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THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the Fiscal Year Ended DECEMBER 31, 2002

Commission File No. 1-8491
------------------------------------------------------------

HECLA MINING COMPANY
- --------------------------------------------------------------------------------

(Exact name of registrant as specified in its charter)

Delaware 82-0126240
- ---------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

6500 N. Mineral Drive, Suite 200
Coeur d'Alene, Idaho 83815-9408
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 208-769-4100
-------------------

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on
- ---------------------------------------------- which each class is registered
Common Stock, par value $0.25 per share ) ------------------------------
)
Preferred Share Purchase Rights for )
Series A Junior Participating )
Preferred Stock, par value $0.25 per share )
)
Series B Cumulative Convertible Preferred )
Stock, par value $0.25 per share ) New York Stock Exchange
- ---------------------------------------------- ------------------------------

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_. No ___.

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes _X_. No ___.

The aggregate market value of the Registrant's voting Common Stock held
by nonaffiliates was $412,835,348 as of February 28, 2003. There were
109,377,249 shares of the Registrant's Common Stock outstanding as of February
28, 2003.

Documents incorporated by reference herein:

To the extent herein specifically referenced in Part III, the
information contained in the Proxy Statement for the 2002 Annual Meeting of
Shareholders of the Registrant, which will be filed with the Commission pursuant
to Regulation 14A within 120 days of the end of the Registrant's 2002 fiscal
year is incorporated herein by reference. See Part III.





SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

Certain statements contained in this report (including information
incorporated by reference) are forward-looking statements that reflect our
current expectations and projections about our future results, performance,
prospects and opportunities. We have tried to identify these forward-looking
statements by using words such as "may," "will," "expect," "anticipate,"
"believe," "intend," "plan," "estimate" and similar expressions. These
forward-looking statements are based on information currently available to us
and 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 Item 1 - Business - Risk Factors.

Other matters, including unanticipated events and conditions, also may
cause our actual future results to differ materially from these forward-looking
statements. There can be no assurance that our expectations will prove to be
correct and undue reliance should not be placed on these forward-looking
statements. All of these forward-looking statements are based on our
expectations as of the date of this filing. 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.


Part I

Item 1. Business

INTRODUCTION

Hecla Mining Company, a Delaware corporation, was originally
incorporated in 1891 and is principally engaged in the exploration, development,
mining and processing of silver, gold, lead and zinc, and owns or has interests
in a number of precious and nonferrous metals properties. In this report, "we"
or "our" refer to Hecla Mining Company and/or our affiliates and subsidiaries.

We believe we are one of the world's low cost producers in the precious
metals mining industry. We believe we have earned a reputation as one of the
world's best narrow-vein, hard rock, underground mining companies, based on our
expertise developed during more than a century of operating underground mines.
Our strategy for growth is to focus our efforts and resources on expanding our
precious metals reserves through exploration efforts, primarily on properties we
currently own. We will also consider acquisition opportunities as a component of
our growth strategy.

Our principal producing metals properties during 2002 included:

o the San Sebastian silver mine, located in the State of Durango, Mexico,
and 100% owned by us through our wholly owned subsidiary, Minera Hecla,
S.A. de C.V. (Minera Hecla). The mine is 56 miles northeast of the city
of Durango on concessions acquired through our


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acquisition of Monarch Resources Investments Limited in June 1999.
During 2002, San Sebastian contributed $23.5 million, or 22%, to our
consolidated sales;

o the La Camorra gold mine, located in the eastern Venezuelan State of
Bolivar, approximately 120 miles southeast of Puerto Ordaz, and 100%
owned by us through our wholly owned subsidiary, Minera Hecla
Venezolana, C.A. La Camorra has been a producing mine for us since
October 1999 through our acquisition of Monarch Resources Investments
Limited. During 2002, La Camorra contributed $49.2 million, or 47%, to
our consolidated sales;

o the Greens Creek silver mine, a 29.73% owned joint-venture arrangement
with Kennecott Greens Creek Mining Company (KGCMC), the manager of the
mine, and Kennecott Juneau Mining Company (KJMC), both wholly owned
subsidiaries of Kennecott Minerals. The Greens Creek mine is located on
Admiralty Island, near Juneau, Alaska, and has been in production since
1989, with a temporary shutdown from April 1993 through July 1996.
Greens Creek is a large polymetallic deposit containing silver, zinc,
gold and lead. During 2002, Greens Creek contributed $23.3 million, or
22%, to our consolidated sales;

o the Lucky Friday mine, a 100% owned, deep underground silver and lead
mine located in northern Idaho. Lucky Friday has been a producing mine
for us since 1958. During 2002, Lucky Friday contributed $9.6 million,
or 9%, to consolidated sales.

For the year ended December 31, 2002, we reported net income of
approximately $8.6 million (before undeclared preferred stock dividends of $23.3
million), or $0.11 per share of common stock, compared to net income of
approximately $2.3 million (before undeclared preferred stock dividends of $8.1
million), or $0.03 per share of common stock, for the year ended December 31,
2001.

For additional information, see Item 7, Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations.

Our principal executive offices are located at 6500 N. Mineral Drive,
Suite 200, Coeur d'Alene, Idaho 83815-9408, telephone (208) 769-4100. Our web
site address is www.hecla-mining.com. Copies of our annual, quarterly and recent
reports and amendments to these reports are available on our website free of
charge.

A glossary of certain terms, under "Glossary of Certain Mining Terms,"
appears at the end of this Item 1.

PRODUCTS AND SEGMENTS

Sales of metal concentrates and metal products are made principally to
custom smelters and metals traders. We are organized and managed primarily on
the basis of our principle products being produced from our operating units. The
La Camorra mine is the only unit included in the gold segment. Production from
all other mines are considered to be in the silver segment, since they


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are primarily silver producers. The percentage of sales contributed by each
segment is reflected in the following table:

Year
----------------------------------
Product/Segment 2002 2001 2000
------------------ ------ ------ ------
Silver 53.4% 51.4% 58.4%
Gold 46.6% 48.6% 41.6%

For financial information with respect to our business segments and
geographic areas, refer to Notes 2 and 11 of Notes to Consolidated Financial
Statements.

The table below summarizes our production and average cash operating
cost, average total cash cost and average total production cost per ounce for
silver and gold, as well as average metals prices for each period indicated:



Year
--------------------------------------
2002 2001 2000
---------- ---------- ----------

Silver (ounces)(1) 8,681,293 7,434,290 7,998,677
Gold (ounces)(2) 239,633 194,742 146,038
Lead (tons)(1) 18,291 28,378 39,430
Zinc (tons)(1) 26,134 23,664 25,054

Average cost per ounce of silver produced:

Cash operating cost(3,4) $ 2.16 $ 3.55 $ 4.02
Total cash cost(3,4) $ 2.25 $ 3.57 $ 4.02
Total production cost(3,4) $ 3.68 $ 5.09 $ 5.49

Average cost per ounce of gold produced:

Cash operating cost(5) $ 137 $ 133 $ 208
Total cash cost(5) $ 137 $ 133 $ 211
Total production cost(5) $ 206 $ 200 $ 275

Industrial minerals (tons shipped)(6) 9,588 260,716 1,268,579

Average metals prices:

Silver - Handy & Harman ($/oz.) $ 4.63 $ 4.36 $ 5.00
Gold - Realized ($/oz.) $ 303 $ 280 $ 284
Gold - London Final ($/oz.) $ 310 $ 272 $ 279
Lead - LME Cash ($/pound) $ 0.205 $ 0.216 $ 0.206
Zinc - LME Cash ($/pound) $ 0.353 $ 0.402 $ 0.512



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(1) The increase in silver production from 2001 to 2002 was principally a
result of increased production from the San Sebastian mine, which
commenced production in May 2001 and reached full production during
the second quarter of 2002, offset by reduced production at the Lucky
Friday mine, where operations were reduced in October 2001. Decreased
lead production from 2001 to 2002 is principally due to reduced
production at the Lucky Friday mine. Increased zinc production in
2002 compared to 2001 is due to increased mill throughput at Greens
Creek during 2002. The decrease in silver, lead and zinc production
from 2000 to 2001 was principally due to decreased tons mined at
Lucky Friday, partly offset by an increase in tons mined at the
Greens Creek mine and at the San Sebastian mine.

(2) The increase in gold production from 2001 to 2002 was principally due
to increased production of over 25,000 ounces at the San Sebastian
mine, and over 15,000 ounces at the La Camorra mine primarily due to
improvements to the crushing, milling and adsorption capacities,
allowing for increases in tons milled (20% improvement) and gold
ounces produced. The increase in gold production from 2000 to 2001
was principally due to increased production at the La Camorra mine
(59,000 ounces) due to an average higher gold grade and an 18%
increase in tons processed during 2001, and increased production at
the San Sebastian mine, partly offset by decreased production of
24,000 ounces at the Rosebud mine due to the completion of operations
during the third quarter 2000.

(3) For the years ended December 31, 2002 and 2001, approximately $0.8
million and $0.4 million of costs, respectively, at the Lucky Friday
mine were classified as care-and-maintenance costs and included in
the determination of the costs per ounce at Lucky Friday. Excluding
the $0.8 million and $0.4 million in costs, the cash operating, total
cash and total production costs per ounce total $2.07, $2.16 and
$3.59, respectively, for 2002, and $3.49, $3.52 and $5.04,
respectively, for 2001.

(4) The low costs per silver ounce during 2002, compared to 2001, are due
in part to significant by-product credits from increased gold
production in the silver segment and an increase in the average gold
price. Costs per ounce amounts are calculated pursuant to standards
of the Gold Institute.

(5) Costs per ounce of gold are based on the gold produced by the gold
segment only. Gold produced in the silver segment (San Sebastian and
Greens Creek) is treated as a by-product credit in calculating silver
costs per ounce.

(6) The decrease in industrial minerals tons shipped from 2001 to 2002 is
due to the sale of the K-T Group in March 2001, as well as the sale
of the pet operations of the Colorado Aggregate division (CAC) of
MWCA, Inc., our wholly owned subsidiary, in March 2002. The decrease
in industrial minerals tons shipped from 2000 to 2001 was principally
due to the sale of the K-T Group in March 2001.


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EXPLORATION

We conduct exploration activities from our operating units and review
proposals and results from our headquarters in Coeur d'Alene, Idaho. We own or
control patented and unpatented mining claims, fee land, mineral concessions and
state and private leases in the United States, Mexico, Venezuela and other South
American countries. Our strategy regarding reserve replacement is to concentrate
our efforts on: (1) existing operations where an infrastructure already exists;
(2) other properties presently being developed; and (3) advanced-stage
exploration properties that have been identified as having potential for
additional discoveries principally in the United States, Mexico and Venezuela.
We intend to focus on low-cost properties that yield high returns and we
continuously evaluate opportunities to acquire additional properties.

Mineral exploration, particularly for silver and gold, is highly
speculative in nature, involves many risks and frequently is nonproductive.
There can be no assurance that our mineral exploration efforts will be
successful. Once mineralization is discovered, it may take a number of years
from the initial phases of drilling until production is possible, during which
time the economic feasibility of production may change. Substantial expenditures
are required to establish ore reserves through drilling, to determine
metallurgical processes to extract the metals from the ore and, in the case of
new properties, to construct mining and processing facilities. As a result of
these uncertainties, no assurance can be given that our exploration programs
will result in the expansion or replacement of existing ore reserves that are
being depleted by current production.

In March 2002, we were informed by CVG-Minerven (a Venezuelan
government-owned gold mining company) that we had been awarded the Block B
exploration and mining lease near El Callao in the Venezuelan State of Bolivar.
Block B is a 1,795-hectare land position in the historic El Callao gold district
that includes the historic Chile, Laguna and Panama mines which produced over
1.5 million ounces of gold between 1921 and 1946. For further information, see
Note 4 of Notes to Consolidated Financial Statements.

In August 2002, through our wholly owned subsidiary, Hecla Ventures
Corporation, we entered into an earn-in agreement with Rodeo Creek Gold, Inc., a
wholly owned subsidiary of Great Basin Gold Ltd. (Great Basin), to acquire a 50%
interest in an area of Great Basin's Ivanhoe high-grade gold property, which is
referred to as the Hollister Development Block and is located on the Carlin
Trend in Nevada. An "earn-in" agreement is an agreement under which a party must
take certain actions in order to "earn" an interest in an entity. In order to
receive the interest, we are required to complete a multi-stage exploration and
development program leading to commercial production. For further information,
see Note 4 of Notes to Consolidated Financial Statements.

