News Details

Silver production up 64%, gold production up 68%;

Significant capital and operating cost reductions

For the Period Ended June 30, 2013

COEUR D'ALENE, Idaho--(BUSINESS WIRE)-- Hecla Mining Company (NYSE:HL) today announced a second quarter net loss applicable to common shareholders of $25.0 million, or $0.08 per basic share, and a loss after adjustments applicable to common shareholders of $10.2 million, or $0.03 per basic share.¹ Second quarter silver production was 2.2 million ounces at a Total Cash Cost, Net of By-product Credits, per Silver Ounce of $5.56.²

The Company reported a 64% increase in second quarter silver production to 2.2 million ounces compared to a year ago, with strong production from Greens Creek and the re-opening of the Lucky Friday silver mine. In addition, gold production increased by 68% to 22,226 ounces, following the June 1 acquisition of Aurizon, the owner of the Casa Berardi gold mine in Quebec.

HIGHLIGHTS AND SIGNIFICANT ITEMS

• Completed the acquisition of Aurizon Mines Ltd. on June 1, 2013.
• Issued $500 million of 6 7/8% Senior Notes due in 2021.
• Produced 2.2 million ounces of silver, a 64% increase over the same period in 2012 and an 18% increase over the first quarter of 2013.
• Produced 22,226 ounces of gold, a 68% increase over the same period in 2012, with only one month of production from Casa Berardi.
• Total Cash Cost, Net of By-product Credits, per Silver Ounce was $5.56, a 21% decrease over the first quarter, and Total Cash Cost, Net of By-product Credits, per Gold Ounce was $1,152² at Casa Berardi for June (the first month following the acquisition).
• Sales of $85.3 million, a 27% increase over the same period in 2012.
• Negative provisional price adjustment of $15.1 million, of which $12.90 was due to silver, resulting in a $16.27 realized silver price.
• Expenses related to the Aurizon acquisition totaled $20.3 million.

• Net loss applicable to common shareholders of $25.0 million, or $0.08 per basic share.
• Loss after adjustments applicable to common shareholders of $10.2 million, or $0.03 per basic share.
• Adjusted EBITDA of $31.5 million³, about $4.0 million more than the same period in 2012.
• Reduced capital, exploration and pre-development expenditures 13%, 28% and 35%, respectively, from original 2013 budgets.
• Cash and cash equivalents of $296 million at June 30, 2013.

"The acquisition of Aurizon and associated financing was a pivotal event for Hecla, despite the associated costs resulting in a loss for the second quarter. With Greens Creek operating well, the Lucky Friday ramping up and Casa Berardi in the final quarters of completing major improvements, we are in a strong operating and financial position," said Hecla's President and Chief Executive Officer Phillips S. Baker, Jr. "However, in response to lower precious metals prices we have significantly scaled back capital, exploration and pre-development expenditures from original plans this year. As we plan for next year, we will continue to monitor metals prices and further adjust our plans accordingly with the goal of spending within EBITDA. With mines that have operated as long as 70 years and a company that has been in existence over 120 years, we have operated in significantly lower price environments than we have today. Our operations are low cost and have significant revenue from lead and zinc that we have largely hedged. This hedging is approximately the equivalent of one year's operating costs, and we are now hedging all metals once they have been shipped, to reduce the variability in our realized price. In addition, our balance sheet is strong with almost $300 million of cash.

"The combination of our properties' locations in great mining jurisdictions, their long lives and low costs along with our financial strength we believe positions Hecla to be among the few precious metals mining companies that can prosper in lower price environments. We will look for opportunities to not only deliver value for shareholders in the short term but position the company for long term success," Mr. Baker added.

FINANCIAL OVERVIEW

Net loss applicable to common shareholders for the second quarter was $25.0 million, or $0.08 per share, compared to net income applicable to common shareholders of $2.4 million, or $0.01 per basic share, for the same period a year ago, and was impacted by the following items:

• Costs expensed related to the acquisition of Aurizon were $20.3 million during the quarter excluding a foreign exchange gain of $0.5 million and a mark to market inventory adjustment resulting from the purchase price allocation of $0.5 million.
• A $6.8 million tax benefit compared to a $0.7 million provision in the same period in 2012, as a result of higher pre-tax income in 2012.
• Losses of $15.1 million on provisional price adjustments compared to losses of $1.5 million in the same period of 2012.
• Interest expense, net of amount capitalized, increased to $6.5 million in the second quarter, compared to $0.5 million in the same period of 2012, as a result of the $500 million 6 7/8% Senior Notes.

