# Hecla Mining Co: Form 10-Q for the period ended Mar 31, 2022

- Company: [Hecla Mining Co](/companies/hl.md) (CIK 719413)
- Form: 10-Q
- Filed: 2022-05-10
- Accepted by EDGAR: May 10, 2022, 10:58 ET
- Period: 2022-03-31
- Accession: 0001437749-22-011641
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/719413/000143774922011641/hl20220331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/719413/000143774922011641/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $186.5m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2022-01-01 to 2022-03-31 | $141.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-01-01 to 2022-03-31 | $45.4m | us-gaap:GrossProfit |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | $14.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $10.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $5.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | $4.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | $0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 544,061,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | $37.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $21.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2022-01-01 to 2022-03-31 | $3.5m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2022-01-01 to 2022-03-31 | $1.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2022-03-31 | $212.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $344.0m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $2.74bn | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $188.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $1.01bn | us-gaap:Liabilities |
| Shareholders' equity | at 2022-03-31 | $1.73bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 78,434 characters.

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 States 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 at our Nevada Operations segment prior to suspension of operations during 2021. 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 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.

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.

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

- rapidly responding to the threats from the COVID-19 pandemic to protect our workforce, operations and communities while maintaining liquidity;
- operating our properties safely, in an environmentally responsible 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's Silver Valley in the historic Coeur d'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.

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.

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 million in COVID-19 mitigation costs during the three months ended March 31, 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 and metals prices. 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). 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 zinc were higher, with the average realized price for silver lower, in the first three months of 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.

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 million revolving credit agreement, of which $17.3 million was used as of March 31, 2022 for letters of credit, leaving approximately $232.7 million available for borrowing.

Another challenge for us is the risk associated with environmental litigation and ongoing reclamation activities. As described *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 our environmental liabilities and liquidity needs, as well as our strategic plans, may be significantly impacted as a result of these matters or new matters that may arise. We strive to ensure that our activities are conducted in compliance with applicable laws and regulations and attempt to resolve environmental litigation on terms as favorable to us as possible.

### Consolidated Results of Operations

Sales of products by metal for the three-month periods ended March 31, 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 |

22

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 quarters of 2022 and 2021, we recorded net positive price adjustments to provisional settlements of $1.0 million and $0.6 million, respectively. The price adjustments related to silver, gold, lead and zinc contained in our concentrate shipments were largely 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 and doré shipped during the period.

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 |

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 products versus the portion of those metals actually paid for by our customers pursuant to our sales contracts. Differences can also arise from inventory changes incidental to shipping schedules, or variances in ore grades which impact the amount of metals contained in concentrates produced and sold.

Sales, total cost of sales, gross profit, Cash Cost, After By-product Credits, per Ounce (“Cash Cost”) (non-GAAP) and All-In Sustaining Cost, After By-product Credits, per Ounce (“AISC”) (non-GAAP) at our operations for the three-month periods ended March 31, 2022 and 2021 were as follows (in thousands, except for Cash Cost and AISC):

| Three Months Ended March 31, 2022: | Silver Greens Creek | Lucky Friday | Other (2) | Total Silver (3) | Gold Casa Berardi | Nevada Operations | Total Gold |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| 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 |

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

(3) The calculation of AISC, After By-product Credits, per 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, 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 we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset operating costs within our calculations of Cash Cost, After By-product Credits, per Silver Ounce and AISC, After By-product Credits, per Silver Ounce.

We believe the identification of silver as a by-product credit is appropriate at Casa Berardi and Nevada Operations because of its lower economic value compared to gold and due to the fact that gold is the primary product we intend to produce there. In addition, we do not receive sufficient revenue from silver at Casa Berardi 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 first quarter of 2022, we recorded income applicable to common stockholders of $4.0 million ($0.01 per basic common share), compared to income of $21.3 million ($0.04 per basic common share) during the first quarter of 2021. The following factors contributed to the results for the first three 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.

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

| 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 |

(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 million decrease in gross profit during the first quarter of 2022 compared to the same 2021 period was the result of lower sales volumes, as a result of lower ore grades and the timing of concentrate shipments, and lower average silver prices, partially offset by higher average gold, zinc and lead prices.

The chart below illustrates the factors contributing to the variances in Cash Cost, After By-product Credits, per Silver Ounce for the first quarter of 2022 compared to the first quarter of 2021:

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) |

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 |

The decrease in Cash Costs, After By-Product Credits, per Silver Ounce for the first quarter of 2022 compared to 2021 was primarily due to the higher by-product credits, partially offset by higher mining and milling costs. The net impact of these factors was outweighed by higher sustaining capital spending, resulting in the increase in AISC, After By-Product Credits, per Silver Ounce for the first quarter of 2022 compared to 2021.

### 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 |

(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 profit in the first quarter of 2022 compared to the first quarter of 2021 was the result of higher sales volume and lead and zinc prices, partially offset by lower average silver prices.

