loss), and a net gain of $0.9million, including a $3.0million loss transferred from accumulated other comprehensive income(loss) during the three months ended March 31, 2024 and 2023, respectively. These gains and losses were recognized on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which are included in 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.

Credit-risk-related Contingent Features

Certain of our derivative contracts contain cross default provisions which provide that a default under our Credit Agreement would cause a default under the derivative contract. As of March 31, 2024, we have not posted any collateral related to these contracts. The fair value of derivatives in a net liability position related to these agreements was $5.4million as of March 31, 2024, which includes accrued interest but excludes any adjustment for nonperformance risk. If we were in breach of any of these provisions at March 31, 2024, we could have been required to settle our obligations under the agreements at their termination value of $5.4million.

Note 9. Fair Value Measurement

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

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

Level 2: significant other observable inputs; and

Level 3: significant unobservable inputs.