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

These risks, uncertainties and other factors include, but are not limited to, those set forth under Part I, Item 1A - Business - Risk Factors in our annual report filed on Form 10-K for the year ended December 31, 2007, as updated in Part II, Item 1A. Risk Factors in this quarterly report on Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to Hecla Mining Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Hecla Mining Company has provided precious and base metals to the U.S. economy and worldwide since its incorporation in 1891. We discover, acquire, develop, produce, and market silver, gold, lead and zinc. In doing so, we intend to manage our business activities in a safe, environmentally responsible and cost-effective manner.

We produce both metal concentrates, which we sell to custom smelters, and unrefined gold bullion bars, which may be sold as dorι or further refined before sale to precious metals traders. We are organized and managed into three segments that encompass our operating units and significant exploration interests:

• The Lucky Friday unit;
• The Greens Creek unit; and
• The San Sebastian unit and various exploration activities in Mexico.

Prior to the second quarter of 2008, we also reported a fourth segment, the La Camorra unit, representing our operations and various exploration activities in Venezuela. On June 19, 2008, we entered into an agreement to sell our wholly owned subsidiaries holding our business and operations in Venezuela, the transaction closing on July 8, 2008. Our Venezuelan activities are reported as discontinued operations on the Condensed Consolidated Statement of Operations for all periods presented (see Note 5of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information). As a result, we have determined that it is no longer appropriate to present a separate segment representing our operations in Venezuela, and have restated the corresponding information for all periods presented.

Metals prices represent one of our greatest opportunities, and risks, as well as the bases for some of our most significant estimates. In the third quarter and first nine months of 2008, the prices of silver and gold exceeded their levels from the same periods last year. The average price of lead for the first nine months of 2008 exceeded its level for the same 2007 period, however, the average lead price for the third quarter of 2008 was below its level for the third quarter of 2007. Zinc prices were lower for both periods of 2008, compared to the same 2007 periods.

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

• Managing our operations and cash flows in a manner that will facilitate repayment of our bridge and term loans;

• Assuming operating responsibility for and fully integrating our acquisition in April 2008 of the remaining 70.3% of the Greens Creek Joint Venture in Alaska, of which we previously held 29.7%, which will double our silver production by giving our various subsidiaries sole ownership of the world's fifth largest silver mine (See Note 14 of Notes to the Condensed Consolidated Financial Statements (Unaudited) for further discussion);

• Expanding our proven and probable reserves, and production capacity, at operating properties;

• Investing in the generation of new exploration projects in the vicinities of four world-class mining districts we believe to be under-explored and under-invested, including North Idaho's Silver Valley in the historic Coeur d'Alene Mining District, the prolific silver-producing district near Durango, Mexico, Alaska's Admiralty Island located offshore of Juneau, and the Creede district of Southwestern Colorado;

• Continuing to seek opportunities to acquire and investment in mining properties and companies; and

• Along with the expansion occurring in 2008 as a result of our acquisition of the remaining interest in Greens Creek, the right to earn into a 70% interest in the San Juan Silver Mining Joint Venture, and an agreement to acquire substantially all of the assets of Independence Lead Mines Company, as discussed further in Note 14 of Notes to the Condensed Consolidated Financial Statements (Unaudited), we plan to continue to seek opportunities for growth both internally and through acquisition. See the Results of Operations and Financial Liquidity and Capital Resources sections below.

Our estimate for 2008 silver production is approximately 9 million ounces, which includes production resulting from our April 16, 2008 acquisition of the companies owning the remaining 70.3% of the Greens Creek mine (discussed in Notes 14 of Notes to the Condensed Consolidated Financial Statements (Unaudited)).

For the third quarter and first nine months of 2008, we recorded losses applicable to common shareholders of $7.2 million and $39.5 million ($0.05 and $0.31 per common share, respectively), compared to income applicable to common shareholders of $12.3 million and $44.6 million ($0.10 and $0.37 per common share, respectively) during the same periods in 2007. The following factors resulted in the reduced results for the third quarter and first nine months of 2008, compared to the same periods in 2007:

