HECLA MINING CO/DE/ (HL)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 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 this MD&A, all references to income or losses per share are on a diluted basis.

Overview

Hecla Mining Company stands as North America's premier silver producer, with a rich heritage dating back to 1891. Our operations at Greens Creek, Lucky Friday, and Keno Hill combined to produce 37% of total 2025 silver production in the U.S. and Canada, complemented by significant gold production from Greens Creek. Our strategic positioning in the stable jurisdictions of the U.S. and Canada provides us with distinct operational advantages and reduced political risk compared to our global peers. Our operational and strategic framework centers on four core pillars:

1.
Achieving operational excellence through standardized systems and continuous improvement

2.
Optimizing our portfolio through strategic reviews and targeting highest risk-adjusted return projects

3.
Intensifying our focus on financial discipline with a rigorous capital allocation framework

4.
Leveraging our position as North America's largest silver producer to meet growing demand from green technology markets

Recent Developments

On March 25, 2026, we completed the sale of our Hecla Quebec Inc. ("Hecla Quebec") subsidiary which owns the Casa Berardi mine to Orezone Gold Corporation ("Orezone") for a fair value of $385.7 million ($601.7 million on an undiscounted basis) comprised of the following:

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Cash of $170.0 million upon closing on March 25, 2026

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Accounts receivable related to working capital adjustments of $16.6 million

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65,757,265 Orezone common shares valued at $106.1 million on closing

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Deferred cash consideration ("Deferred Cash Consideration") with a fair value of $57.1 million for the cash payments of $30 million and $50 million to be received 18 months and 30 months after closing, respectively

•
Contingent cash consideration ("Contingent Cash Consideration") with a fair value of $35.9 million for a total of up to $241 million of undiscounted payments consisting of:

o
A fair value of $3.3 million for two annual gold-price related payments of $5 million each should the average gold price exceed $4,200/oz for the first and second years following closing

o
A fair value of $9.9 million for two contingent payments of $10 million each due upon issuance of certain permits to open pit mine two additional identified orebodies

o
A fair value of $22.7 million for certain future gold production-based royalty payments with an undiscounted value of up to $211 million ($80/ounce for the first 500,000 ounces, then $180/ounce thereafter from future open pit operations)

Orezone has a set-off right to reduce the unpaid balance of the Deferred Cash Consideration payments by 50% of the amount by which the financial assurance required by the Quebec government under the updated Casa Berardi closure plan exceeds $150 million, excluding increases caused by Orezone's post-closing actions. The closure excess amount has been included in determining the fair value of the Deferred Cash Consideration.

The sale of Hecla Quebec represents disciplined portfolio optimization and focuses capital allocation on our silver assets, which we believe to represent significant growth and value creation opportunities. We have solidified our revenue exposure to silver and we are focused on operating in what we view to be the most favorable jurisdictions. We used the cash proceeds from the transaction for debt reduction and balance sheet strengthening, enhancing our financial flexibility and capacity to invest in strategic growth investments.

We determined that the sale of Hecla Quebec represents a strategic shift that has a major effect on our operations and financial results and therefore, beginning in the first quarterly report on Form 10-Q for the period ending March 31, 2026, the Casa Berardi operation is no longer a reportable segment and its financial results are reflected in the Company’s unaudited interim condensed consolidated financial statements as a discontinued operation for all periods presented. Unless otherwise specified, the discussion of financial results within this Item 2 MD&A will focus on our continuing operations, in relation to the respective comparative periods which have been recast to reflect the continuing operations of our business.

Second Quarter 2026 Highlights

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Operational Achievements:

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Production - We produced 4.2 million ounces of silver, compared to 4.5 million ounces in the second quarter of 2025, primarily due to lower throughput and grades at Greens Creek. We produced 14,199 ounces of gold at Greens Creek, a decrease compared to 17,750 ounces produced in the second quarter of 2025, driven by lower throughput and grades.

Financial Performance:

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Revenue Generation - Generated sales of $333.9 million, a 52% increase over the second quarter of 2025.

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Income from continuing operations and shareholder returns - Generated income from continuing operations of $117.9 million, compared to $26.9 million in the second quarter of 2025 and returned $2.5 million in dividends to common stockholders.