During the quarter, operating cash flow was ($1.1 million), due primarily to the unusual factors impacting net income this quarter, as described above.

Capital expenditures (including non-cash capital lease additions) at the operations totaled $34.2 million for the second quarter. Expenditures were $12.7 million at the Lucky Friday, $15.6 million at Greens Creek and $5.9 million at Casa Berardi. With the acquisition of Aurizon, Hecla's total capital expenditures for 2013 (excluding capitalized interest) are expected to be approximately $178 million, including $62.0 million at the Lucky Friday, $67.0 million at Greens Creek and $48.0 million at Casa Berardi. Planned capital expenditures have been reduced at the Lucky Friday and Greens Creek by about 13% for the year. The planned $26.0 million open pit expenditure at Casa Berardi has been deferred.

Exploration expenditures were $6.2 million in the second quarter. Most of the exploration was concentrated on surface and underground at Greens Creek ($2.3 million, or 40%) andSan Sebastian($1.1 million, or 19%). Year-to-date expenditures are $12.7 million, which is about the same as last year. Expected exploration expenditures for the year have been reduced about 28% to $22.0 million with about $9.0 million remaining for the second half of the year.

Pre-development expenses were $4.5 million in the second quarter with $3.5 million at the Bulldog Declineproject in Colorado. Expected pre-development expenditures for 2013 have been revised downward by 35% to about $16.0 million, with about $7.0 million remaining for the second half of the year.

For 2014, the Company expects capital, exploration and pre-development expenditures to be within Adjusted EBITDA.

Metals Prices

The average realized silver price in the second quarter was $16.27 per ounce, compared with an average realized price in the second quarter of 2012 of $27.05 per ounce.

Overall second quarter 2013 realized metals prices were lower than those in the first quarter of 2013 and the second quarter of 2012, as a result of lower metals prices that led to negative adjustments to provisional settlements of $15.1 million compared to net negative price adjustments to provisional settlements of $1.5 million in the second quarter of 2012. The adjustment to provisional settlements is largely due to a decrease in silver prices in the time period between the shipment of concentrate and the final settlement. Compounding this effect was the fact that about 40% of the Company's silver production was sold in June, the month with a lower average silver price than the second quarter's. The provisional price adjustments were applied to 2.3 million silver ounces representing an approximate $6.00 per ounce adjustment. The provisional price adjustment related to zinc and lead contained in our concentrate shipments was largely offset by net gains on forward contracts of $0.4 million in the second quarter of 2013 for those metals.

The Company has an active base metals hedging program in place to help manage the exposure to changes in prices of zinc and lead. To reduce the impact of changing metals prices on earnings in future quarters, the company is hedging all its metals exposure once the metal is shipped. The following table summarizes the quantities of base metals committed under financially settled forward sales contracts at June 30, 2013:

OPERATIONS OVERVIEW

Second quarter Total Cash Cost, Net of By-product Credits, per Silver Ounce was $5.56, compared to $1.03 in the same period in 2012. The following table provides the production summary on a consolidated basis for the second quarter and six months ended June 30, 2013 and 2012:

Greens Creek Mine – Alaska

The performance of Greens Creek was very strong in the second quarter of 2013. A total of 2.0 million ounces of silver was produced at Greens Creek, a 48% increase over the 1.4 million ounces in the same period in 2012 and a 13% increase over the first quarter of 2013. Second quarter Total Cash Cost, Net of By-product Credits, per Silver Ounce was $2.71, a 54% reduction over the first quarter of 2013. The increase compared to $1.03 in the same period in 2012 was due in part to lower zinc grades as well as lower average gold and base metals prices. Mining costs per ton were up by 6% and milling costs per ton were up by 17% in the second quarter compared to the same period in 2012 due to higher power generation costs resulting from low availability of hydroelectric power. Production of gold, lead and zinc were up 13%, 19.5% and 10% over the first quarter, respectively.