• A decrease in gross profit at our Greens Creek and Lucky Friday units of $2.1 million and $7.2 million, respectively, for the third quarter of 2008, and by $19.2 million and $9.9 million, respectively, for the first nine months of 2008, compared to the same 2007 periods (see the Greens Creek Segment and Lucky Friday Segment sections below for further discussion of these variances).
• An increased loss from discontinued operations at the La Camorra unit of $3.3 million for the first nine months of 2008, compared to the same 2007 period, including foreign exchange losses in the first nine months of 2008 that exceeded those incurred in 2007 by $3.1 million (see the Discontinued Operations - La Camorra Unit section below).
• A loss on the sale of our interests in Venezuela, net of the related income tax effect, of $11.4 million in the second quarter of 2008 (see Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).
• The sale of our interest in the Hollister Development Block gold exploration project in April 2007, which resulted in a pre-tax gain of $63.8 million reported in the second quarter of 2007.
• Interest expense of $6.8 million and $12.7 million for the third quarter and first nine months of 2008 in connection with debt incurred for the purchase of the remaining interest in the Greens Creek joint venture. See Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information on the debt facility.
• $3.3 million and $9.8 million increases in preferred stock dividends when comparing the third quarter and first nine months of 2008 to the same 2007 periods, due to the issuance of 2,012,500 shares of Mandatory Convertible Preferred Stock in December 2007. The net proceeds from the preferred stock issuance were utilized for the purchase of the remaining interest of the Greens Creek joint venture.
• Decreased average prices for zinc and lead produced at our operations for the three-month period ended September 30, 2008, and for zinc for the nine-month period ended September 30, 2008, compared to the same 2007 periods, as illustrated by the following table:

                                            Three months ended       Nine months ended
                                              September 30,            September 30,

                                             2008         2007        2008        2007

  Silver - London PM Fix ($/ounce)        $    15.03    $  12.70   $    16.63    $ 13.12
  Gold - London PM Fix ($/ounce)          $      870    $    681   $      897    $   666
  Lead - LME Final Cash Buyer ($/pound)   $     0.87    $   1.43   $     1.08    $  1.07
  Zinc - LME Final Cash Buyer ($/pound)   $     0.80    $   1.46   $     0.95    $  1.56

During the third quarter of 2008, the Company realized silver, gold, lead and zinc prices of $12.30 per ounce, $848 per ounce, $0.87 per pound and $0.73 per pound, respectively, compared to realized prices of $13.49 per ounce, $732 per ounce, $1.69 per pound and $1.30 per pound, respectively, in the third quarter of 2007 at its ongoing operations.

During the nine months ended September 30, 2008, the Company realized silver, gold, lead and zinc prices of $15.93 per ounce, $901 per ounce, $1.00 per pound and $0.84 per pound, respectively, compared to realized prices of $13.55 per ounce, $689 per ounce, $1.27 per pound and $1.36 per pound, respectively, in the same period of 2007 at its ongoing operations.

The differences between realized metal prices and average market prices are due to the difference between metal prices upon transfer of title of concentrates to the buyer and final settlement. For the three months ended September 30, 2008, the Company reported negative adjustments to provisional settlements of $11.6 million compared to positive adjustments of $1.0 million for the same period of 2007. For the nine months ended September 30, 2008, the Company reported negative adjustments to provisional settlements of $15.9 million compared to positive adjustments of $0.4 million for the first nine months of 2007.

• Recognition of $44.7 million to increase our current estimated liabilities for environmental remediation in Idaho's Coeur d'Alene Basin and the Bunker Hill Superfund Site in June 2007. During the second quarter of 2007, we finalized a proposed multi-year clean-up plan for the upper portion of the Coeur d'Alene Basin, together with an estimate of related costs to implement the plan. Based on that work and a reassessment of our other potential liabilities in the Basin, we increased our accrual for remediation in the Basin by $42 million. We also accrued an additional $2.7 million for the remaining Bunker Hill Superfund Site work. For additional discussion, see Bunker Hill Superfund Site and Coeur d'Alene River Basin Environmental Claims in Note 6 of Notes to Consolidated Financial Statements.
• Sale of our 8.2 million shares of Great Basin Gold stock in the second quarter of 2008, resulting in an $8.1 million gain.
• Increased average prices for silver and gold produced at our operations, as illustrated by the table above.

The Greens Creek Segment

Below is a comparison of the operating results and key production statistics of our Greens Creek segment, which reflects our 29.7% ownership share through April 16, 2008 and our 100% ownership thereafter, as we completed the acquisition of the companies holding the remaining 70.3% ownership of the Greens Creek mine on April 16. See Note 14 of Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion of the acquisition. Dollars are presented in thousands, except for per ton and per ounce amounts.

