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. market 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 work force reduction in the first quarter of 2009 and a 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 as a reportable segment as of and for the three- and nine- month periods ended September 30, 2009. The corresponding information for all periods presented has 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; and
• 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 10.5 and 11 million ounces.

Results of Operations

For the third quarter and first nine months of 2009, we recorded income applicable to common shareholders of $22.5 million and $25.5 million ($0.10 and $0.12 per common share), respectively, compared to losses applicable to common shareholders of $7.2 million and $39.5 million ($0.05 and $0.31 per common share), respectively, during the same periods in 2008. The following factors resulted in the improved results for the third quarter and first nine months of 2009, compared to the same periods in 2008:

• Increased gross profit at our Greens Creek unit by $20.5 million and $36.2 million for the third quarter and first nine months of 2009, respectively, compared to the same 2008 periods (see the Greens Creek Segment section below for further discussion of these variances).
• Higher gross profit at our Lucky Friday unit for the third quarter of 2009 (although lower for the nine-month period as discussed below) by $6.3 million compared to the same period in 2008 (see the Lucky Friday Segment section below for more information).
• A decrease in the loss from discontinued operations at the La Camorra unit from $17.4 million for the first nine months of 2008. There was no such comparable loss reported in the same 2009 period 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, 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 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 $2.7 million and $13.4 million in the third quarter and first nine months of 2009, respectively, compared to the same 2008 periods as a result of an overall cash conservation effort.
• Lower interest expense, net of interest capitalized, during the third quarter and first nine months of 2009 by $4.0 million and $2.5 million, respectively, compared to the same 2008 periods 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).
• Higher realized metals prices for all four metals produced at our operations during the third quarter of 2009 compared to the same period in 2008. However, realized prices and average market prices for silver, zinc and lead were lower in the first nine months of 2009 compared to the same period last year, as discussed below.

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

• Decreased realized prices and average market prices for silver, zinc and lead produced at our operations, partially offset by higher gold prices, for the nine-month period ended September 30, 2009 compared to the same 2008 period. However, our realized prices for all four metals were higher in the third quarter of 2009 compared to the same period in 2008. The following table compares our realized prices and the average market prices for the three- and nine-month periods ended September 30, 2009 and 2008:

                                             Three months ended September      Nine months ended September
                                                          30,                              30,
                                              2009              2008            2009              2008
Silver -   London PM Fix ($/ounce)          $   14.70     $           15.03   $   13.68     $          16.63
           Realized price per ounce         $   16.33     $           12.30   $   14.93     $          15.93
Gold -     London PM Fix ($/ounce)          $     960     $             870   $     930     $            897
           Realized price per ounce         $     999     $             848   $     970     $            901
Lead -     LME Final Cash Buyer ($/pound)   $    0.87     $            0.87   $    0.69     $           1.08
           Realized price per pound         $    1.02     $            0.87   $    0.82     $           1.00
Zinc -     LME Final Cash Buyer ($/pound)   $    0.80     $            0.80   $    0.67     $           0.95
           Realized price per pound         $    0.95     $            0.73   $    0.78     $           0.84

• 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 nine 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).
• Decreased gross profit at our Lucky Friday unit by $2.8 million for the first nine months of 2009 compared to the same 2008 period (see the Lucky Friday Segment section below).

• $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).

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. Dollars are presented in thousands, except for per ton
and per ounce amounts.


                                        Three months ended September 30,         Nine months ended September 30,
                                           2009                 2008                2009                 2008
Sales                                $          71,670    $          53,894   $         167,240    $         118,211
Cost of sales and other direct
production costs                               (29,750 )            (37,291 )           (79,789 )            (87,425 )
Depreciation, depletion and
amortization                                   (13,435 )             (8,572 )           (39,792 )            (19,349 )
Gross profit                         $          28,485    $           8,031   $          47,659    $          11,437

Tons of ore milled                             204,984              187,617             601,590              393,202
Production:
Silver (ounces)                              1,801,692            1,776,914           5,913,643            4,017,108
Gold (ounces)                                   16,815               16,396              50,789               36,504
Zinc (tons)                                     17,835               16,452              50,829               34,371
Lead (tons)                                      5,585                4,781              16,124               10,920
Payable metal quantities sold:
Silver (ounces)                              2,210,838            2,006,266           5,474,457            3,735,758
Gold (ounces)                                   15,416               17,441              43,038               32,047
Zinc (tons)                                     10,942               12,947              37,589               27,139
Lead (tons)                                      5,757                5,269              12,946                9,786
Ore grades:
Silver ounces per ton                            12.63                13.32               13.50                14.36
Gold ounces per ton                               0.13                 0.14                0.13                 0.15
Zinc percent                                     10.04                10.13                9.61                10.25
Lead percent                                      3.53                 3.32                3.46                 3.60
Total cash cost per silver ounce
(1)                                  $           (0.48 )  $            3.79   $            1.70    $            1.96

(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 $20.5 million and $36.2 million increases in gross profit during the third quarter and first nine 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 nine months ended September 30, 2009 of $8.1 million and $15.0 million, respectively, as a result of increases in metals prices between transfer of title of concentrates to buyers and final settlements during those periods, compared to negative price adjustments of $10.4 million and $14.3 million, respectively, during the three and nine months ended September 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 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 23% and 27%, respectively, per ton of ore milled for the three and nine months ended September 30, 2009 compared to the same 2008 periods due to increased availability of grid electric power, lower diesel prices and improved ore production.
• Higher realized prices for silver, zinc and lead for the third quarter of 2009 compared to the same 2008 period, and higher average gold prices for the three- and nine-month periods ended September 30, 2009 compared to the same 2008 periods. See the Results of Operations section above for a comparison of 2009 and 2008 realized and average market prices.