Greens Creek is expected to produce between 6.0 and 7.0 million ounces of silver in 2013.

Lucky Friday Mine – Idaho

The Lucky Friday mine, which re-opened in February after a year of rehabilitation and enhancement work, produced 217,096 ounces of silver during the second quarter at a Total Cash Cost, Net of By-product Credits, per Silver Ounce of $32.19. These expected elevated costs were due to start-up costs and low silver production during ramp-up. A total of 23,226 tons of ore was milled during the second quarter. All production stopes that were previously operating are now in operation and the mill ran at 760 tons per day in July. The Company expects the mine to ramp up to its expected throughput rate of 900 tons per day in September and that Total Cash Cost, Net of By-product Credits, per Silver Ounce will decline significantly to approximately $9.50 per ounce by year end as a result.

Work continued in the second quarter on the No. 4 Shaft project, which is expected to help increase production levels beginning in 2017.

Lucky Friday is expected to produce approximately 1.3 million ounces in the second half of 2013.

Casa Berardi – Quebec

With the completion of the acquisition of Aurizon on June 1, only one month of gold production from Casa Berardi is recorded in the second quarter. Production of gold totaled 6,740 ounces of gold at a Total Cash Cost, Net of By-product Credits, per Gold Ounce of approximately $1,152 per ounce, which was impacted by lower grades and tons due to mine sequencing in June.

The mine is currently undergoing a shaft deepening project, designed to increase production and extend mine life, which is expected to be completed in the first quarter of 2014. Additional mine enhancements this year include the now completed and commissioned concrete plant and a new paste fill facility, both of which are expected to increase the efficiency of operations.

Casa Berardi is expected to produce approximately 60,000 ounces of gold in the second half of 2013, of which 2/3 is expected in the fourth quarter, within its expected long-term run rate of 125,000 to 150,000 ounces per year.

Aurizon Acquisition

The acquisition of Aurizon Mines Ltd. was completed on June 1, 2013. Funding of the acquisition included the issuance of $500 million of 6 7/8% Senior Notes due on April 12, 2021. Under the terms of the transaction, Hecla acquired all the outstanding common shares of Aurizon for total consideration of approximately CAD$514 million and 56,997,790 common shares for a total cost of $714.5 million. The acquisition brought to Hecla the producing Casa Berardi gold mine, as well as various other exploration and development projects also located in Quebec, that could potentially generate future production growth.

EXPLORATION AND PRE-DEVELOPMENT

Greens Creek – Alaska

Greens Creek exploration made significant progress in defining three stacked high-grade folds that comprise the mineralization at 200 South. This resource has been drilled for over 700 feet of strike length and is open down dip and to the southwest along strike. Significant intersections include 32.4 oz/ton silver, 0.57 oz/ton gold, 4.3% zinc and 2.4% lead over 10.8 feet; 47.4 oz/ton silver, 0.12 oz/ton gold, 16.4% zinc and 7.5% lead over 7.5 feet; 41.1 oz/ton silver, 0.08 oz/ton gold, 11.2% zinc and 12.9% lead over 7.0 feet; and 43.0 oz/ton silver, 0.09 oz/ton gold, 8.3% zinc and 3.5% lead over 3.5 feet. (See additional drill assay highlights in tables at the end of the release.)

Surface drilling is being conducted on the Killer Creek area at Greens Creek, which is about 1.5 miles west-northwest of the mine portal. The five completed holes show broad zones up to 400 feet with stringer veins containing copper, zinc, lead and silver mineralization in the footwall rocks. In general the northern holes are more copper-rich with veins up to 7.0 feet wide.

Casa Berardi – Quebec

At Casa Berardi, five underground drills have been targeting the 113, 118, 123 and 124 Zones. Eleven holes have been completed and the most significant results include 1.7 oz/ton gold over 9.8 feet, 1.13 oz/ton gold over 16.4 feet, and 1.25 oz/ton gold over 26.6 feet. In-fill drilling on the 550 m level confirmed the ore continuity for the lenses 118-06 and 124-03.