Exploration expenditures for the three years ended December 31, 2002,
2001 and 2000, were approximately $5.8 million, $2.2 million and $6.3 million,
respectively. Our near-term exploration plan consists of exploring for
additional reserves at, or in the vicinity of, our San Sebastian mine in Mexico;
the La Camorra mine, the Block B and Canaima properties in Venezuela; the Greens
Creek mine in Alaska; and the Hollister Development Block in Nevada.


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Exploration expenditures for 2003 are estimated to be in the range of $10.0
million to $15.0 million.

REGULATION OF MINING ACTIVITY

Our U.S. mining operations are subject to inspection and regulation by
the Mine Safety and Health Administration of the Department of Labor (MSHA)
under provisions of the Federal Mine Safety and Health Act of 1977. MSHA
directives have had no material adverse impact on our results of operations or
financial condition and we believe that we are substantially in compliance with
the regulations promulgated by MSHA.

All of our exploration, development and production activities in the
United States, Mexico and South America are subject to regulation by
governmental agencies under one or more of the various environmental laws. These
laws address emissions to the air, discharges to water, management of wastes,
management of hazardous substances, protection of natural resources, protection
of antiquities and reclamation of lands which are disturbed. We believe that we
are in compliance with applicable environmental regulations. Many of the
regulations also require permits to be obtained for our activities. These
permits normally are subject to public review processes resulting in public
input prior to agency approval of the activity. While these laws and regulations
govern how we conduct many aspects of our business, our management does not
believe they have a material adverse effect on our results of operations or
financial condition at this time. Our projects are evaluated considering the
cost and impact of environmental regulation on the proposed activity. New laws
and regulations are evaluated as they develop to determine the impact on, and
changes necessary to, our operations. It is possible that future changes in
these laws or regulations could have a significant impact on some portion of our
business, causing those activities to be economically reevaluated at that time.
We believe an adequate provision has been made for the reclamation of mine waste
and mill tailings at all of our operating and nonoperating properties in a
manner that complies with current applicable federal and state environmental
requirements.

Environmental laws and regulations may also have an indirect impact on
us, such as increased cost for electrical power. Charges by smelters, to which
we sell our metallic concentrates and products, have substantially increased
over the past several years due to requirements that smelters meet revised
environmental quality standards. We have no control over the smelters'
operations or their compliance with environmental laws and regulations. If the
smelting capacity available to us was significantly reduced because of
environmental requirements or otherwise, it is possible that our silver
operations could be adversely affected.

Our U.S. operations may also be subject to both the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(CERCLA or Superfund), which regulates and establishes liability for the release
of hazardous substances, and the Endangered Species Act (ESA), which identifies
endangered species of plants and animals and regulates activities to protect
these species and their habitats. See Item 1A - Risk Factors "We face
substantial governmental regulation and environmental risks."


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LEGISLATION

From time to time, the U.S. Congress considers proposed amendments to
the General Mining Law of 1872, as amended, which governs mining claims and
related activities on Federal lands. There was no significant activity with
respect to mining law reform in Congress during 2002. The extent of any such
future changes is not known and the potential impact on us as a result of
Congressional action is difficult to predict. Although a majority of our
existing U.S. mining operations occur on private or patented property, changes
to the General Mining Law, if adopted, could adversely affect our ability to
economically develop mineral resources on federal lands.

EMPLOYEES

As of December 31, 2002, we employed 720 people, including people
employed with our subsidiaries.

GLOSSARY OF CERTAIN MINING TERMS

* CASH OPERATING COSTS -- Includes all direct and indirect operating cash costs
incurred at each operating mine, excluding royalties and mine production
taxes.

* DORE -- Unrefined gold and silver bullion bars consisting of approximately
90% precious metals which will be further refined to almost pure metal.

* MINERALIZED MATERIAL -- A mineralized body which has been delineated by
appropriately spaced drilling and/or underground sampling to support a
sufficient tonnage and average grade of metals.

* ORE -- A mixture of valuable minerals and gangue (valueless minerals) from
which at least one of the minerals or metals can be extracted at a profit.

* OREBODY -- A continuous, well-defined mass of material of sufficient ore
content to make extraction economically feasible.

* PRIMARY DEVELOPMENT -- The initial access to an orebody through adits,
shafts, declines and winzes.

* PROVEN AND PROBABLE ORE RESERVES -- Reserves that reflect estimates of the
quantities and grades of mineralized material at our mines which we believe
can be recovered and sold at prices in excess of the total cash cost
associated with extracting and processing the ore. The estimates are based
largely on current costs and on prices and demand for our products. Mineral
reserves are stated separately for each of our mines based upon factors
relevant to each mine. Reserves represent diluted in-place grades and do not
reflect losses in the recovery process. Our estimates of Proven and Probable
reserves for the Lucky Friday mine, the San Sebastian mine and the La Camorra
mine are based on the following metals prices:


-8-



December 31,
2002 2001
-------------------

Silver $ 4.75 $ 5.10

Gold $ 300 $ 300

Lead $ 0.21 $ 0.24

Zinc $ 0.44 $ 0.48

Proven and Probable ore reserves for the Lucky Friday, San Sebastian and La
Camorra mines are calculated and reviewed in-house and are subject to
periodic audit by others, although audits are not performed on an annual
basis.

Proven and Probable ore reserves for the Greens Creek mine are based on
calculations of reserves provided to us by the operator of Greens Creek that
have been reviewed but not independently confirmed by us. Kennecott Greens
Creek Mining Company's estimates of Proven and Probable ore reserves for the
Greens Creek mine as of December 2002 and 2001 are derived from successive
generations of reserve and feasibility analyses for different areas of the
mine each using a separate assessment of metals prices. The weighted average
prices used were:

December 31,
2002 2001
-------------------

Silver $ 5.00 $ 4.92

Gold $ 300 $ 309

Lead $ 0.24 $ 0.25

Zinc $ 0.46 $ 0.49

Changes in reserves represent general indicators of the results of efforts to
develop additional reserves as existing reserves are depleted through
production. Grades of ore fed to process may be different from stated reserve
grades because of variation in grades in areas mined from time to time,
mining dilution and other factors. Reserves should not be interpreted as
assurances of mine life or of the profitability of current or future
operations. Our Proven and Probable ore reserves are sensitive to price
changes, although we do not believe that a 10% increase or decrease in
estimated metals prices would have a significant impact on Proven and
Probable ore reserves at our La Camorra, San Sebastian and Greens Creek
mines.

* PROBABLE RESERVES -- Reserves for which quantity and grade and/or quality are
computed from information similar to that used for Proven reserves, but the
sites for inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower
than that for Proven reserves, is high enough to assume continuity between
points of observation.


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* PROVEN RESERVES -- Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from the results of detailed sampling, and (b)
the sites for inspection, sampling and measurement are spaced so closely and
the geologic character is so well-defined that size, shape, depth and mineral
content of reserves are well established.

* RESERVES -- That part of a mineral deposit which could be economically and
legally extracted or produced at the time of the reserve determination.

* SECONDARY DEVELOPMENT -- The preparation of the orebody for production
through crosscuts, raises and stope preparation.

* STOPE -- An underground excavation from which ore has been extracted either
above or below mine level.

* TOTAL CASH COSTS -- Includes all direct and indirect operating cash costs
incurred at each operating mine.

* TOTAL PRODUCTION COSTS -- Includes total cash costs, as defined, plus
depreciation, depletion, amortization and reclamation accruals relating to
each operating mine.

* TOTAL PRODUCTION COSTS PER OUNCE -- Calculated based upon total production
costs, as defined, net of by-product revenues earned from all metals other
than the primary metal produced at each mine, divided by the total ounces of
the primary metal produced.

* UNPATENTED MINING CLAIM -- A parcel of property located on federal lands
pursuant to the General Mining Law and the requirements of the state in which
the unpatented claim is located, the paramount title of which remains with
the federal government. The holder of a valid, unpatented lode-mining claim
is granted certain rights including the right to explore and mine such claim
under the General Mining Law.




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RISK FACTORS

The following risks and uncertainties, together with other information
set forth in this Form 10-K, should be carefully considered by current and
future investors in our securities. Any of the following risks could materially
adversely affect our business, financial condition or operating results and
could negatively impact the value of our common stock.

ALTHOUGH WE HAD OPERATING PROFITS IN 2002 AND 2001, WE HAVE INCURRED A TOTAL OF
$168.7 MILLION OF LOSS APPLICABLE TO COMMON SHAREHOLDERS IN THE PAST FIVE YEARS
AND THERE CAN BE NO ASSURANCE THAT OUR OPERATIONS WILL REMAIN PROFITABLE.

Our net income improved in 2002 and 2001 as a result, in large part, of
increased gold production, lower silver and gold production costs, lower
interest expense, a gain on the sale of our subsidiary, Kentucky-Tennessee Clay
Company and, recently, increased gold prices. Prior to 2001, we incurred net
losses for each of the prior ten years. Many of the factors affecting our
operating results are beyond our control, including expectations with respect to
the rate of inflation, the relative strength of the United States dollar and
certain other currencies, interest rates, global or regional political or
economic crises, global or regional demand, speculation, and sales by central
banks and other holders and producers of gold and silver in response to these
factors, and we cannot foresee whether our operations will continue to generate
sufficient revenue for us to be profitable. While silver and gold prices
improved in 2002 over average prices in 2001, there can be no assurance such
prices will continue at or above such levels.

OUR PREFERRED STOCK HAS A LIQUIDATION PREFERENCE OF $50 PER SHARE, OR $37.7
MILLION, PLUS DIVIDENDS IN ARREARS OF APPROXIMATELY $6.6 MILLION.

This means that if we were liquidated as of January 2, 2003, holders of
our preferred stock would be entitled to receive approximately $44.3 million
from any liquidation proceeds before holders of our common stock would be
entitled to receive any proceeds.

WE ARE CURRENTLY INVOLVED IN ONGOING LITIGATION THAT MAY ADVERSELY AFFECT US.

There are several ongoing lawsuits in which we are involved. If any of
these cases results in a substantial monetary judgment against us or is settled
on unfavorable terms, our results of operations, financial condition and cash
flows could be materially adversely affected. For example, we may ultimately
incur environmental remediation costs substantially in excess of the amounts we
have accrued and the plaintiffs in environmental proceedings may be awarded
substantial damages (which costs and damages we may not be able to recover from
our insurers). See Note 8 of Notes to Consolidated Financial Statements.

OUR EARNINGS MAY BE AFFECTED BY METALS PRICE VOLATILITY.

The majority of our revenues is derived from the sale of silver, gold,
lead and zinc and, as a result, our earnings are directly related to the prices
of these metals. Silver, gold, lead and zinc prices fluctuate widely and are
affected by numerous factors including:

* expectations for inflation;


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* speculative activities;

* relative exchange rate of the U.S. dollar;

* global and regional demand and production;

* political and economic conditions; and

* production costs in major producing regions.

These factors are beyond our control and are impossible for us to
predict. If the market prices for these metals fall below our costs to produce
them for a sustained period of time, we will experience losses and may have to
discontinue development or mining at one or more of our properties.

In the past, we have used limited hedging techniques to reduce our
exposure to price volatility, but we may not be able to do so in the future. See
"Our hedging activities could expose us to losses."

The following table sets forth the average daily closing prices of the
following metals for 1985, 1990, 1995, 1998 and each year thereafter through
2002.



1985 1990 1995 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- -------- -------- --------

Silver(1)
(per oz.) $ 6.14 $ 4.82 $ 5.19 $ 5.53 $ 5.25 $ 5.00 $ 4.39 $ 4.63
Gold(2)
(per oz.) 317.26 383.46 384.16 294.16 278.77 279.03 271.00 309.97
Lead(3)
(per lb.) 0.18 0.37 0.29 0.24 0.23 0.21 0.22 0.21
Zinc(4)
(per lb.) 0.36 0.69 0.47 0.46 0.49 0.51 0.40 0.35

- -----------------------------
(1) Handy & Harman
(2) London Final
(3) London Metals Exchange -- Cash
(4) London Metals Exchange -- Special High Grade -- Cash

On February 28, 2003, the closing prices for silver, gold, lead and
zinc were $4.64 per ounce, $345.45 per ounce, $0.21 per pound, and $0.36 per
pound, respectively.

THE VOLATILITY OF METALS PRICES MAY ADVERSELY AFFECT OUR DEVELOPMENT AND
EXPLORATION EFFORTS.

Our ability to produce silver and gold in the future is dependent upon
our exploration efforts, and our ability to develop new ore reserves. If prices
for these metals decline, it may not be economically feasible for us to continue
our development of a project or to continue commercial production at some of our
properties.