Total production cost per ton increased by approximately 30% in the first quarter of 2022 compared to the first quarter of 2021 primarily due to higher costs for labor, equipment maintenance, contractors and consumables and lower mill throughput.

The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, per Silver Ounce for the first quarters of 2022 and 2021.

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 |

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 |

The decrease in Cash Cost and AISC, After By-product Credits, per Silver Ounce for the first quarter of 2022 compared to the first quarter of 2021 was due to higher silver production resulting from increased grades, higher by-product credits due to increased lead and zinc prices, and improved quality of concentrates.

### 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 |

(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).*

Gross profit decreased by $13.1 million for the first quarter of 2022 compared to the first quarter of 2021 primarily due to lower gold production, due to lower ore grades, accompanied by higher mining costs for labor, contractors and consumables. The increase in mining costs is partially attributable to inflation and a higher portion of development costs for 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.

The chart below illustrates the factors contributing to Cash Cost, After By-product Credits, per Gold Ounce for the first quarter of 2022 compared to the first quarter of 2021:

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 |

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 |

The increase in Cash Cost and AISC, After By-product Credits, per Gold Ounce for the first quarter of 2022 compared to the first quarter of 2021 was primarily the result of lower gold production 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.

### 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 compared 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. 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 ton and Cash Cost and AISC, After By-product Credits, per Gold Ounce.

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.

### Corporate Matters

#### Employee Benefit Plans

Our defined benefit pension plans, while providing a significant benefit to our employees, represent a liability to us. The liability recorded for the underfunded status of our plans was $5.9 million and $6.0 million as of March 31, 2022 and December 31, 2021, respectively. We do not expect to be required to contribute to our defined benefit pension 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 plan provisions, 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 first quarter of 2022, an income and mining tax provision of approximately $5.6 million resulted in an effective tax rate of 57.6% for that period. This compares to an income and mining tax provision of $4.7 million, or an effective tax rate of 18.1%, for the first quarter of 2021. 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, the effective tax rate will fluctuate, sometimes significantly, period to period. For the period ended March 31, 2022, we used the annual effective tax rate method to calculate the tax provision, a change from the discrete method used for the period ended March 31, 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 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-month periods ended March 31, 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.

Cash Cost, After By-product Credits, per Ounce is an important operating statistic that we utilize to measure each mine's operating performance. We use AISC, After By-product Credits, per Ounce as a measure of our mines' net cash flow after costs for exploration, pre-development, reclamation, and sustaining capital. This is similar to the Cash Cost, After By-product Credits, per Ounce non-GAAP measure we report, but also includes on-site exploration, reclamation, and sustaining capital costs. Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain silver and gold production. Cash Cost, After By-product Credits, per Ounce and AISC, After By-product Credits, per Ounce also allow us to benchmark the performance of each of our mines versus those of our competitors. As a silver and gold mining company, we also use these statistics on an aggregate basis - aggregating the Greens Creek 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 and royalties. AISC, Before By-product Credits for each mine also includes on-site exploration, reclamation, and sustaining capital costs. AISC, Before By-product Credits for our consolidated silver properties also includes corporate costs for general and administrative expense, and sustaining exploration and capital costs. By-product credits include revenues earned from all metals other than the primary metal produced at each operation. As depicted in the tables below, by-product credits comprise an essential element of our silver operations' cost structure, distinguishing our silver operations due to the polymetallic nature of their orebodies.

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

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

35

| 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

| 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

| 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

| 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

| 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 |  |

(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.

### 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. 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, 2022, we had $212.0 million in cash and cash equivalents, of which $23.4 million was held in foreign 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, 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 10-K, our board of directors declared and paid dividends on common stock totaling $3.4 million in the first quarter of 2022 and $4.7 million in the first quarter of 2021. 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 |

41

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

Pursuant to our stock repurchase program described in *Note 12* of *Notes to Consolidated Financial Statements* in our 2021 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. As of March 31, 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, 2022, was $5.08 per share.

Pursuant to our at-the-market equity distribution agreement (“ATM”) described in *Note 12* of *Notes to Consolidated Financial Statements* in our 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. 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 and cash resources, customary black-out restrictions, and whether we have any material inside information. The agreement can be terminated by us at any time. Any shares issued under the equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to a shelf registration statement on Form S-3. No shares have been sold under the agreement as of March 31, 2022.

We believe as a result of our cash balances, the performance of our current and expected operations, current metals prices, proceeds from potential at-the-market sales of common stock, and availability of our revolving credit facility, we 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, IQ Notes and revolving credit facility (if amounts are drawn); care-and-maintenance and other costs related to addressing the impact 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 total of approximately $135 million will be spent in 2022 on capital expenditures, primarily for equipment, infrastructure, and development at our mines, including $21.5 million already incurred as of March 31, 2022. We also estimate that exploration and pre-development expenditures will total approximately $45 million in 2022, including $12.8 million already incurred as of March 31, 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 expenditures 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 you that such financing will be available to us.