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Investments in Continuing Operations - Made capital investments of $39.1 million, including $12.1 million at Greens Creek, $16.7 million at Lucky Friday and $7.2 million at Keno Hill.

Year to date 2026 Highlights

Operational Achievements:

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Leading North American Silver Producer - Through the completion of the sale of Hecla Quebec, we have solidified our position as North America's premier silver producer.

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Production - We produced 8.1 million ounces of silver, compared to 8.6 million ounces of silver in 2025, primarily due to lower grades at Keno Hill and throughput at Greens Creek, partly offset by higher grades at Lucky Friday. At Greens Creek, we produced 27,085 ounces of gold, a decrease compared to 31,509 ounces produced in 2025, driven by lower grade and throughput.

Financial Performance:

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Revenue Generation - Generated sales of $745.3 million, a 76% increase over 2025.

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Income from continuing operations and shareholder returns - Generated income from continuing operations of $282.5 million, compared to $51.2 million in the 2025 period and returned $5.0 million in dividends to common stockholders.

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Investments in Continuing Operations - Made capital investments of $78.4 million, including $18.2 million at Greens Creek, $33.7 million at Lucky Friday and $22.3 million at Keno Hill.

Growth Pipeline

We are evaluating several organic growth opportunities that may leverage existing infrastructure, operational expertise, and permitting frameworks.

At Greens Creek, we are evaluating a proposed pyrite concentrate circuit that, if developed, could recover additional silver and gold that currently report to tailings. Preliminary engineering and metallurgical work indicates the potential for incremental future silver and gold production from this circuit, possibly as soon as late 2027 or the first half of 2028. These estimates are preliminary and remain subject to significant technical, economic, permitting, metallurgical, and other uncertainties, and the project has not been approved for construction.

We are also evaluating the potential to reprocess all or part of the existing dry-stack tailings facility at Greens Creek. This project could recover additional silver and gold currently contained in tailings material, subject to further metallurgical testing and the identification of a suitable third-party processing arrangement.

Lastly, we continue to evaluate the potential restart of our fully permitted Midas mill in northern Nevada. Any restart would depend on, among other things, our ability to expand the existing high-grade gold and silver resource to a scale sufficient to support a sustainable operation.

Each of these opportunities remains in varying stages of engineering, metallurgical evaluation, permitting review, and economic analysis. The timing, scope, and ultimate development of these opportunities may influence future capital allocation decisions, exploration expenditures, and sustaining or growth capital requirements, and may require the receipt of additional permits, approvals, and other authorizations. We have not approved construction or development of any of these projects, and any decision to proceed would require further technical, economic, and regulatory review and approval by management and, where applicable, our Board of Directors.

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There is no assurance that any of these opportunities will be developed, or that if developed, will be completed on the timeline or with the results currently anticipated.

See Item 1A. "Risk Factors" in Part II of this report.

External Factors that Impact our Results

Our financial results vary as a result of fluctuations in market prices primarily for silver and, to a lesser extent, gold, zinc, lead, and copper. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. To date, tariffs have not materially impacted our financial results. However, future tariffs or other global trade restraints could impact our performance. Historically our US operations have had significant sales into China and Canada, and each of those countries is or could be subject to tariffs, and each has or may retaliate in kind. Notwithstanding these recent developments, we believe that the outlook for precious metals fundamentals is favorable due to macro-economic factors such as geopolitical uncertainty and global growth expectations, which have resulted in significant volatility in the financial and commodities markets, including the precious metals market. See Item 1A. “Risk Factors” contained in Part I of our 2025 Form 10-K for further discussion. Because we cannot control the price of our products, except to the extent we have entered into hedging transactions, the key measures that management focuses on in operating our business are production volumes, payable sales volumes, Cash Cost, After By-product Credits, per Ounce (non-GAAP) and All-In Sustaining Cost, After By-product Credits, per Ounce (“AISC”) (non-GAAP), operating cash flows, capital investments, free cash flow (non-GAAP), and adjusted EBITDA (non-GAAP). The average realized prices for all metals sold by us continued to exhibit significant volatility during the period. We have also experienced significant cost inflation across our operations, principally associated with higher energy prices, increased costs for other consumables such as reagents, explosives, steel, and higher labor and contractor costs.