At the 124 Zone Principale, eight definition holes have been completed to better define the continuity of the mineralization of the lenses 127-16 and 127-17 and have confirmed the continuity of the 27-116 lenses above the 280 m level. Drill results include 0.42 oz/ton gold over 12.1 feet, 0.24 oz/ton gold over 16.4 feet, 0.31 oz/ton gold over 23.0 feet, and 0.32 oz/ton gold over 16.4 feet. Only one drill was active on surface where extensions to two holes are in progress to evaluate a 42-foot thick quartz vein intersected in last year's drilling below the 123 Zone.

Lucky Friday – Idaho

At Lucky Friday, the first drill has begun definition drilling from the 6200-56 Ramp station on the east side of the resource. Strong intersections have been drilled in the 30, 80 and 90 Veins including 35.2 oz/ton silver, 10.5% lead and 3.4% zinc over 7.5 feet (30 Vein); 31.4 oz/ton silver, 24.0% lead and 2.3% zinc over 3.6 feet (80 Vein) and 12.1 oz/ton silver, 11% lead and 5.7% zinc over 6.7 feet (40 Vein). Diamond drilling from the 6400-55 Ramp is focused on upgrading the resource on the western-central region of the 30 Vein, above the 7300 level, from inferred to indicated categories.

San Sebastian – Mexico

Exploration

Drilling continued along the Middle Vein, which is currently defined for over 3,000 feet along strike and to a depth of 1,000 feet and appears to be open for extension along strike to the southeast. A combination of in-fill drilling to refine and upgrade the resource and exploration drilling that extended the very high-grade resource to the southeast was conducted in the quarter. Recent drill intersections include 65.2 oz/ton silver and 0.07 oz/ton gold over 1.6 feet; 33.6 oz/ton silver and 0.05 oz/ton gold over 2.6 feet and 16.0 oz/ton silver and 0.03 oz/ton gold over 2.4 feet. (See additional drill assay highlights in tables at the end of the release.)

Pre-Development

Pre-development expenditures were primarily directed towards scoping studies to determine the production viability, rate and sequencing of mining with the addition of the newly discovered Middle Vein to the Hugh Zone and Andrea Vein. Drilling for metallurgical samples is complete and results are being analyzed to refine the metallurgical processing and mill design plans. A decision to develop a ramp for definition drilling on both the Hugh Zone and Middle Vein is expected by year-end.

San Juan Silver – Colorado

Pre-Development

Development of the Bulldog infrastructure is continuing with the 2800-foot long decline now advanced over 2,000 feet. The expected fourth quarter 2013 completion of the decline will access old workings and the ore body for the confirmation of the resource and potential drill platforms for exploration. Scoping studies, resource updates and economic models for the Bulldog continue to be advanced.

Heva and Hosco – Quebec

The former Joanna Project is now called the Heva and Hosco Projects, and they were included in the acquisition of Aurizon, along with a number of other exploration and pre-development projects in Quebec.

Heva and Hosco host a development-stage gold project encompassing over 10 kilometers along the Cadillac break, one of the most prolific structures for large gold producers in the Abitibi greenstone belts in Quebec.

The Heva deposit represents a continuous free-milling mineralized system that extends over 2 kilometers along the Cadillac break. The new metallurgical tests performed on the ore from the Heva Zones suggest the ore is not refractory and that over 95% recovery may be achievable with conventional cyanide treatment.

The Company expects to evaluate Heva, Hosco, and the other projects it now controls in Quebec in the context of the new larger and more diversified Hecla to determine which projects have the potential to generate the most value for shareholders.

Junior Exploration Investment Program

Typhoon Exploration Inc.

On June 18, Hecla announced that it had acquired 5.5 million common shares of Typhoon Exploration Inc. for CDN$500,000 pursuant to an option agreement entered into between Typhoon and Aurizon dated May 17, 2010. This acquisition is the fourth of four CDN$500,000 tranches, the first three of which were made by Aurizon prior to its acquisition by Hecla. Upon completion of the subscription, Hecla controls approximately 29.4% of the issued and outstanding common shares of Typhoon. Typhoon has exploration properties located in Quebec, Canada, including the Fayolle property which is located 35 kilometres north of the Heva and Hosco properties.