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 |

Cash and cash equivalents increased by $2.0 million in the first three months of 2022 as a result of operational performance. Cash held in foreign currencies represents balances in CAD and MXN, with a $9.6 million increase in the first quarter of 2022 resulting from an increase in CAD held. The value of marketable equity securities increased 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** |

Cash provided by operating activities in the first quarter of 2022 was substantially unchanged compared to the first quarter of 2021, with lower income adjusted for non-cash items offset by the impact of working capital changes.

|  | Three Months Ended March 31, 2022 | March 31, 2021 |
| --- | ---: | ---: |
| **Cash used in investing activities (in millions)** | **$(29.2)** | **$(21.4)** |

During the first quarter of 2022 we invested $21.5 million in capital expenditures compared to $21.4 million in the first quarter of 2021, with higher capital spending at Greens Creek and Lucky Friday offset by lower spending at Casa Berardi. In the first quarter of 2022 we acquired investments in other mining companies for a total cost of $10.9 million and recognized $2.5 million in proceeds on the sale of investments, with no such activity in the first quarter of 2021.

|  | Three Months Ended March 31, 2022 | March 31, 2021 |
| --- | ---: | ---: |
| **Cash used in financing activities (in millions)** | **$(7.2)** | **$(6.8)** |

We paid total cash dividends on our common and preferred stock of $3.5 million and $4.8 million in the first quarter of 2022 and 2021, respectively. We made repayments on our capital leases of $1.7 million and $1.9 million in the first quarter of 2022 and 2021, respectively.

Exchange rate fluctuations between the U.S. dollar and the Canadian dollar and Mexican peso resulted in a $0.5 million increase in cash and cash equivalents in the first quarter of 2022 compared to an increase of $0.2 million in the first quarter of 2021.

### 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, 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 |

(1) Consists of open purchase orders and contractual obligations of approximately $7.7 million at Greens Creek, $10.1 million at Lucky Friday, $0.2 million at Casa Berardi and $4.6 million at the Nevada Operations.

(2) We have a $250 million revolving credit agreement which is currently undrawn. We had $17.3 million in letters of credit outstanding as of March 31, 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) Includes scheduled finance lease payments of $13.9 million and $1.6 million (including interest) for equipment at Greens Creek and Casa Berardi, respectively.

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

(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. 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, 2022, our liabilities for these matters totaled $114.2 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 in *Management's Discussion and Analysis of Financial Condition and Results of Operations* in our 2021 Form 10-K.

### 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'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's 100%-owned subsidiaries: Hecla Limited; Silver Hunter Mining Company; Rio Grande Silver, Inc.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Hecla Montana, Inc.; Revett Silver Company; RC Resources, Inc.; Troy Mine Inc.; Revett Exploration, Inc.; Revett Holdings, Inc.; Mines Management, Inc.; Newhi, Inc.; Montanore Minerals Corp.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; Hecla Juneau Mining Company; Klondex Holdings Inc.; Klondex Gold & Silver Mining Co.; Klondex Midas Holdings Limited; Klondex Aurora Mine Inc.; Klondex Hollister Mine Inc; and Hecla Quebec, Inc. We completed the offering of the Senior Notes 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.
- ***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.

### Unaudited Interim Condensed Consolidating Balance Sheets

*(in thousands)*

| Assets | As of March 31, 2022 Parent | Guarantors | Non- Guarantors | Eliminations | Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| 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 |

46

### Unaudited Interim Condensed Consolidating Statements of Operations

*(in thousands)*

|  | Three Months Ended March 31, 2022 Parent | Guarantors | Non- Guarantors | Eliminations | Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| 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) |

### Unaudited Interim Condensed Consolidating Statements of Cash Flows

*(in thousands)*

|  | Three Months Ended March 31, 2022 Parent | Guarantors | Non- Guarantors | Eliminations | Consolidated |
| --- | ---: | ---: | ---: | ---: | ---: |
| 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 |

## Market risk

As filed, 4,463 characters.

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, 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 *Item 1A. – Risk Factors* of our 2021 Form 10-K).

#### 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 ). We utilize financially-settled forward 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, 2022, metals contained in concentrate sales and exposed to future price changes totaled 2.1 million ounces of silver, 5,476 ounces of gold, 10,798 tons of zinc, and 5,940 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 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.

#### 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 months ended March 31, 2022 and 2021, we recognized net foreign exchange loss of $2.0 million and $2.1 million, respectively. Foreign currency exchange rates are influenced by a number of factors beyond our control. A 10% change in the exchange rate between the USD and CAD from the rate at March 31, 2022 would have resulted in a change of approximately $10.1 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, 2022 would have resulted in a change of approximately $0.1 million in our net foreign exchange gain or loss.

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.

## Controls and procedures

As filed, 1,566 characters.

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, 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, 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

## Risk factors

As filed, 265 characters.

*Item 1A - Risk Factors* of our annual report filed on Form 10-K for the year ended December 31, 2021 sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.

Filed May 10, 2022.
Source: SEC EDGAR, the filing index for accession 0001437749-22-011641. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.