Consolidated Results of Continuing Operations

Total sales for the three and six months ended June 30, 2026 and 2025 were as follows:

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Overview

Hecla Mining Company stands as the premier silver producer, with a rich heritage dating back to 1891. Our operations at Greens Creek, Lucky Friday and Keno Hill combined to produce 37% of 2024 silver production in the U.S. and Canada, complemented by significant gold production from Casa Berardi and Greens Creek. We began ramp-up of the Keno Hill mill during the second quarter of 2023. Our strategic positioning in the stable jurisdictions of U.S. and Canada provides us with distinct operational advantages and reduced political risk compared to our global peers. Our operational and strategic framework centers on four core pillars:

1.
Achieving operational excellence through standardized systems and continuous improvement

2.
Optimizing our portfolio through strategic reviews and targeting highest risk-adjusted return projects

3.
Intensifying our focus on financial discipline with a rigorous capital allocation framework

4.
Leveraging our position as North America's largest silver producer to meet growing demand from green technology markets

Recent Developments

On January 26, 2026, we announced the sale of our Hecla Quebec Inc. subsidiary which owns the Casa Berardi segment to Orezone for up to $593 million in total consideration. The transaction is expected to close in the first quarter of 2026, subject to the satisfaction of customary closing conditions. There can be no assurance that the transaction will be completed on the expected timeline or at all, or that we will receive the full anticipated consideration. Details of the consideration to be received are as follows:

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Cash consideration of $160 million due upon closing;

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Equity consideration of approximately 65.7 million Orezone common shares, to be issued upon closing, valued at $112 million as of January 26, 2026;

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Deferred cash consideration of $30 million and $50 million to be paid at 18 months and 30 months, respectively, from closing; and

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Contingent consideration of up to $241 million consisting of:

o
Production-based royalty payments of up to $211 million ($80/ounce for the first 500,000 ounces, then $180/ounce thereafter from open pit operations)

o
Permit receipt payment of $20 million upon grant of permits

o
Gold price-linked payment of up to $10 million at gold prices exceeding $4,200/ounce.

The sale of Casa Berardi represents a disciplined portfolio optimization and focuses capital allocation on our differentiated silver assets, which we believe to represent significant growth and value creation opportunities. Upon closing, we will further solidify our position as a leading silver multi-asset mining company with what we believe to be the best revenue exposure to silver amongst our immediate peers and focused on operating in what we view to be the most favorable jurisdictions. We anticipate using the cash proceeds from the transaction for debt reduction and balance sheet strengthening, enhancing our financial flexibility and capacity to invest in strategic growth investments, positioning us to maximize value from our world-class silver portfolio. We are confident in Orezone's operational expertise and believe they are well-positioned to create additional value from Casa Berardi.

2025 Highlights

Operational Achievements:

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Strong Production - Delivered 17.0 million ounces of silver and 150,509 ounces of gold. Gold production benefited from higher grades and recoveries at Greens Creek and the continuation of underground mining at Casa Berardi. See Consolidated Results of Operations below for information on total cost of sales, as well as cash costs and AISC, each after by-product credits, per silver and gold ounce for 2025, 2024 and 2023.

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Lucky Friday Production - Achieved record production of 5.3 million ounces, while continuing to advance infrastructure projects such as the surface cooling plant and beginning work on a new tailings impoundment.

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Keno Hill Consistent Production - Produced 3.0 million ounces of silver, meeting production guidance of 2.9 - 3.1 million ounces, which represents a 9% increase from the prior year, while continuing to improve the developed state of the mine and invest in infrastructure needed to advance toward commercial production.