                                        Three months ended            Nine months ended
                                           September 30,                September 30,

                                        2008           2007          2008           2007

Sales                                $    50,400    $   19,298    $   111,123    $    57,997
Cost of sales and other direct
production costs                         (33,797 )      (6,841 )      (80,337 )      (20,832 )
Depreciation, depletion and
amortization                              (8,572 )      (2,304 )      (19,349 )       (6,534 )

Gross profit                         $     8,031    $   10,153    $    11,437    $    30,631


Tons of ore milled                       187,617        58,384        393,202        161,204
Silver ounces produced                 1,776,914       679,884      4,017,108      2,073,435
Gold ounces produced                      16,396         5,614         36,504         14,963
Zinc tons produced                        16,452         5,021         34,371         13,574
Lead tons produced                         4,781         1,697         10,920          4,688
Payable silver ounces sold             2,006,266       527,476      3,735,758      1,782,063
Payable gold ounces sold                  17,441         3,795         32,047         11,648
Payable Zinc tons sold                    12,947         3,278         27,139         10,571
Payable Lead tons sold                     5,269         1,220          9,786          3,623
Silver ounces per ton                      13.32         15.54          14.36          16.62
Gold ounces per ton                         0.14          0.14           0.15           0.14
Zinc percent                               10.13          9.65          10.25           9.45
Lead percent                                3.32          3.72           3.60           3.68
Total cash cost per silver ounce
(1)                                  $      3.79    $    (7.42 )  $      1.96    $     (5.15 )

(1) A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

• higher cost of sales, as a percentage of sales which increased to 67% and 72%, respectively, for the third quarter and first nine months of 2008, compared to 35% and 36%, respectively, for the same periods of 2007. The higher cost of sales in 2008 is primarily due to increased costs of diesel fuel and other consumables. The nine-month period increase includes the fair value of the finished and in-process product inventory acquired upon purchase of the 70.3% ownership. Upon the sale of the acquired inventory, the fair market value was expensed, which increased the cost of sales, and decreased the gross profit margin. The lower of cost or market represents the differential between the fair value of the acquired inventory and the acquired company's cost to produce;
• higher depreciation, depletion and amortization expense, as a percentage of sales, as a result of the fair market valuation of the acquired 70.3% share of property, plant, equipment and mineral interests at the acquisition date;
• 14% decline in silver ore grades for the third quarter and first nine months of 2008, compared to the same 2007 periods;
• lower average zinc and lead prices for the three-month period, and lower average zinc prices for the nine-month period, compared to the same 2007 periods;
• a 43% increase in concentrate freight costs primarily due to higher energy prices; and
• negative price adjustments to revenues of $10.4 million and $14.3 million during the three and nine-month periods ended September 30, 2008 as a result of declines in metal prices between transfer of title of concentrates to buyers and final settlement.

The Greens Creek operation is currently powered by diesel generators, and production costs have been significantly affected by increasing fuel prices. Infrastructure has been installed that allows hydroelectric power to be supplied to Greens Creek by Alaska Electric Light and Power Company ("AEL&P"), via a submarine cable from North Douglas Island, near Juneau, to Admiralty Island, where Greens Creek is located. This project is anticipated to reduce production costs at Greens Creek in the future. AEL&P has agreed to supply its excess power to Greens Creek, however, supply has been hampered by low reservoir water supplies and high demand in the Juneau vicinity.

The $11.21 and $7.11 increases in total cash cost per ounce for the third quarter and first nine months of 2008, respectively, compared to 2007, are attributable to lower silver grades, higher concentrate freight costs, and increased operating costs. While value from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product is appropriate because:

• silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;
• we have historically presented Greens Creek as a producer primarily of silver, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year;
• metallurgical treatment maximizes silver recovery;
• the Greens Creek deposit is a massive sulfide deposit containing an unusually high proportion of silver; and
• in most of its working areas, Greens Creek utilizes selective mining methods in which silver is the metal targeted for highest recovery.

We periodically review our proven and probable reserves to ensure that reporting of primary products and by-products is appropriate. Within our cost per ounce calculations, because we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset increases in operating costs due to increased prices.

The Lucky Friday Segment

     The following is a comparison of the operating results and key production
statistics of our Lucky Friday segment (dollars are in thousands, except for per
ounce amounts):


                                        Three months ended            Nine months ended
                                           September 30,                September 30,

                                        2008           2007          2008           2007

Sales                                $    14,125    $   20,512    $    54,024    $    59,344
Cost of sales and other direct
production costs                          (9,431 )      (8,932 )      (30,196 )      (26,344 )
Depreciation, depletion and
amortization                              (1,328 )      (1,016 )       (3,591 )       (2,930 )

Gross profit                         $     3,366    $   10,564    $    20,237    $    30,070


Tons of ore milled                        81,665        72,592        245,480        241,011
Silver ounces produced                   739,870       661,511      2,164,338      2,317,741
Lead tons produced                         4,707         4,032         13,877         13,630
Zinc tons produced                         2,399         1,606          7,489          5,711
Payable silver ounces sold               669,150       633,393      2,016,149      2,154,338
Payable lead tons sold                     4,248         3,866         12,841         12,502
Payable zinc tons sold                     1,743         1,132          5,051          3,527
Silver ounces per ton                       9.72          9.89           9.45          10.46
Lead percent                                6.25          6.03           6.10           6.15
Zinc percent                                3.54          3.22           3.58           3.16
Total cash cost per silver ounce
(1)                                  $      6.06    $    (2.38 )  $      4.55    $     (0.28 )

(1) A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

The $7.2 million decrease in gross profit for the third quarter of 2008, compared to the same 2007 period, is primarily the result of lower average lead and zinc prices and higher operating costs. The $9.8 million decrease in gross profit for the first nine months of 2008 compared to 2007 is primarily due to lower average zinc prices, increased concentrate treatment charges, and higher operating costs. The results for the first nine months of 2008 were also affected by lower silver production due to silver ore grades that decreased by 10% compared to the same 2007 period. The lower silver ore grades are due to the nature of the ore body. In addition, negative price adjustments to revenues of $1.2 million and $1.7 million, respectively, impacted results for the three and nine-month periods ended September 30, 2008 due to declines in metal prices between transfer of title of concentrates to buyers and final settlement.

The $8.44 and $4.83 increases in total cash costs per silver ounce in the third quarter and first nine months of 2008, compared to the same 2007 periods, are primarily attributed to the lower silver ore grades and higher mining and milling costs. The negative third quarter variance was also a result of reduced by-product credits, due to lower lead and zinc prices.

Mining at longer strike lengths at the Lucky Friday has allowed us to take advantage of the high metal prices and the mill's ability to recover more zinc due to recent upgrades. This has resulted in an economic benefit and has allowed us to temporarily mine lower grade ore that is below anticipated life-of-mine reserve levels, which also delays some production of metals included in the reserve to later periods. While value from lead and zinc is significant at the Lucky Friday, we believe that identification of silver as the primary product, with zinc and lead as by-products, 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;
• the Lucky Friday unit is situated in a mining district long associated with silver production; and
• the Lucky Friday unit generally utilizes selective mining methods to target silver production.

The San Sebastian Segment

We reached the end of the known mine life on the Francine and Don Sergio veins at the San Sebastian unit located in Mexico during the fourth quarter of 2005. However, significant exploration efforts have continued during 2006, 2007, and 2008 at the Hugh Zone and other exploration targets located on or near the San Sebastian property, where we now hold approximately 500 square miles of contiguous concessions. Concessions totaling 166 square miles were added to our land package at the San Sebastian segment during the first quarter of 2008. Additional exploration activity at the San Sebastian unit in 2007 and 2008 has included completion of initial drilling on a number of veins at our Rio Grande project, where our concession holdings cover approximately 5 square miles. We incurred $0.6 million and $4.2 million, respectively, in exploration expenses during the third quarter and first nine months of 2008 at San Sebastian, compared to $2.2 million and 5.2 million in the comparable periods of 2007. The San Sebastian mine and Velardeρa mill are currently on care-and-maintenance status as we continue exploration efforts.

Discontinued Operations - The La Camorra Unit

During the second quarter of 2008, we committed to a plan to sell all of the outstanding capital stock of El Callao Gold Mining Company ("El Callao") and Drake-Bering Holdings B.V. ("Drake-Bering"), our wholly owned subsidiaries holding our business and operations of the La Camorra Unit to Rusoro Mining, Ltd. ("Rusoro") for $20 million in cash and 4,273,504 shares of Rusoro common stock valued at $5.4 million at the time of the transaction. The transaction closed on July 8, 2008. Pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the results of our Venezuelan operations have been reported in discontinued operations for all periods presented. See Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.

The following is a comparison of the operating results and key production statistics of our discontinued Venezuelan operations, which included the La Camorra mine, a custom milling business and Mina Isidora (dollars are in thousands, except per ton and per ounce amounts):

                                          Three months ended             Nine months ended
                                             September 30,                 September 30,

                                        2008             2007            2008          2007

Sales                                $         -    $       10,460    $   23,855    $   46,174
Cost of sales and other direct
production costs                               -            (6,516 )     (21,656 )     (38,136 )
Depreciation, depletion and
amortization                                   -            (2,627 )      (4,785 )     (11,824 )

Gross income (loss)                  $         -    $        1,317    $   (2,586 )  $   (3,786 )

. . .