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OUR DEVELOPMENT OF NEW OREBODIES MAY COST MORE AND PROVIDE LESS RETURN THAN WE
ESTIMATED.

Our ability to sustain or increase our current level of production of
metals partly depends on our ability to develop new orebodies and/or expand
existing mining operations. Before we can begin a development project, we must
first determine whether it is economically feasible to do so. This determination
is based on estimates of several factors, including:

* reserves;

* expected recovery rates of metals from the ore;

* facility and equipment costs;

* capital and operating costs of a development project;

* future metals prices;

* comparable facility and equipment costs; and

* anticipated climate conditions.

Development projects may have no operating history upon which to base
these estimates, and these estimates are based in large part on our
interpretation of geological data, a limited number of drill holes and other
sampling techniques. As a result, actual cash operating costs and returns from a
development project may differ substantially from our estimates as a result of
which it may not be economically feasible to continue with a development
project.

OUR ORE RESERVE ESTIMATES MAY BE IMPRECISE.

Our ore reserve figures and costs are primarily estimates and are not
guarantees that we will recover the indicated quantities of these metals.
Reserves are estimates made by our technical personnel and no assurance can be
given that the estimate of the amount of metal or the indicated level of
recovery of these metals will be realized. Reserve estimation is an interpretive
process based upon available data. Our reserve estimates for properties that
have not yet started may change based on actual production experience. Further,
reserves are valued based on estimates of costs and metals prices. The economic
value of ore reserves may be adversely affected by:

* declines in the market price of the various metals we mine;

* increased production or capital costs; or

* reduced recovery rates.

Short-term operating factors relating to our ore reserves, such as the
need to sequentially develop orebodies and the processing of new or different
ore grades, may adversely affect our profitability. We may use forward sales
contracts and other hedging techniques to partially


-13-



offset the effects of a drop in the market prices of the metals we mine.
However, if the price of metals that we produce declines substantially below the
levels used to calculate reserves for an extended period, we could experience:

* delays in new project development;

* increased net losses;

* reduced cash flow;

* reductions in reserves; and

* possible write-down of asset values.

OUR AVAILABLE CASH AND CASH FLOWS MAY BE INADEQUATE TO FUND EXPANSION PROJECTS.

We currently believe that our cash on hand, cash proceeds from an
underwritten public offering completed in January 2003, future cash flows from
operations, amounts available under existing loan agreements and/or future debt
or equity security issuances will be adequate to fund our:

* anticipated minimum capital expenditure requirements;

* idle property expenditures;

* debt service; and

* exploration expenditures.

Although we believe existing cash and cash equivalents are adequate, we
cannot project the cash impact of possible future investment opportunities or
acquisitions, and our operating properties may require more cash than
forecasted.

OUR MINERAL EXPLORATION EFFORTS MAY NOT BE SUCCESSFUL.

We must continually replace ore reserves depleted by production. Our
ability to expand or replace depleted ore reserves depends on the success of our
exploration program. Mineral exploration, particularly for silver and gold, is
highly speculative. It involves many risks and is often nonproductive. Even if
we find a valuable deposit of minerals, it may be several years before
production is possible. During that time, it may become economically unfeasible
to produce those minerals. Establishing ore reserves requires us to make
substantial capital expenditures and, in the case of new properties, to
construct mining and processing facilities. As a result of these costs and
uncertainties, we may not be able to expand or replace our existing ore reserves
as they are depleted by current production.


-14-



OUR JOINT DEVELOPMENT AND OPERATING ARRANGEMENTS MAY NOT BE SUCCESSFUL.

We often enter into joint venture arrangements in order to share the
risks and costs of developing and operating properties. For instance, our Greens
Creek mine is operated through a joint venture arrangement. In a typical joint
venture arrangement, we own a percentage of the assets in the joint venture.
Under the agreement governing the joint venture relationship, each party is
entitled to indemnification from each other party and is only liable for the
liabilities of the joint venture in proportion to its interest in the joint
venture. However, if a party fails to perform its obligations under the joint
venture agreement, we could incur losses in excess of our pro-rata share of the
joint venture. In the event any party so defaults, the joint venture agreement
provides certain rights and remedies to the remaining participants, including
the right to sell the defaulting party's percentage interest and use the
proceeds to satisfy the defaulting party's obligations. We currently believe
that our joint venture partners will meet their obligations.

WE FACE STRONG COMPETITION FROM OTHER MINING COMPANIES FOR THE ACQUISITION OF
NEW PROPERTIES.

Mines have limited lives and as a result, we continually seek to
replace and expand our reserves through the acquisition of new properties. In
addition, there is a limited supply of desirable mineral lands available in the
United States and other areas where we would consider conducting exploration
and/or production activities. Because we face strong competition for new
properties from other mining companies, some of whom have greater financial
resources than we do, we may be unable to acquire attractive new mining
properties on terms that we consider acceptable.

THE TITLES TO SOME OF OUR PROPERTIES MAY BE DEFECTIVE.

Unpatented mining claims constitute a significant portion of our
undeveloped property holdings. The validity of these unpatented mining claims is
often uncertain and may be contested. In accordance with mining industry
practice, we do not generally obtain title opinions until we decide to develop a
property. Therefore, while we have attempted to acquire satisfactory title to
our undeveloped properties, some titles may be defective.

In Mexico, there is ongoing litigation concerning a lien that predates
acquisition of the Velardena mill by our subsidiary, Minera Hecla, S.A. de C.V.
For additional information, see Note 8 of Notes to Consolidated Financial
Statements.

OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY RISKS AND HAZARDS ASSOCIATED WITH
THE MINING INDUSTRY.

Our business is subject to a number of risks and hazards including:

* environmental hazards;

* political and country risks;

* industrial accidents;


-15-



* labor disputes;

* unusual or unexpected geologic formations;

* cave-ins;

* explosive rock failures; and

* flooding and periodic interruptions due to inclement or hazardous
weather conditions.

Such risks could result in:

* damage to or destruction of mineral properties or producing facilities;

* personal injury;

* environmental damage;

* delays in mining;

* monetary losses; and

* legal liability.

For some of these risks, we maintain insurance to protect against these
losses at levels consistent with our historical experience and industry
practice. However, we may not be able to maintain this insurance, particularly
if there is a significant increase in the cost of premiums. Insurance against
environmental risks is generally either unavailable or too expensive for us and
other companies in our industry, and, therefore, we do not maintain
environmental insurance. To the extent we are subject to environmental
liabilities, we would have to pay for these liabilities. Moreover, in the event
that we are unable to fully pay for the cost of remedying an environmental
problem, we might be required to suspend operations or enter into other interim
compliance measures.

OUR FOREIGN OPERATIONS, INCLUDING OUR OPERATIONS IN VENEZUELA, ARE SUBJECT TO
ADDITIONAL INHERENT RISKS.

We currently conduct mining operations in Mexico and Venezuela and have
exploration projects in Mexico and South America. We anticipate we will continue
to conduct significant operations in those and other international locations in
the future. Because we conduct operations internationally, we are subject to
political and economic risks such as:

* the effects of local political and economic developments;

* exchange controls and export or sale restrictions;

* currency fluctuations;


-16-



* expropriation; and

* taxation and laws or policies of foreign countries and the United
States affecting trade, investment and taxation.

Consequently, our exploration, development and production activities
outside of the United States may be substantially affected by factors beyond our
control, any of which could materially adversely affect our financial position
or results of operations.

Venezuela, the site of our La Camorra mine, recently experienced
political unrest in the form of street marches and demands that the current
president hold a referendum to determine whether to remove him from office. An
approximate two-month long general strike commenced in December 2002 and
continued into February 2003. The result of the strike included shortages of oil
and gas supplies in Venezuela and a severe economic downturn. We continued to
operate the La Camorra mine during the general strike and were able to obtain
adequate supplies, including oil and gas for our operations. The general strike
in Venezuela ended in early February, but oil and gas operations are not up to
full capacity. Although we believe we will be able to manage and operate our La
Camorra mine and related exploration projects successfully, due to the strike
and its ramifications on supplies of oil, gas and other products, there can be
no assurance that we will be able to operate without interruptions to our
operations.

Following the general strike in Venezuela, the Venezuelan government
announced its intent to implement exchange controls on foreign currency
transactions. Rules and regulations regarding the implementation of exchange
controls in Venezuela have not been finalized as of the date of this filing.
Exchange controls may require us to convert United States dollars into foreign
currency. Management is currently monitoring the finalization of exchange
controls in Venezuela, and there can be no assurance that the implementation of
exchange controls will not adversely affect our operations in Venezuela.

OUR OPERATIONS ARE SUBJECT TO CURRENCY FLUCTUATIONS.

Currency fluctuations may affect the cash flow which we will realize
from our operations since our products are sold in world markets in United
States dollars. There can be no assurance that foreign exchange fluctuations
will not materially adversely affect our financial performance and results of
operations.

For additional discussion of exchange controls in Venezuela, see the
discussion above under "Our foreign operations, including our operations in
Venezuela, are subject to additional inherent risks."

WE ARE REQUIRED TO OBTAIN GOVERNMENTAL PERMITS IN ORDER TO CONDUCT MINING
OPERATIONS.

In the ordinary course of business, mining companies are required to
seek governmental permits for expansion of existing operations or for the
commencement of new operations. Obtaining the necessary governmental permits is
a complex and time-consuming process involving numerous jurisdictions and often
involving public hearings and costly undertakings on our part. The duration and
success of our efforts to obtain permits are contingent upon many variables not
within our control. Obtaining environmental protection permits, including the


-17-



approval of reclamation plans, may increase costs and cause delays depending on
the nature of the activity to be permitted and the interpretation of applicable
requirements implemented by the permitting authority. There can be no assurance
that all necessary permits will be obtained and, if obtained, that the costs
involved will not exceed those that we previously estimated. It is possible that
the costs and delays associated with the compliance with such standards and
regulations could become such that we would not proceed with the development or
operation of a mine or mines.

WE FACE SUBSTANTIAL GOVERNMENTAL REGULATION AND ENVIRONMENTAL RISKS.

Our business is subject to extensive federal, state and local laws and
regulations governing development, production, labor standards, occupational
health, waste disposal, use of toxic substances, environmental regulations, mine
safety and other matters. We have been, and are currently involved in lawsuits
in which we have been accused of violating environmental laws, and we may be
subject to similar lawsuits in the future. See Note 8 of Notes to Consolidated
Financial Statements. New legislation and regulations may be adopted at any time
that results in additional operating expense, capital expenditures or
restrictions and delays in the mining, production or development of our
properties.

We maintain reserves for costs associated with mine closure,
reclamation of land and other environmental matters. At December 31, 2002, our
reserves for these matters totaled $49.7 million. We anticipate that we will
make expenditures relating to these reserves over the next five to ten years.
Future expenditures related to closure, reclamation and environmental
expenditures are difficult to estimate due to:

* the early stage of our investigation;

* the uncertainties relating to the costs and remediation methods that
will be required in specific situations;

* the possible participation of other potentially responsible parties;
and

* changing environmental laws, regulations and interpretations.

It is possible that, as new information becomes available, changes to
our estimates of future closure, reclamation and environmental contingencies
could materially adversely affect our future operating results.

Various laws and permits require that financial assurances be in place
for certain environmental and reclamation obligations and other potential
liabilities. We currently have in place such financial assurances in the form of
surety bonds. As of December 31, 2002, we also had set aside as restricted
investments approximately $6.4 million as collateral for these bonds. The amount
of the financial assurances and the amount required to be set aside by us as
collateral for these financial assurances are dependent upon a number of
factors, including our financial condition, reclamation cost estimates,
development of new projects and the total dollar value of financial assurances
in place. There can be no assurance that we will be able to maintain or add to
our current level of financial assurances.


-18-



OUR HEDGING ACTIVITIES COULD EXPOSE US TO LOSSES.

From time to time, we engage in hedging activities, such as forward
sales contracts and commodity put and call option contracts, to minimize the
effect of declines in metals prices on our operating results. While these
hedging activities may protect us against low metals prices, they may also limit
the price we can receive on hedged products. As a result, we may be prevented
from realizing possible revenues in the event that the market price of a metal
exceeds the price stated in a forward sale or call option contract. We are also
subject to posting margins if the margin free limit of $10.0 million in the
aggregate for all our contracts is exceeded. As of December 31, 2002, if we
closed out our existing hedge contract positions, we would have to pay our
counterparties $6.5 million. In addition, we may experience losses if a
counterparty fails to purchase under a contract when the contract price exceeds
the spot price of a commodity.

OUR BUSINESS DEPENDS ON GOOD RELATIONS WITH OUR EMPLOYEES.

Certain of our employees are represented by unions. At December 31,
2002, there were 65 hourly employees at the Lucky Friday mine. The United
Steelworkers of America is the bargaining agent for the Lucky Friday hourly
employees. The current labor agreement expires on June 16, 2003. At December 31,
2002, there were 136 hourly and 46 salaried employees at the San Sebastian mine
and Velardena mill. The National Mine and Mill Workers Union represents process
plant hourly workers at San Sebastian. Under Mexican labor law, wage adjustments
are negotiated annually and other contract terms every two years. The contract
at San Sebastian is due for negotiation of wages in July 2003 and for wages and
other terms in July 2004. At December 31, 2002, there were 346 hourly and 41
salaried employees at our La Camorra gold mine, most of whom are represented by
the Mine Workers Union. The contract with respect to La Camorra will expire in
March 2004. We anticipate that we will be able to negotiate a satisfactory
contract with each union, but there can be no assurance that this can be done
without a disruption to production.

OUR STOCKHOLDER RIGHTS PLAN AND PROVISIONS IN OUR CERTIFICATE OF INCORPORATION,
OUR BY-LAWS AND DELAWARE LAW COULD DELAY OR DETER TENDER OFFERS OR TAKEOVER
ATTEMPTS THAT MAY OFFER A PREMIUM FOR OUR COMMON STOCK.

Our stockholder rights plan and provisions in our certificate of
incorporation, our by-laws and Delaware law could make it more difficult for a
third party to acquire control of us, even if that transaction would be
beneficial to stockholders. These impediments include:

* the rights issued in connection with the stockholder rights plan
that will substantially dilute the ownership of any person or group
that acquires 15% or more of our outstanding common stock unless the
rights are first redeemed by our board of directors, in its
discretion. Furthermore, our board of directors may amend the terms
of these rights, in its discretion, including an amendment to lower
the acquisition threshold to any amount greater than 10% of the
outstanding common stock;

* the classification of our board of directors into three classes
serving staggered three-year terms;


-19-



* the ability of our board of directors to issue shares of preferred
stock with rights as it deems appropriate without stockholder
approval;

* a requirement that special meetings of our board of directors may be
called only by our chief executive officer or a majority of our
board of directors;

* a provision that special meetings of stockholders may only be called
pursuant to a resolution approved by a majority of our entire board
of directors;

* a prohibition against action by written consent of our stockholders;

* a requirement that our board members may only be removed for cause
and by an affirmative vote of at least 80% of the outstanding voting
stock;

* a requirement that our stockholders comply with advance-notice
provisions to bring director nominations or other matters before
meetings of our stockholders;

* a prohibition against certain business combinations with an acquirer
of 15% or more of our common stock for three years after such
acquisition unless the stock acquisition or the business combination
is approved by our board prior to the acquisition of the 15%
interest, or after such acquisition our board and the holders of
two-thirds of the other common stock approve the business
combination; and

* a prohibition against our entering into some business combinations
with interested stockholders without the affirmative vote of the
holders of at least 80% of the voting power of the then outstanding
shares of voting stock.

The existence of the stockholder rights plan and these provisions may
deprive stockholders of an opportunity to sell our stock at a premium over
prevailing prices. The potential inability of our stockholders to obtain a
control premium could adversely affect the market price for our common stock.

WE ARE DEPENDENT ON KEY PERSONNEL.

We are currently dependent upon the ability and experience of our
executive officers and there can be no assurance that we will be able to retain
all of such officers. The loss of one or more of the officers could have a
material adverse effect on our operations. We also compete with other companies
both within and outside the mining industry in connection with the recruiting
and retention of qualified employees knowledgeable in mining operations.

In December 2002, Arthur Brown announced he would retire as Chief
Executive Officer effective in May 2003. Subject to formal board approval, we
expect he will be succeeded by Phillips S. Baker, Jr. currently our President,
Chief Operating Officer and Chief Financial Officer. Mr. Brown will remain as
Chairman of the Board.


-20-



OUR CURRENT AND FUTURE CASH POSITION MAY NOT PROVIDE US WITH SUFFICIENT
LIQUIDITY.

We had cash and cash equivalents at December 31, 2002, of approximately
$19.5 million. In addition, in January 2003, we announced the completion of an
underwritten public offering for 23.0 million shares of common stock, which
resulted in net proceeds of approximately $91.2 million in cash to us.

We believe cash requirements over the next twelve months will be funded
through a combination of current cash, proceeds from the January 2003 public
offering, future cash flows from operations, amounts available under existing
loan agreements and/or future debt or equity security issuances. Although we
believe existing cash and cash equivalents are adequate, we cannot project the
cash impact of possible future investment opportunities or acquisitions, and our
operating properties may require more cash than forecasted.





-21-



Item 2. Properties

SILVER SEGMENT

THE LUCKY FRIDAY MINE

Since 1958, we have operated the Lucky Friday mine (100% owned), a deep
underground silver and lead mine located in the Coeur d'Alene Mining District in
northern Idaho. The principal ore-bearing structure at the Lucky Friday mine
through 1997 was the Lucky Friday vein, a fissure vein typical of many in the
Coeur d'Alene Mining District. The orebody is located in the Revett Formation,
which is known to provide excellent host rocks for a number of orebodies in the
Coeur d'Alene District. The Lucky Friday vein strikes northeasterly and dips
steeply to the south with an average width of six to seven feet. Its principal
ore minerals are galena and tetrahedrite with minor amounts of sphalerite and
chalcopyrite. The ore occurs as a single continuous orebody in and along the
Lucky Friday vein. The major part of the orebody has extended from the
1,200-foot level to and below the 6,020-foot level.

During 1991, we discovered several mineralized structures containing
some high-grade silver ores in an area known as the Gold Hunter property,
approximately 5,000 feet northwest of the then existing Lucky Friday workings.
We control the Gold Hunter property under a long-term operating agreement that
entitles us, as operator, to an 81.48% interest in the net profits from
operations from the Gold Hunter properties. We will be obligated to pay a
royalty after we have recouped our costs to explore and develop the properties.
As of December 31, 2002, unrecouped costs totaled approximately $32.6 million.

The principal mining method at the Lucky Friday mine is ramp access,
cut and fill. This method utilizes rubber-tired equipment to access the veins
through ramps developed outside of the orebody. Once a cut is taken along the
strike of the vein, it is backfilled with cemented tailings and the next cut is
accessed, either above or below, from the ramp system.

The ore produced from the mine is processed in a 1,100-ton-per-day
conventional flotation mill. In 2002, ore was processed at a rate of
approximately 525 tons per day. The flotation process produces both a
silver-lead concentrate and a zinc concentrate. During 2002, mill recovery
totaled approximately 94% silver, 93% lead and 75% zinc. All silver, lead and
zinc concentrate production during 2002 was shipped to Teck Cominco's smelter in
Trail, British Columbia, Canada.

In the fourth quarter of 2000, due to continuing low silver and lead
prices, our management and board of directors deferred the decision to approve
additional capital expenditures, which are needed to develop the next area of
the mine, and recorded an adjustment of $31.2 million to reduce the carrying
value of the Lucky Friday mine plant, property and equipment. In 2001, due to
low metals prices, we made the decision to reduce the level of mining activity
at the Lucky Friday mine to approximately 30% of full production. During 2002,
mining activity was approximately 50% of full production. We estimate that with
minimal additional development the mine can sustain the lower production levels
through 2004, as long as the cost of operating is less than putting the property
on care and maintenance.


-22-



Information with respect to the Lucky Friday mine's production, average
cost per ounce of silver produced and Proven and Probable ore reserves for the
past three years is set forth in the table below:

Years
--------------------------------------------
Production 2002 2001 2000
- ------------------------- ----------- ----------- -----------
Ore milled (tons) 159,651 239,330 321,719
Silver (ounces) 2,004,404 3,224,373 5,011,507
Gold (ounces) 206 415 537
Lead (tons) 10,091 20,984 31,946
Zinc (tons) 2,259 2,789 3,107

Average Cost per Ounce
of Silver Produced
- -------------------------
Cash operating costs(1) $ 4.97 $ 5.27 $ 5.02
Total cash costs(1) $ 4.97 $ 5.27 $ 5.02
Total production costs(1) $ 5.49 $ 6.05 $ 5.83

Proven and Probable
Ore Reserves(2,3,4) 12/31/02 12/31/01 12/31/00
- ------------------------- ---------- ---------- ----------
Total tons -- -- 1,322,270
Silver (ounces per ton) -- -- 16.7
Lead (percent) -- -- 10.7
Zinc (percent) -- -- 1.4
Contained silver (ounces) -- -- 22,089,451
Contained lead (tons) -- -- 141,380
Contained zinc (tons) -- -- 18,546

- --------------------------

(1) Beginning in the fourth quarter of 2001, the Lucky Friday began a
recalculation of costs per ounce which eliminated costs classified as
care-and-maintenance. Approximately $0.4 million and $0.8 million,
respectively, of costs were classified as care-and-maintenance in the
fourth quarter of 2001 and for the year ended December 31, 2002, and
included in the determination of the costs per ounce at Lucky Friday.
Excluding the $0.4 million and $0.8 million, the cash operating, total
cash and total production costs per ounce total $5.14, $5.14 and
$5.92, respectively, for 2001, and $4.57, $4.57 and $5.09,
respectively, for 2002.

(2) For Proven and Probable ore reserve assumptions and definitions, see
Glossary of Certain Mining Terms.


-23-



(3) Reserves are in-place material that incorporate estimates of the
amount of waste which must be mined along with the ore and expected
mining recovery. Mill recoveries are expected to be 93% for silver,
90% for lead and 50% for zinc.

(4) As of December 31, 2002 and 2001, it was determined the Lucky Friday
mineralized material did not meet all the criteria established for
disclosure of reserves by the Securities and Exchange Commission's
Industry Guide 7. At December 31, 2002, the estimated mineralized
material included 1,082,000 tons with 13.2 ounces per ton silver, 8.5%
lead and 1.7% zinc. At December 31, 2001, the estimated mineralized
material included 1,205,180 tons with 14.2 ounces per ton silver, 9.4%
lead and 1.6% zinc.

Ultimate reclamation activities contemplated include stabilization of
tailings ponds and waste rock areas. There were no final reclamation activities
performed in 2002.

The net book value of the Lucky Friday mine property and its associated
plant and equipment was approximately $1.0 million as of December 31, 2002. At
December 31, 2002, there were 86 employees at the Lucky Friday mine. The United
Steelworkers of America is the bargaining agent for the Lucky Friday hourly
employees. The current labor agreement expires on June 16, 2003. Avista
Corporation supplies electrical power to the Lucky Friday mine.

For a description of a legal claim involving Lucky Friday mine, see
Part 1, Item 3 - Legal Proceedings.

THE GREENS CREEK MINE

At December 31, 2002, we held a 29.73% interest in the Greens Creek
mine, located on Admiralty Island, near Juneau, Alaska, through a joint-venture
arrangement with Kennecott Greens Creek Mining Company (KGCMC), the manager of
the mine, and Kennecott Juneau Mining Company (KJMC), both wholly owned
subsidiaries of Kennecott Minerals. The Greens Creek mine is a polymetallic
deposit containing silver, zinc, gold and lead.

Greens Creek lies within the Admiralty Island National Monument, an
environmentally sensitive area. The Greens Creek property includes 17 patented
lode claims and one patented millsite claim, in addition to property leased from
the U.S. Forest Service. Greens Creek also has title to mineral rights on 7,500
acres of federal land adjacent to the mine properties. The entire project is
accessed and served by 13 miles of road and consists of the mine, an ore
concentrating mill, a tailings impoundment area, a ship-loading facility, camp
facilities and a ferry dock.

Pursuant to a 1996 land exchange agreement, the joint venture
transferred private property equal to a value of $1.0 million to the U.S. Forest
Service and received access to approximately 7,500 acres of land with potential
mining resources surrounding the existing mine. Production from new ore
discoveries on the exchange lands will be subject to the federal royalties
included in the land exchange agreement. The federal royalties are based on a
defined calculation that is similar to the calculation of net smelter return and
are equal to 0.75% or 3% of


-24-



the calculated amount depending on the value of the ore extracted. The royalty
is 3% if the average value of the ore during a year is greater than $120 per ton
of ore, and 0.75% if the value is $120 per ton or less. The benchmark of $120
per ton is escalated annually by the Gross Domestic Product until the year 2016.

Currently, Greens Creek is mining approximately 2,000 tons per day
underground from the 200 South, the Southwest and West ore zones. Ore from the
underground trackless mine is milled at the mine site. The mill produces
silver/gold dore and lead, zinc and bulk concentrates. The dore is marketed to a
precious metal refiner and the three concentrate products are predominantly sold
to a number of major smelters worldwide. Concentrates are shipped from a marine
terminal located on Admiralty Island about nine miles from the mine site. The
Greens Creek mine uses electrical power provided by diesel-powered generators
located on-site.

The employees at the Greens Creek mine are employees of Kennecott
Greens Creek Mining Company and are not represented by a bargaining agent. At
December 31, 2002, our interest in the net book value of the Greens Creek mine
property and its associated plant and equipment was approximately $57.0 million.

The Greens Creek deposit consists of zinc, lead, and iron sulfides and
copper-silver sulfides and sulfosalts with substantial contained silver and gold
values. The deposit has a vein-like to blanket-like form of variable thickness.
The ore is thought to have been laid down by an "exhalative" process (i.e.,
volcanic-related rifts or vents deposited base and precious metals onto an ocean
floor). Subsequently, the mineralization was folded and faulted by multiple
generations of tectonic events.

Kennecott Greens Creek Mining Company's geology and engineering staff
computes the estimated ore reserves for the Greens Creek mine with technical
support from Rio Tinto Zinc. We review geologic interpretation and reserve
methodology, but the reserve compilation is not independently confirmed by us in
its entirety. Information with respect to our 29.73% share of production,
average costs per ounce of silver produced and Proven and Probable ore reserves
is set forth in the following table.

Years (reflects 29.73% interest)
-----------------------------------------------
Production 2002 2001 2000
- ------------------------- --------- --------- ---------

Ore milled (tons) 218,072 195,646 184,178
Silver (ounces) 3,244,495 3,259,915 2,754,067
Gold (ounces) 30,531 26,041 24,882
Zinc (tons) 23,875 20,875 21,947
Lead (tons) 8,200 7,394 7,484


-25-



Average Cost per Ounce
of Silver Produced
- -------------------------

Cash operating costs $ 1.76 $ 2.41 $ 2.20
Total cash costs $ 1.81 $ 2.41 $ 2.20
Total production costs $ 4.28 $ 4.79 $ 4.87

Proven and Probable
Ore Reserves (1,2,3,4) 12/31/02 12/31/01 12/31/00
- ------------------------- --------- --------- ---------

Total tons 2,095,703 2,256,663 2,977,198
Silver (ounces per ton) 14.9 16.7 15.7
Gold (ounces per ton) 0.13 0.13 0.13
Zinc (percent) 11.4 11.6 11.9
Lead (percent) 4.2 4.6 4.4
Contained silver (ounces) 31,252,609 37,627,765 46,663,068
Contained gold (ounces) 268,603 299,456 396,891
Contained zinc (tons) 238,029 262,455 353,698
Contained lead (tons) 88,574 103,220 131,515

- -------------------------
(1) For Proven and Probable ore reserve assumptions and definitions, see
Glossary of Certain Mining Terms.

(2) Ore reserves represent in-place material, diluted and adjusted for
expected mining recovery. Mill recoveries of ore reserve grades are
expected to be 74% for silver, 64% for gold, 81% for zinc and 69% for
lead.

(3) The changes in reserves in 2002 versus 2001 were due to a) changes in
forecast metals prices; b) reassessments of metal contents and expected
mining recoveries of certain orebodies; and c) removal of some material
from reserves until new reserve estimates and mining plans are
completed in 2003. Proven and Probable reserves at the Greens Creek
mine are based on average drill spacing of 50 to 100 feet. Cutoff grade
assumptions vary by orebody and are developed based on reserve prices,
anticipated mill recoveries and smelter payables and cash operating
costs. Cutoff grades range from $70 per short ton net smelter return to
$100 per short ton net smelter return.

(4) The changes in reserves in 2001 versus 2000 were due to production,
downward revisions of reserves due to lower assumed metals prices and
reassessment of reserves based on new drilling and a new mine plan for
the Central West orebody.

THE SAN SEBASTIAN MINE

The San Sebastian mine is located in the State of Durango, Mexico, and
is 100% owned by us through a subsidiary, Minera Hecla. The mine is 56 miles
northeast of the city of Durango


-26-



on concessions acquired through our acquisition of Monarch Resources Investments
Limited in 1999. The processing plant is located near Velardena, Durango,
Mexico, and was acquired in April 2001. Concession holdings cover over
100-square miles including the mine site and multiple outlying active
exploration areas.

Ore production during 2001 consisted of surface mining and bulk
sampling from four vein systems and underground mine development of the Francine
vein. Underground development started in May 2001, and surface mining ceased
during the fourth quarter of 2001. Limited underground ore production from
development started in September and increased gradually as stopes were
developed during the remainder of 2001. Underground mining production reached
full production (approximately 450 short tons per day) during the second quarter
of 2002. The current mine plan for the Francine vein produces ore through 2004
and into the first quarter of 2005. Exploration is active on the Francine vein
and other nearby vein systems to expand ore reserves.

San Sebastian is a high-grade silver mine with significant gold
credits. Several epithermal veins exist within the San Sebastian Valley and in
the mine area. Known veins include the Francine vein, Profesor vein, Middle vein
and North vein systems. These veins are hosted within a series of shales with
interbedded fine-grained sandstones interpreted to belong to the Cretaceous
Caracol Formation.

Our Cerro Pedernalillo exploration project, located about six
kilometers from the Francine vein, has discovered three veins covering more than
1.5 kilometers in length. Our Cerro Pedernalillo drilling project has
intersected significant ore values, with approximately 28% of the drill
intercepts in the Don Sergio vein above mine cutoff grade over a two-meter
horizontal width.

The Francine vein strikes northwest and dips southwest and is located
on the southwestern limb of a doubly plunging anticline. The Francine vein
ranges in true thickness from more than 4.0 meters to less than 0.5 meters and
consists of several episodes of banded quartz, silica-healed breccias and minor
amounts of calcite. The vein is oxidized to a depth of approximately 100
vertical meters and the wall rocks contain an alteration halo of less than 2
meters next to the vein. Mineralization within the oxidized portion of the vein
contains limonite, hematite, silver halides and various copper carbonates.
Higher-grade gold and silver mineralization is associated with disseminated
hematite and limonite after pyrite and chalcopyrite, copper carbonates including
malachite and azurite and hydrous copper silicates including chrysocolla. Native
gold occurs associated with hematite and limonite. Mineralization in the sulfide
portion of the Francine vein contains pyrite, chalcopyrite, sphalerite, galena,
native silver, argentite and trace amounts of aguilarite.

Access to the underground workings is through a ramp from the surface
connecting one or more levels, excavated at a -15% grade. Ore is mined by
cut-and-fill stoping. Ore is extracted from the stopes using rubber-tired
equipment and hauled to the surface in trucks. Subeconomic material is used to
backfill and stabilize mined-out stopes. Electric power is purchased from
Comision Federal de Electridad (federal electric company). Water is supplied
from mine


-27-



dewatering or hauled from a local reservoir. A conversion from contractor mining
to owner mining began in late January 2003.

Ore is hauled in trucks by a contractor to the processing plant. The
process plant is a conventional leach / counter-current decantation / Merrill
Crowe precipitation circuit. The ore is crushed in a two-staged crushing plant
consisting of a primary jaw, a secondary cone crusher and a double-deck
vibrating screen. The grinding circuit includes a primary ball mill and cyclone
classifiers. The ground ore is thickened followed by agitated leaching and four
stages of counter-current decantation to wash solubilized silver and gold from
the pulp. The solution bearing silver and gold is then clarified, deaerated and
zinc dust added to precipitate silver and gold which is recovered in plate and
frame filters. Precipitate is dried and then shipped to a third-party refiner.
Commencing in the fourth quarter of 2002, over one-half of the precipitate has
been refined into dore before being shipped to a third-party refiner.

The plant was constructed in 1994 and is capable of processing
approximately 550 short tons per day. Site infrastructure includes a water
supply system, maintenance shop, warehouse, laboratory and various offices.
Electric power is purchased from Comision Federal de Electridad (federal
electric company).

At December 31, 2002, the net book value of the San Sebastian mine
property and its associated plant and equipment was $8.1 million. Capital
improvements were approximately $1.8 million during 2002 and included a modern
tailings disposal facility, leach circuit expansion, CIC (carbon in column)
scavenger recovery circuit and refinery improvements.

As of December 31, 2002, reclamation and closure accruals of $1.0
million have been established.

For a description of a legal claim relating to our Velardena mill, see
Note 8 of Notes to Consolidated Financial Statements.

At December 31, 2002, there were 136 hourly and 46 salaried employees
at the San Sebastian mine and Velardena mill. The National Mine and Mill Workers
Union represents process plant hourly workers at San Sebastian. Under Mexican
labor law, wage adjustments are negotiated annually and other contract terms
every two years. The contract is due for negotiation of wages in July 2003 and
for wages and other terms in July 2004.

Information with respect to the San Sebastian mine's production,
average cost per ounce of silver produced and Proven and Probable ore reserves
are set forth in the table below.

Year Year
---------- ----------
Production 2002 2001
-------------------------- ---------- ----------

Ore milled (tons) 156,532 69,779
Silver (ounces) 3,432,394 950,002
Gold (ounces) 41,510 15,983


-28-



Average Cost per Ounce
of Silver Produced (1)
--------------------------

Cash operating costs $ 0.91 $ 1.64
Total cash costs $ 1.09 $ 1.81
Total production costs $ 2.06 $ 2.89

Proven and Probable
Ore Reserves (2,3,4) 12/31/02 12/31/01
-------------------------- ---------- ----------

Total tons 369,556 304,222
Silver (ounces per ton) 23.7 28.20
Gold (ounces per ton) 0.24 0.30
Contained silver (ounces) 8,761,109 8,579,060
Contained gold (ounces) 88,269 91,267

--------------------------
(1) The low costs per silver ounce during 2002, compared to 2001,
are due in part to significant by-product credits from increased
gold production. Costs per ounce amounts are calculated pursuant
to standards of the Gold Institute. For the years ended December
31, 2002 and 2001, gold by-product credits were approximately
$3.76 per silver ounce and $4.61 per silver ounce, respectively.

(2) For Proven and Probable ore reserve assumptions and definitions,
see Glossary of Certain Mining Terms.

(3) Ore reserves represent in-place material, diluted and adjusted
for expected mining recovery. Mill recoveries of ore reserve
grades are expected to be approximately 90% for gold and 91% for
silver. Payable recoveries by smelters and refiners for
precipitate sales of gold and silver produced are expected to be
97.0% for silver and 98.5% for gold. Payable recoveries by
smelters and refiners for dore sales of gold and silver produced
are expected to be 99.75% for silver and 99.50% for gold. Proven
and Probable reserves at the San Sebastian mine are based on
drill spacing of 35 meters. Cutoff grade assumptions are
developed based on a gold price of $280 and a silver price of
$4.50, anticipated mill recoveries, royalties and cash operating
costs. Cutoff grades at San Sebastian are $34 per tonne net
production value.

(4) The increase in Proven and Probable ore reserves from 2001 to
2002 is the result of: a) incorporation of new definition
drilling information in the estimate of reserves; and b) a new
mine plan.


-29-



GOLD SEGMENT

THE LA CAMORRA MINE

The La Camorra mine is located in the eastern Venezuelan State of
Bolivar, approximately 120 miles southeast of Puerto Ordaz. It is 100% owned by
us through a Venezuelan subsidiary, Minera Hecla Venezolana, C.A., and has been
a producing mine for us since October 1999. We acquired the La Camorra mine in
June 1999 with the acquisition of Monarch Resources Investments Limited
(Monarch).

La Camorra is a high-grade underground gold mine that exploits two
shear-zone hosted quartz veins. It lies in the Botanamo greenstone belt of the
Precambrian Guayana Shield and is hosted by the Caballape Group of
volcaniclastics. The formations most likely date from Archean to Proterozoic age
and consist primarily of intermediate volcanics with subordinate metasediments.
Within the La Camorra concession, the gold mineralization is associated with the
near vertical Main and Betzy quartz veins occurring in a west-northwest,
east-southeast shear zone within medium- to coarse-grained pyroclastics.

Gold occurs both as free particles in quartz and attached to or
included in pyrite. Locally, gold is also seen on chloritic partings.

In 1998, a core drilling program was initiated by Monarch to test the
depth extension of the ore zones below the 400-meter level. We believe the
results of that program, and subsequent drill programs we have carried out,
confirm that ore-grade mineralization extends to depths below the levels to
which the current mine reserves have been delineated.

In 2002, a mid-level core drilling program was undertaken to explore
and define ore between the 400- and 500-meter levels within the mine. Based upon
this drill program, a further deep drill program began in December 2002 to
explore the Main and Betzy veins at depths down to the 575-meter level.

In addition, we control nine other exploration concessions near the La
Camorra mine, encompassing 8,000 hectares. Exploration drilling was conducted on
two of these concessions during 2002, Isbelia and Canaima. Work was concentrated
at Canaima to undertake a prefeasibility diamond drill program and a
hydrogeological and geotechnical investigation, which continued at year end.

Access to the underground workings at the La Camorra mine is through a
ramp from the surface connecting one or more levels, excavated at a -15% grade.
Ore is mined primarily by longhole stoping. Ore is extracted from the stopes
using rubber-tired equipment and hauled to the surface in mine haulage trucks.
Subeconomic material is used to backfill and stabilize mined-out stopes. The
mine is currently producing over 500 tons of ore per day.

The process plant uses a conventional carbon-in-leach process. The ore
is crushed with a three-stage system consisting of a primary jaw crusher with
secondary and tertiary cone crusher with a multi-deck vibrating screen. The
grinding circuit includes a primary and a secondary ball


-30-



mill. The ground ore is mixed with a cyanide solution and clarified, followed by
countercurrent carbon-in-leach gold adsorption. The carbon is then stripped and
the gold recovered and poured into gold bars for shipment to a refiner. Mill
recovery averages over 95%.

The plant was constructed in 1994 and is capable of processing
approximately 600 tons per day. Site infrastructure includes a water supply
system, maintenance shop, warehouse, living quarters, a dining facility,
administration building and a National Guard post. We also share a housing
facility located near the town of El Callao with units for approximately 50
families. Mine electric power is purchased from Eleoriente (a state-owned
electric company). Diesel-powered electric generators are available on-site for
operation of critical equipment during power outages. At December 31, 2002, the
net book value of the La Camorra mine property and its associated plant and
equipment was approximately $20.3 million.

Our reclamation plan has been approved by the Ministry of Environment
and Natural Resources. Planned activities include regrading and revegetation of
disturbed areas. A reclamation and closure accrual of $1.3 million was
established as of December 31, 2002.

At December 31, 2002, there were 346 hourly and 41 salaried employees
at our La Camorra gold mine, most of whom are represented by the Mine Workers
Union. The contract with respect to La Camorra will expire in March 2004.

Information with respect to the La Camorra mine's production, average
costs per ounce of gold produced and Proven and Probable ore reserves is set
forth in the table below.

Year
-----------------------------------------------
Production 2002 2001 2000
- ------------------------- --------- --------- ---------

Ore processed (tons) 194,960 163,139 138,216
Gold (ounces) 167,386 152,303 92,848

Average Cost per Ounce
of Gold Produced
- -------------------------

Cash operating costs $ 137 $ 133 $ 188
Total cash costs $ 137 $ 133 $ 188
Total production costs $ 206 $ 200 $ 246


Proven and Probable
Ore Reserves(1,2,3) 12/31/02 12/31/01 12/31/00
- ------------------------- --------- --------- ---------

Total tons 453,224 482,238 591,464
Gold (ounces per ton) 0.910 0.867 0.634
Contained gold (ounces) 412,332 418,050 375,200

- -------------------------


-31-



(1) For Proven and Probable ore reserve assumptions, including assumed
metals prices, see Glossary of Certain Mining Terms.

(2) The decrease in tons of Proven and Probable ore reserves in 2002
compared to 2001 is due to the depletion of reserves by mining,
subsequently offset by the addition of new reserves based on new
diamond drilling below the current mining front. Proven and
Probable ore reserves at the La Camorra mine are based on drill
spacing of 30 to 50 meters and closely spaced chip sample
information. Cutoff grade assumptions are developed based on
reserve prices, anticipated mill recoveries and cash operating
costs. The cutoff grade at La Camorra is 8 grams per tonne.

(3) The decrease in tons of Proven and Probable ore reserves in 2001
compared to 2000 is due to mining, offset by: 1) conversion of
mineralization to reserves based on new development and drilling;
and 2) addition of newly delimited mineralization from development
and drilling to reserve. Ore grade and contained metal improvements
in reserve are attributable to a change in reserve methodology in
2001 compared to 2000 based on very favorable mill/model
reconciliation and operations experience with the orebodies.

DISCONTINUED OPERATIONS

During 2000, in furtherance of our determination to focus our
operations on silver and gold mining and to raise cash to reduce debt and
provide working capital, our board of directors made the decision to sell our
industrial minerals segment. At that time, our principal industrial minerals
assets consisted of ball clay operations in Kentucky, Tennessee and Mississippi;
kaolin operations in South Carolina and Georgia; feldspar operations in North
Carolina; a clay slurry plant in Monterrey, Mexico; and specialty aggregate
operations (primarily scoria) in southern Colorado. We conducted these
operations through four wholly owned subsidiaries: (1) Kentucky-Tennessee Clay
Company, which operated our ball clay and kaolin divisions; (2) K-T Feldspar
Corporation, which operated the feldspar business; (3) K-T Clay de Mexico, S.A.
de C.V., which operated the clay slurry plant business; and (4) MWCA, Inc.,
which operates our specialty aggregate business. Based upon the 2000 decision to
sell the industrial minerals segment, our Consolidated Financial Statements
reflect the industrial minerals segment as a discontinued operation.

On March 27, 2001, we completed a sale of Kentucky-Tennessee Clay
Company, K-T Feldspar Corporation, K-T Clay de Mexico, S.A. de C.V. and certain
other minor industrial minerals companies (collectively the K-T Group),
transferring all of our interest in each of the companies subject to the
agreement. We completed a sales transaction for the Mountain West Products
division of MWCA in March 2000. We completed a sale of the landscape operations
of the Colorado Aggregate division of MWCA in June 2000. On March 4, 2002, we
completed a sale of the pet operations of the Colorado Aggregate division of
MWCA. Our management is currently evaluating its available options with regard
to the remaining minor portion of the industrial minerals segment.


-32-



NONOPERATING PROPERTIES

HOLLISTER DEVELOPMENT BLOCK

In August 2002, we, through our wholly owned subsidiary, Hecla Ventures
Corporation, entered into an earn-in agreement with Rodeo Creek Gold, Inc., a
wholly owned subsidiary of Great Basin Gold Ltd. (Great Basin), concerning
exploration, development and production on an area of Great Basin's Ivanhoe
high-grade gold property, which is referred to as the Hollister Development
Block and is located on the Carlin Trend in Nevada. The agreement provides us
with an option to earn a 50% working interest in the Hollister Development Block
in return for funding a two-stage, advanced exploration and development program
leading to commercial production. We estimate the cost to achieve our 50%
interest in the Hollister Development Block to be approximately $21.8 million.
Upon earn-in, we will operate the mine. For additional information relating to
the Hollister Development Block, see Note 4 of Notes to Consolidated Financial
Statements. The Hollister Development Block is defined by a 6,000-foot by
7,000-foot project boundary (964 acres) within a large claim block held by Great
Basin. The area was a producer of mercury around the turn of the century, and
later a producer of gold. The most recent operation was the Hollister mine,
consisting of a pair of open-pits and an associated heap-leach facility,
operated from 1990 through 1996. Located on the northwestern extension of the
Carlin Trend, the nearest active mining operations are the Dee mine, located 8
miles to the southeast, and the Ken Snyder mine, located 12 miles to the
northwest. The nearest major population centers are the towns of Battle
Mountain, approximately 38 miles southwest, and Elko, approximately 47 miles to
the southeast.

The underground exploration project will consist of approximately 6,500
feet of decline, cross-cuts and diamond drill stations, a minimum of
approximately 2,500 feet of exploration and bulk sampling on different veins
within the system, and approximately 40,000 feet of diamond drilling from
underground locations. The exploration project will take place out of the
existing East Hollister pit, thereby restricting surface impacts to areas
previously disturbed.

Plans for 2003 include applications for all operating permits,
construction of the surface support facilities and a drive of the initial
500-foot decline.

BLOCK B

In March 2002, we acquired the Block B exploration and mining lease
near El Callao in the Venezuelan State of Bolivar from CVG-Minerven (a
Venezuelan government-owned gold mining company) through March 2023. Block B is
a seven-square-mile property position in the prolific El Callao gold mining
district. The area's mining history dates back to the 1800s and contains many
historic mines including the Chile, Laguna and Panama mines, which collectively
produced over 1.6 million ounces of gold between 1921 and 1946.

Pursuant to the lease agreement, we paid CVG-Minerven $500,000 in
September 2002. In March 2003, an additional payment of $1.25 million will be
required, with a final payment of $1.0 million due in September 2003. We will
also pay CVG-Minerven a royalty of 2% to 3% (depending on the gold price) on
production from Block B.


-33-



The El Callao area is accessed by the International Highway from Puerto
Ordaz, on the south side of the River Orinoco, on a maintained, asphalt highway
that runs through to Santa Elena on the Brazilian border. Overall good
infrastructure exists and a 115 kw electricity supply feeds the area dominantly
inhabited by small-scale underground miners. The population of El Callao is
approximately 15,000 people.

Geologically, the gold is found in shear-zone hosted quartz veins and
stockworks hosted by Archean to Proterozoic greenstones composed of andesitic to
basaltic lavas. Gold occurs as free gold in quartz and is also commonly
associated with coarse-grained pyrite.

Exploration has begun in the Chile vein system known to host high-grade
gold mineralization. The Chile mine itself was an important gold producer that
produced more than 550,000 ounces of gold at an average grade of over one ounce
per ton. Since the mine shutdown in the 1940s, two phases of exploration
drilling were undertaken, one in the 1960s and a more recent drill testing in
1998 that encountered high grades west of the old mine.

Based upon this information, we have planned a detailed exploration
drilling campaign of two phases, Phase I, a 35-hole program for 9,100 meters to
confirm the existing information, and Phase II, a 15-hole program for 3,900
meters to in-fill and expand on the results of the Phase I program. Total
budgeted expenditure for these phases of exploration drilling will be
approximately $1.9 million. As of December 31, 2002, 17 holes of Phase I have
been drilled for a completed total of 3,932 meters of diamond drilling.
Depending on the results of the drilling, we will commence a feasibility study
for the development of a ramp.

THE ROSEBUD MINE

The Rosebud gold mine, in which we have a 50% interest, is located in
the Rosebud Mining District, in Pershing County, Nevada. The Rosebud property
consists of a 100% interest in three patented lode-mining claims and 125
unpatented lode-mining claims. The Rosebud mine may be reached from Winnemucca,
Nevada, by traveling west a distance of approximately 58 miles on an all-weather
gravel road.

In June 2000, we announced, together with Newmont Gold Company, which
holds the remaining 50% interest in the mine, the planned closure of the Rosebud
mine when it was recognized that production would cease during the third
quarter. Mining activity was completed in July 2000, and milling activity was
completed in August of 2000.

The Rosebud property has been reclaimed per the closure plan approved
by the Nevada Department of Environmental Protection. Revegetation on the
property will be monitored for the next three to five years, after which the
property will completely revert back to the public domain under the U.S. Bureau
of Land Management.


-34-



THE GROUSE CREEK MINE

The Grouse Creek gold mine is located in central Idaho, 27 miles
southwest of the town of Challis in the Yankee Fork Mining District. Mining at
Grouse Creek began in late 1994 and ended in April 1997 due to
higher-than-expected operating costs and less-than-expected operating margins,
primarily because the ore occurred in thinner, less continuous structures than
had been originally expected.

We recorded a write-down of the mine's carrying value totaling $97.0
million in 1995. We recorded further adjustments in 1996 for future severance,
holding, reclamation and closure costs totaling $22.5 million, and adjustments
to the carrying value of property, plant and equipment, and inventories totaling
$5.3 million.

Following completion of mining in the Sunbeam pit in April 1997, we
placed the Grouse Creek mine on a care-and-maintenance status. During the
care-and-maintenance period, reclamation was undertaken to prevent degradation
of the property. During 1997, the milling facilities were mothballed and
earthwork completed to contain and control surface waters. In 1998, an
engineered cap was constructed on the waste rock storage facility and
modifications were made to the water treatment facility. In 1999 and 2000,
activities included further work on the waste rock storage facility cover and
continued work controlling surface waters.

We increased the reclamation accrual by $23.0 million in 1999 due to
anticipated changes to the closure plan, including increased dewatering
requirements and other expenditures. The changes to the reclamation plan at
Grouse Creek were necessitated principally by the need to dewater the tailings
impoundment rather than reclaim it as a wetland as originally planned.

In May 2000, we notified state and federal agencies that the Grouse
Creek property would proceed to a permanent suspension of operations. We signed
an agreement with the State of Idaho and a voluntary administrative order on
consent with the U.S. Forest Service and U.S. Environmental Protection Agency in
which we agreed to dewater the tailings impoundment, complete a water balance
report and monitoring plan for the site and complete certain studies necessary
for closure of the tailings impoundment. A work plan for final reclamation and
closure of the tailings impoundment is to be submitted by us no later than one
year prior to estimated completion of the tailings impoundment dewatering.

We increased the reclamation accrual by $10.2 million in 2000 based
upon updated cost estimates in accordance with AICPA Statement of Position 96-1
"Environmental Remediation Liabilities," due to the requirements of the
administrative order on consent. During 2001, our activities focused on further
containment of surface and subsurface water along with development of a
dewatering plan for the tailings impoundment. The reclamation and closure cost
accrual for the Grouse Creek mine totaled $27.4 million as of December 31, 2002,
although it is possible that the estimate may change in the future due to the
assumptions and estimates inherent in the accrual.


-35-



THE REPUBLIC MINE

The Republic gold mine is located in the Republic Mining District near
Republic, Washington. In February 1995, we completed operations at the Republic
mine and have been conducting reclamation work in connection with the mine and
mill closure. In August 1995, we entered into an agreement with Newmont to
explore and develop the Golden Eagle deposit on the Republic mine property. Echo
Bay acquired Newmont's interest in 2000 and has been conducting a limited
exploration program on the project.

At December 31, 2002, the accrued reclamation and closure costs balance
totaled $2.4 million, although it is possible that the estimate may change in
the future due to the assumptions and estimates inherent in the accrual.
Reclamation and closure efforts continued in 2002.

The remaining net book value of the Republic mine property and its
associated plant and equipment was approximately $0.6 million as of December 31,
2002.






-36-



Item 3. Legal Proceedings

For a discussion on our legal proceedings, see Note 8 of Notes to
Consolidated Financial Statements.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2002.

Executive Officers of the Registrant

Reference is made to the information set forth in Part III, Item 10 of
this Form 10-K, which is incorporated by reference into this Part I.







-37-



Part II

Item 5. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters

(a) (i) Shares of our common stock are traded on the New York Stock
Exchange, Inc.

(ii) The intraday price range of our common stock on the New York
Stock Exchange for the past two years was as follows:

First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
2002 - High $ 1.99 $ 5.90 $ 5.20 $ 5.45
- Low $ 0.90 $ 1.90 $ 2.20 $ 2.96
2001 - High $ 1.00 $ 1.70 $ 1.26 $ 1.27
- Low $ 0.50 $ 0.66 $ 0.78 $ 0.77

(b) As of December 31, 2002, there were 8,584 shareholders of record
of the Common Stock.

(c) We have not declared or paid any cash dividends on our capital
stock or other securities for several years and do not anticipate
paying any cash dividends in the foreseeable future. We are
currently restricted from paying dividends on our common stock or
repurchasing common stock until such time as we have paid the
cumulative dividends on our Series B preferred stock. In
addition, we have entered into loan documents that constrain our
ability to pay dividends on our common stock or repurchase our
common stock. At December 31, 2002, the cumulative dividend for
the preferred stock was $6.6 million.

(d) In August 2001, we sold 5,749,883 authorized but unissued shares
of our common stock to Copper Mountain Trust Company, trustee for
the Hecla Mining Company Retirement Plan and the Lucky Friday
Pension Plan (the benefit plans). These shares were issued
pursuant to a private placement stock purchase agreement and not
registered under the Securities Act of 1933. The shares were
listed on the New York Stock Exchange.

In January 2003, we filed a Registration Statement with the
Securities and Exchange Commission covering 3,394,883 shares of
our common stock, including 1,394,883 common shares held by the
benefit plans. Also, in January 2003, we completed a public
offering that included the registration and sale of 2.0 million
shares owned directly by the benefit plans. Net proceeds realized
from the sale totaled approximately $8.0 million for the benefit
plans.

On August 2, 2002, through our wholly owned subsidiary Hecla
Ventures Corporation, we entered into an earn-in agreement with
Rodeo Creek Gold, Inc., a wholly owned


-38-



subsidiary of Great Basin Gold Ltd. (Great Basin). Pursuant to
the agreement, Great Basin was issued a warrant to purchase
2,000,000 shares of our common stock as of the date of execution
of the Earn-In Agreement. The warrant is exercisable on or before
August 1, 2004, at $3.73 per share, but has not yet been
exercised. The beneficial owner of the warrant to purchase our
common stock is Great Basin. In the event that we elect to
conduct certain development activities, Great Basin will receive
an additional warrant to purchase 1,000,000 shares of common
stock, at the future current market value, and, upon completion
of development activities, Great Basin will receive a final
warrant to purchase 1,000,000 shares of our common stock at the
future current market value.

On June 13, 2002, we offered holders of our Series B preferred
stock the opportunity to exchange each of their preferred shares
for seven shares of our common stock. As a result of the
completed exchange offer, 1,546,598 shares, or 67.2%, of the
total number of preferred shares previously outstanding (2.3
million), were validly tendered and exchanged into 10,826,186
shares of common stock. The shares exchanged were not registered
with the Securities and Exchange Commission under the Securities
Act of 1933 in reliance on the exemption provided by Section
3(a)(9).

Previously undeclared and unpaid preferred stock dividends of
$11.2 million were eliminated and the $8.0 million annual
cumulative preferred dividends that have historically been
included in income (loss) applicable to common shareholders will
be reduced to approximately $2.6 million beginning in 2003.
During the third quarter of 2002, we incurred a noncash dividend
charge of approximately $17.6 million, which represents the
difference between the value of the common stock issued in the
exchange offer and the value of the shares that were issuable
under the stated conversion terms of the preferred stock.

(e) The following table provides information as of December 31, 2002,
regarding our compensation plans (including individual
compensation arrangements) under which equity securities are
authorized for issuance:



Number of Securities To Weighted-Average Number of Securities
Be Issued Upon Exercise Exercise Price Remaining Available For
of Outstanding Options, of Outstanding Options, Future Issuance Under
Warrants and Rights Warrants and Rights Equity Compensation Plans
----------------------- ----------------------- -------------------------

Equity Compensation Plans Approved
by Security Holders:

1995 Stock Incentive Plan 2,801,670 $ 3.99 2,192,581
Stock Plan for Nonemployee
Directors 96,837 N/A 849,589
Key Employee Deferred Compensation
Plan 6,740 $ 3.58 5,993,260

Equity Compensation Plans Not Approved
by Security Holders -- -- --
----------------------- ----------------------- -------------------------
Total 2,905,247 $ 3.86 9,035,430
======================= ======================= =========================


See Notes 9 and 10 of Notes to Consolidated Financial Statements for
information regarding the above plans.


-39-



Item 6. Selected Financial Data

The following table sets forth selected historical consolidated
financial data for each of the years ended December 31, 1998 through 2002, and
is derived from our audited financial statements. The data set forth below
should be read in conjunction with, and is qualified in its entirety by
reference to our Consolidated Financial Statements.



Selected Financial Data
(dollars in thousands except for per share amounts)
Years Ended December 31,
--------------------------------------------------------------------------------
2002 2001 2000 1999(1) 1998
------------ ------------ ------------ ------------ ------------

Sales of products $ 105,700 $ 85,247 $ 75,850 $ 73,703 $ 75,108
============ ============ ============ ============ ============

Income (loss) from continuing
operations $ 10,863 $ (9,582) $ (84,847) $ (43,391) $ (4,674)
Income (loss) from discontinued
operations(2) (2,224) 11,922 1,529 4,786 4,374
Net income (loss) 8,639 2,340 (83,965) (39,990) (300)
Preferred stock dividends(3) (23,253) (8,050) (8,050) (8,050) (8,050)
Loss applicable to
common shareholders(4) $ (14,614) $ (5,710) $ (92,015) $ (48,040) $ (8,350)
============ ============ ============ ============ ============

Loss from continuing operations
per common share $ (0.15) $ (0.25) $ (1.39) $ (0.83) $ (0.23)
============ ============ ============ ============ ============

Basic and diluted loss per
common share $ (0.18) $ (0.08) $ (1.38) $ (0.77) $ (0.15)
============ ============ ============ ============ ============

Total assets $ 160,141 $ 153,116 $ 194,836 $ 268,357 $ 252,062
============ ============ ============ ============ ============

Accrued reclamation and closure costs $ 49,723 $ 52,481 $ 58,710 $ 49,325 $ 29,753
============ ============ ============ ============ ============

Noncurrent portion of debt $ 4,657 $ 11,948 $ 10,041 $ 55,095 $ 42,923
============ ============ ============ ============ ============

Cash dividends paid per common
share $ -- $ -- $ -- $ -- $ --
============ ============ ============ ============ ============

Cash dividends paid per preferred
share(3) $ -- $ -- $ 1.75 $ 3.50 $ 3.50
============ ============ ============ ============ ============

Common shares issued 86,187,468 73,068,796 66,859,752 66,844,575 55,166,728

Shareholders of record 8,584 8,926 9,273 9,714 10,162

Employees 720 701 1,195 1,277 1,184


(1) On January 1, 1999, we changed our method of accounting for start-up
costs in accordance with AICPA Statement of Position 98-5 "Reporting on
the Costs of Start-up Activities." The impact of this change in
accounting principle related to unamortized start-up costs associated
with our 29.73% interest in the Greens Creek mine and resulted in a
$1.4 million charge for the year ended December 31, 1999.

(2) During 2000, in furtherance of our determination to focus our
operations on silver and gold mining and to raise cash to reduce debt
and provide working capital, our board of directors made the decision
to sell our industrial minerals segment. As such, the industrial
minerals segment has been recorded as a discontinued operation as of
and for each of the five years in the period ended December 31, 2002.
As of December 31, 2001 and 2000, only, the balance sheets have been
reclassified to reflect the net assets of the industrial minerals
segment as a discontinued operation.

(3) As of December 31, 2002, we have not declared or paid $6.6 million of
Series B preferred stock dividends. However, since the dividends are
cumulative, they continue to be reported in determining the income
(loss) applicable to common stockholders, but


-40-



are excluded in the amount reported as cash dividends paid per
preferred share. We completed an offer to acquire all of our currently
outstanding Series B preferred stock in exchange for newly issued
shares of our common stock on July 25, 2002. A total of 1,546,598
shares, or 67.2%, of the total number of Series B preferred shares
outstanding were validly tendered and exchanged into 10,826,186 shares
of our common stock. During the third quarter of 2002, we incurred a
non-cash dividend of approximately $17.6 million related to the
completed exchange offering. The $17.6 million dividend represents the
difference between the value of the common stock issued in the exchange
offer and the value of the shares that were issuable under the stated
conversion terms of the Series B preferred stock. The non-cash dividend
had no impact on our total shareholders' equity as the offset was an
increase in common stock and surplus. As a result of the completed
exchange offering, the total of cumulative preferred dividends is $23.3
million for the year ending December 31, 2002. In 2003, the $8.0
million annual cumulative preferred dividends that have historically
been included in income (loss) applicable to common shareholders will
be reduced to approximately $2.6 million. The completed exchange
offering also eliminated $11.2 million of previously undeclared and
unpaid preferred stock dividends.

(4) After recognizing a $2.2 million loss from discontinued operations and
$23.3 million in preferred stock dividends, our loss applicable to
common stockholders for the year ended December 31, 2002, was
approximately $14.6 million, compared to a loss of $5.7 million in
2001, after recognizing $11.9 million in income from discontinued
operations, due to a gain of $12.7 million on the sale of the majority
of our industrial minerals assets, and $8.0 million in preferred stock
dividends.