Dividends

Common

TheBoard of Directors declared a quarterly dividend of $0.0025 per share of common stock, payable on or about September 3, 2013, to shareholders of record on August 26, 2013. The realized silver price was $16.27 in the second quarter and therefore did not trigger a larger dividend under the Company's dividend policy.

Preferred

The Board of Directors also declared the regular quarterly dividend of $0.875 per share on the outstanding Series B Cumulative Convertible Preferred Stock, on a total of 157,816 shares outstanding. This represents a total amount to be paid of approximately $138,000. The cash dividend is payable October 1, 2013, to shareholders of record on September 13, 2013.

2013 Guidance

For the full year 2013, based on current metals prices, the Company expects:

• Silver production of between 8.0 and 9.0 million ounces at Total Cash Cost, Net of By-product Credits, per Silver Ounce of approximately $5.00.
• Gold production from Casa Berardi of approximately 60,000 ounces in the second half of 2013 at an estimated Total Cash Cost, Net of By-product Credits, per Gold Ounce of $900.
• 2013 capital expenditures (excluding capitalized interest) expected to be about $178 million.
• 2013 pre-development expenditures expected to be about $16.0 million.
• 2013 exploration expenditures expected to be about $22.0 million.

CONFERENCE CALL AND WEBCAST

A conference call and webcast will be held Thursday, August 8, at 10:00 a.m. Eastern Time to discuss these financial and operating results. You may join the conference call by dialing toll-free 1-866-318-8618 or for international calls 1-617-399-5137. The participant passcode is HECLA. Hecla's live and archived webcast can be accessed at www.hecla-mining.com under Investors or via Thomson StreetEvents Network.

ABOUT HECLA

Hecla Mining Company (NYSE:HL) is a leading low-cost U.S. silver producer with operating mines in Alaska and Idaho, and is a growing gold producer with an operating mine in Quebec, Canada. The Company also has exploration and pre-development properties in five world-class silver and gold mining districts in the U.S., Canada, and Mexico, and an exploration office and investments in early-stage silver exploration projects in Canada.

Qualified Person (QP) Pursuant to Canadian National Instrument 43-101

Dean McDonald, P.Geo., Senior Vice President - Exploration of Hecla Mining Company, who serves as a Qualified Person under National Instrument 43-101, supervised the preparation of the scientific and technical information concerning Hecla’s mineral projects in this news release. Information regarding data verification, surveys and investigations, quality assurance program and quality control measures and a summary of analytical or testing procedures for the Greens Creek Mine are contained in a technical report titled “Technical Report for the Greens Creek Mine” dated March 28, 2013, for the Lucky Friday Mine are contained in a technical report titled “Technical Report for the Lucky Friday Mine Shoshone County, Idaho, USA” dated March 28, 2013, for Casa Berardi are contained in a technical report titled "Technical Report on the mineral resource and mineral reserve estimate for Casa Berardi Mine, Northwestern Quebec, Canada" dated March 28, 2013 and in a technical report titled "Feasibility Study of the Hosco deposit - Joanna Gold project" dated June 5, 2012. Also included in these four technical reports is a description of the key assumptions, parameters and methods used to estimate mineral reserves and resources and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors. Copies of these technical reports are available under Hecla and Aurizon's profiles on SEDAR at www.sedar.com.

Cautionary Statements

Statements made which are not historical facts, such as anticipated payments, litigation outcome (including settlement negotiations), production, sales of assets, exploration results and plans, costs, and prices or sales performance are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “should,” “expects,” “intends,” “projects,” “believes,” “estimates,” “targets,” “anticipates” and similar expressions are used to identify these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, expected or implied. These risks and uncertainties include, but are not limited to, metals price volatility, volatility of metals production and costs, litigation, regulatory and environmental risks, operating risks, project development risks, political risks, labor issues, ability to raise financing and exploration risks and results. Refer to the company's Form 10-K and 10-Q reports for a more detailed discussion of factors that may impact expected future results. The company undertakes no obligation and has no intention of updating forward-looking statements other than as may be required by law.