These factors were partially offset by:

• Lower average prices in the nine-month period ended September 30, 2009 for silver, zinc and lead compared to the same 2008 period.
• Higher depreciation, depletion and amortization expense by $4.9 million and $20.4 million, respectively, in the third quarter and first nine months of 2009 compared to the same 2008 periods as a result of additional capitalization and an increase in units-of-production depreciation driven by higher production in 2009.
• 5% and 6% declines in silver ore grades for the third quarter and first nine months of 2009, compared to the same 2008 periods.
• Higher mine license taxes by $1.6 million and $2.2 million for the third and first nine months of 2009 compared to the same 2008 periods. The higher taxes are the result of increased profits primarily due to higher realized metals prices and reduced production costs, as discussed above.

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. During 2009, the mine has been able to receive an increased proportion of its power needs from AEL&P and expects this to continue for the foreseeable future.

Cash cost per ounce decreased by $4.27 for the third quarter of 2009 compared to the same 2008 period primarily due to production costs and treatment and freight costs that decreased by $2.34 and $0.93 per ounce, respectively, and by-product credits that increased by $1.79 per ounce, partially offset by production taxes that increased by $0.90 per ounce. Cash cost per ounce was $0.26 lower for the first nine months of 2009 compared to the same 2008 period due to production costs and treatment and freight costs that decreased by $2.91 and $2.08 per ounce, respectively, partially offset by by-product credits that were lower in the 2009 period by $4.50 per ounce. 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
                                             September 30,            Nine months ended September 30,
                                          2009           2008            2009                 2008
Sales                                  $    23,511    $   14,591   $          57,272    $          55,235
Cost of sales and other direct
production costs                           (11,329 )      (9,897 )           (32,450 )            (31,407 )
Depreciation, depletion and
amortization                                (2,551 )      (1,328 )            (7,339 )             (3,591 )
Gross profit                           $     9,631    $    3,366   $          17,483    $          20,237

Tons of ore milled                          88,281        81,665             258,915              245,480
Production:
Silver (ounces)                            930,258       739,870           2,664,895            2,164,338
Lead (tons)                                  5,615         4,707              16,551               13,877
Zinc (tons)                                  2,781         2,399               7,908                7,489
Payable metal quantities sold:
Silver (ounces)                            866,899       669,150           2,491,437            2,016,149
Lead (tons)                                  5,214         4,248              15,284               12,841
Zinc (tons)                                  2,036         1,743               5,745                5,051
Ore grades:
Silver ounces per ton                        11.22          9.72               10.97                 9.45
Lead percent                                  6.84          6.25                6.87                 6.10
Zinc percent                                  3.52          3.54                3.48                 3.58
Total cash cost per silver ounce
(1)                                    $      3.42    $     6.06   $            5.89    $            4.55

(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 $6.3 million increase in gross profit for the third quarter of 2009 compared to the same 2008 period is primarily the result of higher production due to improving silver ore grades and increased mill tonnage. The $2.8 million decrease in gross profit for the first nine months of 2009 compared to 2008 is primarily due to lower average metal prices, partially offset by improved production, higher silver ore grades, and a 19% decrease in production costs.

The $2.64 decrease in total cash costs per silver ounce in the third quarter of 2009 compared to the same 2008 period is primarily attributed to lower production costs and treatment and freight costs by $1.85 and $1.71 per ounce, respectively. The $1.34 increase in total cash cost per silver ounce in the first nine months of 2009 compared to the same 2008 period is primarily due to lower lead and zinc by-product credits by $5.91 per ounce, due to lower average prices for those metals, partially offset by improved treatment and freight costs and production costs by $2.23 and $2.06 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 lead and zinc 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.

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. 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 summary of the operating results and key production statistics of our discontinued Venezuelan operations prior to sale, which included the La Camorra mine, a custom milling business and Mina Isidora (dollars are in thousands, except per ounce amounts):

                                                         Nine months ended
                                                         September 30, 2008
      Sales                                             $             23,855
      Cost of sales and other direct production costs                (21,656 )
      Depreciation, depletion and amortization                        (4,785 )
      Gross loss                                        $             (2,586 )

      Tons of ore processed                                           25,516
      Gold ounces produced                                            22,160
      Gold ounces per ton                                              0.894
      Total cash cost per gold ounce                    $                996

Corporate Matters

Other significant items affecting the results of our third quarter and first nine months of 2009, as compared to the same periods in 2008, were as follows:

• General and administrative expense was higher by $1.6 million during the third quarter of 2009 compared to the same 2008 period due to higher stock compensation and incentive compensation expense, partially offset by decreased staffing. General and administrative expense was higher by $0.6 . . .