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Nevada Properties Advancement - Advanced exploration and permitting across the Company's Nevada portfolio. At the Midas Project, a 2025 drilling program confirmed mineralized structures in five of six targets tested, including a gold discovery at the previously untested Pogo trend that returned 0.95 ounces per ton gold over 2.2 feet with visible gold, and at the Sinter Offset target, 0.46 ounces per ton gold over 6.1 feet, extending the Sinter Vein approximately 750 feet across a post-mineral fault from its 2021 discovery location. The Midas district historically produced approximately 2.2 million ounces of gold and 27 million ounces of silver during modern-era operations (1998–2014) and includes existing permitted infrastructure, including a mill with approximately 1,200 tons per day capacity, that has been in care and maintenance for approximately five years. At the 100% owned Aurora project, the Company received a Finding of No Significant Impact and Record of Decision for the Polaris exploration project, a permitting milestone enabling the advancement of exploration drilling activities at this historically high-grade gold-silver property. Both Nevada projects are supported by existing infrastructure that the Company plans to evaluate for refurbishment in connection with a potential restart of operations, which is expected to require significantly lower capital expenditure than construction of new facilities, subject to the results of ongoing technical and economic assessments.

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Safety - Reduced company wide TRIFR to 1.69, an improvement of 13% over the prior year.

Financial Performance:

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Revenue Generation - Achieved record sales of more than $1.4 billion.

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Continuous Improvement - Turned Keno Hill profitable for the first time under our ownership, delivering $53.7 million in gross profit and Casa Berardi generated $112.4 million of gross profit, both a significant improvement over the prior year.

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Shareholder Returns - Generated net income applicable to common stockholders of $321.2 million and returned $10.4 million to our common stockholders through dividend payments.

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Investment in Operations - Made capital investments of approximately $252.4 million, including $54.6 million at Greens Creek, $72.9 million at Lucky Friday, $61.5 million at Casa Berardi and $58.2 million at Keno Hill.

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Deleveraged and Strengthened Balance Sheet - Redeemed $212 million of our Senior Notes using proceeds from the sale of stock under our ATM program. In addition, cash flow from operating activities of $562.6 million allowed for full repayment of IQ notes in July and full repayment of the revolving credit facility in September.

Our average realized prices for silver, gold and zinc increased in both 2025 and 2024 compared to 2024 and 2023 respectively. See the Consolidated Results of Operations section below for information on our average realized metals prices for 2025, 2024 and 2023. Lead and zinc represent important by-products at all our silver operations, and gold is also a significant by-product at Greens Creek. Copper is a minor by-product credit at Greens Creek.

See the Consolidated Results of Operations section below for a discussion of the factors impacting income applicable to common stockholders for the three years ended December 31, 2025, 2024 and 2023.

Key Issues Impacting our Business

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

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operating our properties safely, in an environmentally responsible and cost-effective manner;

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strengthen our balance sheet to preserve our financial position in varying metals price and operational environments, improve capital allocation framework with a focus on ROIC and increasing free cash flow;

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improving and optimizing operations at all sites, which includes incurring costs for new technologies and equipment, and implementing standardized systems and processes;

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optimize asset portfolio and identify growth opportunities, including through the pending sale of our Casa Berardi segment and Quebec assets to Orezone;

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expanding our proven and probable reserves, mineral resources and production capacity at our properties;

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advancing the development and ramp up of the Keno Hill mine to sustained profitability;

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seeking opportunities to acquire and invest in mining and exploration properties and companies;

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advancing permitting of the Libby Exploration project in Montana;

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enhance ESG performance and risk management systems;

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build high-performing teams and strengthen organizational capabilities; and

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maintaining and investing in exploration and pre-development projects in the vicinities of 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; our projects located in two districts in Nevada; our projects in the Keno Hill mining district in the Yukon Territory, Canada; northwestern Montana; and the Republic Mining District in Washington state.

We strive to achieve excellent safety and health performance everywhere we work. 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 strive for continuous improvement in mine safety and emergency preparedness by staying current with industry best practices, while implementing measures that are appropriate for our operations and the risks we face. 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, the Workers' Safety and Compensation Board in the Yukon 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 in the United States the Mine Safety and Health Act, various environmental laws and regulations and the 1872 Mining Law.

A number of key factors may impact the execution of our strategy, including regulatory issues, metals prices and inflationary pressures on input costs. 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 and Note 10 of Notes to Consolidated Financial Statements. 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. We utilize forward contracts and options 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) from time to time silver, zinc and lead that we forecast for future concentrate shipments. In addition, we have in place a $225.0 million revolving credit agreement. As of December 31, 2025, no amount was drawn on the facility, with $6.7 million being used for let

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