Cautionary Statements to Investors on Reserves and Resources

Reporting requirements in the United States for disclosure of mineral properties are governed by the SEC and included in the SEC'sSecurities Act Industry Guide 7, entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” (“Guide 7”). However, the Company is also a "reporting issuer" under Canadian securities laws, which require estimates of mineral resources and reserves to be prepared in accordance with Canadian National Instrument 43-101 (“NI 43-101”). NI 43-101 requires all disclosure of estimates of potential mineral resources and reserves to be disclosed in accordance with its requirements. Such Canadian information is being included here to satisfy the Company's “public disclosure” obligations under Regulation FD of the SEC and to provide U.S. holders with ready access to information publicly available in Canada.

Reporting requirements in the United States for disclosure of mineral properties under Guide 7 and the requirements in Canada under NI 43-101 standards are substantially different. This document contains a summary of certain estimates of the Company, not only of proven and probable reserves within the meaning of Guide 7, which requires the preparation of a “final” or “bankable” feasibility study demonstrating the economic feasibility of mining and processing the mineralization using the three-year historical average price for any reserve or cash flow analysis to designate reserves and that the primary environmental analysis or report be filed with the appropriate governmental authority, but also of mineral resource and mineral reserve estimates estimated in accordance with the definitional standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in NI 43-101. The terms “measured resources,” "indicated resources," and "inferred resources" are Canadian mining terms as defined in accordance with NI 43-101. These terms are not defined under Guide 7 and are not normally not permitted to be used in reports and registration statements filed with the SEC in the United States, except where required to be disclosed by foreign law. Still, investors are cautioned not to assume that any part or all of the mineral deposits in such categories will ever be converted into proven or probable reserves. “Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of such a "resource” will ever be upgraded to a higher category or will ever be economically extracted. Investors are cautioned not to assume that all or any part of a "resource” exists or is economically or legally mineable. Investors are also especially cautioned that the mere fact that such resources may be referred to in ounces of silver and/or gold, rather than in tons of mineralization and grades of silver and/or gold estimated per ton, is not an indication that such material will ever result in mined ore which is processed into commercial silver or gold.

Non-GAAP Measures

(Unaudited)

This release contains references to non-GAAP measures of Total Cash Cost, Net of By-product Credits, per Silver and Gold Ounce. Total Cash Cost, Net of By-product Credits, per Silver and Gold Ounce represent non-U.S. Generally Accepted Accounting Principles (GAAP) measurements that the Company believes provide management and investors an indication of net cash flow. Management also uses this measurement for the comparative monitoring of performance of mining operations period-to-period from a cash flow perspective. They represent a measure developed by gold companies and used by silver companies in an effort to provide a comparable standard; however, there can be no assurance that our reporting of this non-GAAP measure is similar to that reported by other mining companies. Cost of sales and other direct production costs and depreciation, depletion and amortization was the most comparable financial measures calculated in accordance with GAAP to Total Cash Cost, Net of By-product Credits.

The following table calculates Total Cash Cost, Net of By-product Credits, per Silver and Gold Ounce (in thousands, except per-ounce amounts):

This release also refers to a non-GAAP measure of earnings after adjustments. Earnings After Adjustments and Earnings After Adjustments per share are non-GAAP measures which are indicators of our performance. They exclude certain impacts which are of a nature which we believe are not reflective of our underlying performance. Management believes that earnings after adjustments per common share provides investors with the ability to better evaluate our underlying operating performance. The following table reconciles net income applicable to common shareholders to earnings after adjustments applicable to common shareholders (in thousands, except per share amounts):

This release refers to a non-GAAP measure of Adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), which is a measure of our operating performance. Adjusted EBITDA is calculated as net income before the following items: interest expense, income tax provision, depreciation, depletion, and amortization expense, exploration expense, pre-development expense, Aurizon acquisition costs, Lucky Friday suspension-related costs, interest and other income (expense), gains and losses on derivative contracts, and provisional price gains and losses. Management believes that, when presented in conjunction with comparable GAAP measures, Adjusted EBITDA is useful to investors in evaluating our operating performance. The following table reconciles net income to Adjusted EBITDA: