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, 2008. 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 and silver bullion bars, which may be sold as dorι or further refined before sale to precious metals traders. We are organized and managed into two segments that encompass our operating units and significant exploration interests:

• The Greens Creek unit; and
• The Lucky Friday unit.

Prior to the first quarter of 2009, we reported an additional segment, the San Sebastian unit, for our various properties and exploration activities in Mexico. However, as a result of a recent work force reduction and decrease in exploration activity there resulting from a company-wide cash conservation effort, and our ownership of 100% of Greens Creek (discussed further below), we have determined that the San Sebastian unit no longer meets the criteria for consideration as a reportable segment as of and for the three- and six month periods ended June 30, 2009. The corresponding information for all periods presented have been restated.

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, with the transaction closing on July 8, 2008. Our Venezuelan activities are reported as discontinued operations on the Condensed Consolidated Statement of Income 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.

The map below shows the locations of our operating units and our exploration projects, as well as our corporate offices located in Coeur d'Alene, Idaho and Vancouver, British Columbia.

[[Image Removed: (MAP)]]

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

• operating our properties cost-effectively;
• expanding our proven and probable reserves and production capacity at our operating properties;
• maintaining and investing in exploration projects in the vicinities of four mining districts we believe to be under-explored and under-invested: North Idaho's Silver Valley in the historic Coeur d'Alene Mining District; the prolific silver-producing district near Durango, Mexico; at our Greens Creek unit on Alaska's Admiralty Island located offshore of Juneau; and the Creede district of Southwestern Colorado;
• continuing to seek opportunities to acquire and invest in mining properties and companies; and seeking opportunities for growth both internally and through acquisitions (see the Results of Operations and Financial Liquidity and Capital Resources sections below).

Our estimate for 2009 silver production is between 10 and 11 million ounces.

For the second quarter and first six months of 2009 we recorded a loss applicable to common shareholders of $0.9 million and income applicable to common shareholders of $3.0 million ($0.00 and $0.01 per common share, respectively) compared to losses applicable to common shareholders of $44.4 million and $32.3 million ($0.35 and $0.26 per common share) during the same periods in 2008. The following factors resulted in the improved results for the second quarter and first six months of 2009 compared to the same periods in 2008:

• Increased gross profit at our Greens Creek unit by $15.0 million and $15.8 million for the second quarter and first six months of 2009, respectively, compared to the same 2008 periods (see the Greens Creek Segment section below for further discussion of these variances).
• A decrease in losses on discontinued operations at the La Camorra unit from $19.3 million and $17.4 million for the second quarter and first six months of 2008, respectively. There were no comparable losses reported in the same 2009 periods as we completed the sale of our discontinued Venezuelan operations in July 2008 (see the Discontinued Operations - La Camorra Unit section below).
• A loss on the sale of our interests in Venezuela of $11.4 million, net of income tax effect, in the second quarter of 2008 (see Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).
• The termination of an employee benefit plan resulting in a non-cash gain of $9.0 million recognized in the first quarter of 2009 (see Note 9 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).
• The sale of our Velardeρa mill in Mexico in March 2009 generating a pre-tax gain of $6.2 million (see Note 15 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).

• Decreased exploration expense of $6.1 million and $10.6 million in the second quarter and first six months of 2009, respectively, compared to the same 2008 periods due to a reduction in exploration activity in North Idaho's Silver Valley, at our San Sebastian unit in Mexico, and at the San Juan Silver project in Colorado as a part of an overall cash conservation effort.
• Lower interest expense, net of interest capitalized, during the second quarter of 2009 (although higher for the six-month period as discussed below) by $3.0 million compared to the same 2008 period due to repayments of debt incurred for the acquisition of the remaining 70.3% ownership interest in Greens Creek (see Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).

The factors discussed above were partially offset by the following other significant items affecting the comparison of our operating results for the second quarter and first six months of 2009 to the results for the same 2008 periods:

• Decreased average prices for silver, zinc and lead produced at our operations, partially offset by higher average gold prices, illustrated by the following table comparing the average prices for the three- and six-months ended June 30, 2009 and 2008:

                                                 Three months ended June 30,       Six months ended June 30,
                                                  2009             2008              2009             2008
Silver - London PM Fix ($/ounce)                $   13.73     $         17.17    $       13.17    $       17.43
         Realized price per ounce               $   14.15     $         17.25    $       14.04    $       17.57
Gold -   London PM Fix ($/ounce)                $     922     $           896    $         915    $         911
         Realized price per ounce               $     970     $           896    $         954    $         893
Lead -   LME Final Cash Buyer ($/pound)         $    0.68     $          1.05    $        0.60    $        1.18
         Realized price per pound               $    0.77     $          0.98    $        0.69    $        1.06
Zinc -   LME Final Cash Buyer ($/pound)         $    0.67     $          0.96    $        0.60    $        1.03
         Realized price per pound               $    0.77     $          0.92    $        0.71    $        0.94

• Decreased gross profit at our Lucky Friday unit by $9.1 million for the first half of 2009 compared to the same 2008 period (see The Lucky Friday Segment section below).
• 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.
• $5.7 million in debt-related fees recognized during the first six months of 2009, including $4.3 million for preferred shares issued pursuant to our amended and restated credit agreement and $1.4 million for professional fees incurred related to compliance with our amended and restated credit agreement (see Note 10 and Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).
• $3.0 million loss on impairment of investments recognized in the second quarter of 2009 related to our shares of Rusoro stock received in the sale of our Venezuelan operations (see Note 2 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information).
• Interest expense, net of interest capitalized, of $7.4 million for the six-month period ended June 30, 2009 compared to $5.8 million in the same 2008 period. The interest is in connection with debt incurred for the purchase of the remaining 70.3% interest in Greens Creek (see Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information on our debt facilities).

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, resulting from the
acquisition of the companies holding the remaining 70.3% ownership of the Greens
Creek mine on April 16, 2008. Dollars are presented in thousands, except for per
ounce amounts.


                                      Three months ended June 30,       Six months ended June 30,
                                         2009              2008            2009            2008
Sales                               $        55,557    $     50,683   $       95,571    $    64,316
Cost of sales and other direct
production costs                            (30,252 )       (44,823 )        (50,039 )      (50,164 )
Depreciation, depletion and
amortization                                (13,425 )        (8,941 )        (26,357 )      (10,777 )
Gross profit (loss)                 $        11,880    $     (3,081 ) $       19,175    $     3,375

Tons of ore milled                          205,122         155,535          396,606        205,585
Production:
Silver (ounces)                           2,115,098       1,744,341        4,111,951      2,240,194
Gold (ounces)                                15,925          15,257           33,974         20,108
Zinc (tons)                                  16,874          13,445           32,994         17,919
Lead (tons)                                   5,353           4,701           10,539          6,139
Payable metal quantities sold:
Silver (ounces)                           1,768,238       1,446,661        3,263,619      1,730,149
Gold (ounces)                                14,492          11,616           27,622         14,624
Zinc (tons)                                  16,311          11,980           26,647         14,180
Lead (tons)                                   3,656           3,626            7,189          4,517
Ore grades:
Silver ounces per ton                         13.80           15.88            13.95          15.31
Gold ounces per ton                            0.13            0.16             0.13           0.15
Zinc percent                                   9.20           10.36             9.40          10.35
Lead percent                                   3.32            3.91             3.42           3.85
Total cash cost per silver ounce
(1)                                 $          2.14    $       2.10   $         2.66    $      0.50

(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 $15.0 million and $15.8 million increases in gross profit during the second quarter and first six months of 2009, respectively, compared to the same 2008 periods were primarily the result of the following factors:

• Positive price adjustments to revenues during the three and six months ended June 30, 2009 of $7.4 million and $11.9 million, respectively, as a result of increases in metal prices between transfer of title of concentrates to buyers and final settlements during those periods, compared to negative price adjustments of $4.8 million and $3.8 million, respectively, during the three and six months ended June 30, 2008.
• An increase in our share of production due to our acquisition of the remaining 70.3% of Greens Creek in April 2008.
• Cost of sales for the second quarter of 2008 included the excess of fair value over cost of the finished and in-process product inventory acquired upon purchase of the 70.3% ownership. Upon the sale of the acquired inventory, the excess of fair market value over cost was expensed, which increased the cost of sales, and decreased the gross profit margin for that period by $16.6 million.
• Improved production costs, which decreased by 32% and 27%, respectively, per ton of ore milled for the three and six months ended June 30, 2009 compared to the same 2008 periods due to lower diesel prices and improved ore production.
• Higher average prices for gold for the three- and six-month periods ended June 30, 2009 compared to the same 2008 periods.

These factors were partially offset by:

• Lower average prices in the three- and six-month period ended June 30, 2009 for silver, zinc and lead compared to the same 2008 periods.

• Higher depreciation, depletion and amortization expense by $2.8 million and $8.4 million, respectively, in the second quarter and first six months of 2009 compared to the same 2008 periods 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.
• 13% and 9% declines in silver ore grades for the second quarter and first six months of 2009, compared to the same 2008 periods.

The Greens Creek operation is partially powered by diesel generators, and production costs are significantly affected by fluctuations in 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 has reduced production costs at Greens Creek to the extent power has been available. Supply of power has been limited by low reservoir water supplies and high power demand in the Juneau vicinity.

Cash cost per ounce increased by $2.16 for the six-month period ended June 30, 2009 compared to the same 2008 period due primarily to by-product credits that decreased by $7.60 per ounce, due to lower average zinc and lead prices, partially offset by production costs and treatment and freight costs that decreased by $2.96 and $2.40 per ounce, respectively. Cash cost per ounce was $0.04 higher in the second quarter of 2009 compared to the 2008 period due primarily to by-product credits that were lower in the 2009 period by $5.61 per ounce, partially offset by production costs and treatment and freight costs that decreased by $3.25 and $2.48 per ounce, respectively. 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 June 30,         Six months ended June 30,
                                         2009               2008              2009            2008
Sales                               $        19,053    $        16,810   $       33,760    $    40,645
Cost of sales and other direct
production costs                            (11,274 )          (10,918 )        (21,121 )      (21,480 )
Depreciation, depletion and
amortization                                 (2,502 )           (1,186 )         (4,788 )       (2,263 )
Gross profit                        $         5,277    $         4,706   $        7,851    $    16,902

Tons of ore milled                           84,188             83,448          170,634        163,815
Production:
Silver (ounces)                             868,339            665,165        1,734,637      1,424,468
Lead (tons)                                   5,297              4,461           10,936          9,170
Zinc (tons)                                   2,536              2,543            5,127          5,090
Payable metal quantities sold:
Silver (ounces)                             847,257            689,845        1,624,538      1,409,848
Lead (tons)                                   5,129              4,128           10,069          8,521
Zinc (tons)                                   1,878              1,608            3,711          3,308
Ore grades:
Silver ounces per ton                         11.03               8.63            10.84           9.32
Lead percent                                   6.79               5.82             6.89           6.03
Zinc percent                                   3.43               3.68             3.46           3.60
Total cash cost per silver ounce
(1)                                 $          6.41    $          6.93   $         7.22    $      3.76

(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 $0.6 million increase in gross profit for the second quarter of 2009 compared to the same 2008 period resulted primarily from improved production and silver ore grades, partially offset by lower average prices for all metals produced at the Lucky Friday. The $9.1 million decrease in gross profit for the first six months of 2009 compared to the same period in 2008 is due to lower average metals prices, partially offset by improved production, higher silver ore grades, and a 6% decrease in production costs.

The $0.52 decrease in total cash cost per silver ounce for the second quarter of 2009 compared to the same 2008 period is due primarily to lower production costs and treatment and freight costs by $2.92 and $2.58 per ounce, respectively, partially offset by lower by-product credits, due to lower average prices for lead and zinc, by $5.65 per ounce. The $3.46 increase in total cash cost per silver ounce in the first six months of 2009 compared to the same 2008 periods is primarily due to lower lead and zinc by-product credits by $8.83 per ounce, due to lower average prices for those metals, partially offset by improved treatment and freight costs and production costs by $2.76 and $2.16 per ounce, respectively. 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.

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 and lead to be by-products of our silver production, the values of these metals have offset increases in operating costs due to the increased average prices.

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 3,595,781 shares of Rusoro common stock. 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.

                                                    Three months ended     Six months ended
                                                      June 30, 2008          June 30, 2008
Sales                                              $             14,521    $          23,855
Cost of sales and other direct production costs                 (18,519 )            (21,656 )
Depreciation, depletion and amortization                         (1,677 )             (4,785 )
Gross loss                                         $             (5,675 )  $          (2,586 )

Tons of ore processed                                             4,613               25,516
Gold ounces produced                                              5,179               22,160
Gold ounces per ton                                               1.920                0.894
Total cash cost per gold ounce                     $              2,155    $             996

Corporate Matters

Other significant variances affecting the results of our second quarter and first six months of 2009 as compared to the same periods in 2008 were as follows:

• Lower general and administrative expense by $0.8 million and $1.0 million, respectively, for the three and six-month periods ended June 30, 2009 primarily the result of decreased staffing and incentive compensation expense, partially offset by costs incurred for workforce reductions.
• Increases in other operating expense of $0.4 million and $1.2 million, respectively, for the three and six-month periods ended June 30, 2009 due primarily to an increase in pension benefit costs recognized resulting from a decrease in the expected returns calculated for plan assets.
• $0.5 million and $2.7 million decreases in interest and other income for the second quarter and first six months of 2009 compared to the 2008 periods due to lower interest income as a result of lower cash balances;
• Higher interest expense, net of interest capitalized, by $1.6 million for the first six months of 2009 compared to the same period of 2008 due to the addition of $360 million in debt as a result of our April 16, 2008 acquisition of 70.3% of Greens Creek. Interest expense, net of interest capitalized, for the second quarter of 2009 was lower by $3.0 million compared to the same 2008 period as a result of the payoff of our bridge facility balance in February 2009 and reductions in our term facility balance. See Note 11 of Notes to Condensed Consolidated Financial Statements (Unaudited) for more information on the debt facility. . . .