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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

FORWARD-LOOKING AND OTHER STATEMENTS

STATEMENTS MADE IN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK WHICH ARE NOT HISTORICAL FACTS, SUCH AS ANTICIPATED PAYMENTS,
LITIGATION OUTCOME, PRODUCTION, SALES OF ASSETS, EXPLORATION RESULTS AND PLANS,
COSTS, PRICES OR SALES PERFORMANCE ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AND INVOLVE A
NUMBER OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE PROJECTED, ANTICIPATED, EXPECTED OR IMPLIED. THESE RISKS
AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO: METALS PRICE VOLATILITY,
VOLATILITY OF METALS PRODUCTION, EXPLORATION RISKS AND RESULTS AND PROJECT
DEVELOPMENT RISKS. WE UNDERTAKE NO OBLIGATION AND HAVE NO INTENTION OF UPDATING
FORWARD-LOOKING STATEMENTS.

A 112-year-old company, we have long been known as a precious metals
producer and are involved in the mining, processing, development and exploration
of silver, gold, lead and zinc. We are operated and organized into two segments,
silver and gold, and have a small industrial minerals subsidiary. One operating
property is included in the gold segment and three are included in the silver
segment. The following table presents sales of products and gross profit (loss)
by segment for the years ended December 31 (in thousands):

2002 2001 2000
--------- --------- ---------
Sales of products:
Silver $ 56,404 $ 43,795 $ 44,277
Gold 49,296 41,452 31,573
--------- --------- ---------
Total sales $ 105,700 $ 85,247 $ 75,850
========= ========= =========

Gross profit (loss):
Silver $ 7,066 $ (7,474) $ (5,227)
Gold 16,649 12,193 (102)
--------- --------- ---------
Total gross profit (loss) $ 23,715 $ 4,719 $ (5,329)
========= ========= =========

During 2002, we produced more silver and gold than at any time in our
history, while continuing to maintain low costs of production. During 2002, we
produced approximately 8.7 million ounces of silver at an average total cash
cost of $2.25 per ounce and approximately 240,000 ounces of gold, 167,000 ounces
of which were produced in our gold segment at an average total cash cost of $137
per ounce. Our silver and gold cash costs per ounce are net of by-product
credits from other metals produced at those mines. Although we are positively
impacted by increases in metals prices, our recent efforts to reduce costs of
operations, improve production, increase our cash position and reduce debt
enhance our ability to operate even in precious metals price environments at
levels below those of the past several years.


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In March 2002, we announced we had been awarded the Block B exploration
and mining lease near El Callao in the Venezuelan State of Bolivar by
CVG-Minerven (a Venezuelan government-owned gold mining company). Block B is a
1,795-hectare land position in the historic El Callao gold district that
includes the historic Chile, Laguna and Panama mines, which produced over 1.5
million ounces of gold between 1921 and 1946. Pursuant to the agreement with
CVG-Minerven, we paid CVG-Minerven $500,000 in September 2002. In March 2003, an
additional payment of $1.25 million will be required, with a final payment of
$1.0 million due September 2003. Additionally, we will also pay CVG-Minerven a
sliding scale royalty of 2% to 3% (depending on the gold price) on production
from Block B.

On June 13, 2002, we offered to holders of our Series B preferred stock
to exchange each of their preferred shares for seven shares of our common stock.
Holders of the preferred stock were offered the opportunity to exchange their
shares at a higher rate in order to limit the impact of the dividend arrearages
and to eliminate the liquidation preferences for converted preferred shares. The
dividend arrearages have the effect of preventing us from paying any dividends
on common stock and allowed the holders of preferred stock to elect two
directors to our board of directors. The arrearages may hinder our ability to
raise capital or negotiate third-party mergers and acquisitions, and may
adversely affect the market value of our common and preferred stock. In
addition, we believed the prospect of not receiving future dividends might be
untenable to our preferred holders and that they should have the opportunity to
exchange their shares for a more actively traded security.

As a result of the completed exchange offer, 1,546,598 shares, or
67.2%, of the total number of preferred shares previously outstanding (2.3
million), were validly tendered and exchanged into 10,826,186 shares of common
stock. Also as a result of the offering, the $8.0 million annual cumulative
preferred dividends that have historically been included in income (loss)
applicable to common shareholders will be reduced to approximately $2.6 million
beginning in 2003. Additionally, $11.2 million of previously undeclared and
unpaid preferred stock dividends were eliminated. During the third quarter, we
incurred a non-cash dividend charge of approximately $17.6 million, which
represents the difference between the value of the common stock issued in the
exchange offer and the value of the shares that were issuable under the stated
conversion terms of the preferred stock.

On August 2, 2002, we, through our wholly owned subsidiary, Hecla
Ventures Corporation, entered into an earn-in agreement with Rodeo Creek Gold,
Inc., a wholly owned subsidiary of Great Basin Gold Ltd. (Great Basin),
concerning exploration, development and production on Great Basin's Hollister
Development Block gold property, located on the Carlin Trend in Nevada. The
agreement provides us with an option to earn a 50% working interest in the
Hollister Development Block in return for funding a two-stage, advanced
exploration and development program leading to commercial production. We
estimate the cost to achieve our 50% interest in the Hollister Development Block
to be approximately $21.8 million. Upon earn-in, we will operate the mine. For
additional information relating to the Hollister Development Block, see Note 4
of Notes to Consolidated Financial Statements.


-43-



In January 2003, we completed an underwritten public offering of 23.0
million newly issued shares of our common stock. The public offering also
included 2.0 million shares held by the Hecla Mining Company Retirement Plan and
the Lucky Friday Pension Plan (the benefit plans). We received net proceeds from
the offering totaling approximately $91.2 million, which will be used to fund
future exploration and development, working capital requirements, capital
expenditures, possible future acquisitions and for other general corporate
purposes. Our benefit plans realized net proceeds of approximately $8.0 million
from the sale of the 2.0 million shares included in the public offering.

We also filed a Registration Statement with the Securities and Exchange
Commission covering 1,394,883 shares of our common stock held by the benefit
plans and 2,000,000 shares of our common stock issuable upon exercise of
warrants issued to Great Basin Gold Ltd. (Great Basin) pursuant to an Earn-in
Agreement discussed in Note 4 of Notes to Consolidated Financial Statements. The
Registration Statement became effective in January 2003.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make a wide variety of
estimates and assumptions that affect (i) the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements, and (ii) the reported amounts of revenues and
expenses during the reporting periods covered by the financial statements. Our
management routinely makes judgments and estimates about the effect of matters
that are inherently uncertain. As the number of variables and assumptions
affecting the future resolution of the uncertainties increases, these judgments
become even more subjective and complex. We have identified certain accounting
policies that are most important to the portrayal of our current financial
condition and results of operations. Our significant accounting policies are
disclosed in Note 1 of Notes to Consolidated Financial Statements.

REVENUE RECOGNITION

Sales of metals products sold directly to smelters are recorded when
title and risk of loss transfer to the smelter at current spot metals prices.
Due to the time elapsed from the transfer to the smelter and the final assay
settlement with the smelter (generally three months), we must estimate the price
at which our metals will be sold in reporting our profitability and cash flow.
Recorded values are adjusted monthly until final settlement at month-end metals
prices. If there was a significant variance in estimated metals prices or assays
compared to the final actual metals prices and assays, our monthly results of
operations could be affected. Sales of metal in products tolled, rather than
sold to smelters, are recorded at contractual amounts when title and risk of
loss transfer to the buyer.

Changes in the market price of metals significantly affect our
revenues, profitability and cash flow. Metals prices can and often do fluctuate
widely and are affected by numerous factors beyond our control, such as
political and economic conditions, demand, forward selling by producers,
expectations for inflation, central bank sales, the relative exchange rate of
the U.S. dollar, purchases and lending, investor sentiment, and global mine
production levels. The aggregate effect of these factors is impossible to
predict. Because a significant portion of our


-44-



revenues is derived from the sale of silver, gold, lead and zinc, our earnings
are directly related to the prices of these metals. If the market price for
these metals falls below our total production costs, we will experience losses
on such sales.

PROVEN AND PROBABLE ORE RESERVES

On a periodic basis, management reviews the reserves that reflect
estimates of the quantities and grades of ore at our mines which management
believes can be recovered and sold at prices in excess of the total cost
associated with extraction and processing the ore. Management's calculations of
Proven and Probable ore reserves are based on in-house engineering and
geological estimates using current operating costs, metals prices and demand for
our products. Periodically, management obtains external determinations of
reserves.

Reserve estimates will change as existing reserves are depleted through
production, as well as changes in estimates caused by changing production cost
and/or metals prices. Changes in reserves may also reflect that grades of ore
fed to process may be different from stated reserve grades because of variation
in grades in areas mined, mining dilution and other factors. Reserves estimated
for properties that have not yet commenced production may require revision based
on actual production experience.

Declines in the market price of metals, as well as increased production
or capital costs or reduced recovery rates, may render ore reserves uneconomic
to exploit unless the utilization of forward sales contracts or other hedging
techniques is sufficient to offset such effects. If our realized price for the
metals we produce, including hedging benefits, were to decline substantially
below the levels set for calculation of reserves for an extended period, there
could be material delays in the development of new projects, net losses, reduced
cash flow, restatements or reductions in reserves and asset write-downs in the
applicable accounting periods. Reserves should not be interpreted as assurances
of mine life or of the profitability of current or future operations. No
assurance can be given that the estimate of the amount of metal or the indicated
level of recovery of these metals will be realized.

DEPRECIATION AND DEPLETION

Depreciation is based on the estimated useful lives of the assets and
is computed using straight-line and unit-of-production methods. Depletion is
computed using the unit-of-production method. The unit-of-production method is
based on Proven and Probable ore reserves. As discussed above, our estimates of
Proven and Probable ore reserves may change, possibly in the near term,
resulting in changes to depreciation, depletion, amortization and reclamation
accrual rates in future reporting periods.

IMPAIRMENT OF LONG-LIVED ASSETS

Management reviews the net carrying value of all facilities, including
idle facilities, on a periodic basis. We estimate the net realizable value of
each property based on the estimated undiscounted future cash flows that will be
generated from operations at each property, the estimated salvage value of the
surface plant and equipment and the value associated with property interests.
These estimates of undiscounted future cash flows are dependent upon the


-45-



estimates of metal to be recovered from Proven and Probable ore reserves, future
production cost estimates and future metals price estimates over the estimated
remaining mine life. If undiscounted cash flows are less than the carrying value
of a property, an impairment loss is recognized based upon the estimated
expected future cash flows from the property discounted at an interest rate
commensurate with the risk involved.

Management's estimates of metals prices, recoverable Proven and
Probable ore reserves, and operating, capital and reclamation costs are subject
to risks and uncertainties of change affecting the recoverability of our
investment in various projects. Although management believes it has made a
reasonable estimate of these factors based on current conditions and
information, it is reasonably possible that changes could occur in the near term
which could adversely affect management's estimate of net cash flows expected to
be generated from our operating properties and the need for asset impairment
write-downs.

ENVIRONMENTAL MATTERS

When it is probable that such costs will be incurred and they are
reasonably estimable, we accrue costs associated with environmental remediation
obligations at the most likely estimate. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study for such facility and are charged
to provision for closed operations and environmental matters. We periodically
review our accrued liabilities for such remediation costs as evidence becomes
available indicating that our remediation liability has potentially changed.
Costs of future expenditures for environmental remediation are not discounted to
their present value unless subject to a contractually obligated fixed payment
schedule. Such costs are based on management's current estimate of amounts that
are expected to be incurred when the remediation work is performed within
current laws and regulations. Recoveries of environmental remediation costs from
other parties are recorded as assets when their receipt is deemed probable.

Future closure, reclamation and environment-related expenditures are
difficult to estimate in many circumstances due to the early stages of
investigation, uncertainties associated with defining the nature and extent of
environmental contamination, the uncertainties relating to specific reclamation
and remediation methods and costs, application and changing of environmental
laws, regulations and interpretations by regulatory authorities and the possible
participation of other potentially responsible parties. Reserves for closure
costs, reclamation and environmental matters totaled $49.7 million at December
31, 2002. We anticipate that expenditures relating to these reserves will be
made over the next five to ten years. It is reasonably possible the ultimate
cost of remediation could change in the future and that changes to these
estimates could have a material effect on future operating results as new
information becomes known.


-46-



RESULTS OF OPERATIONS

The following table displays the actual silver and gold production (in
thousand ounces) by operation for the years ended December 31, 2002, 2001 and
2000, and projected silver and gold production for the year ending December 31,
2003:

Projected Actual
2003 2002 2001 2000
--------- --------- --------- ---------
Silver ounce production:
San Sebastian(1) 3,800 3,432 950 --
Greens Creek(2) 3,300 3,245 3,260 2,754
Lucky Friday 1,900 2,004 3,224 5,012
Other sources(3) -- -- -- 233
--------- --------- --------- ---------

Total silver ounces 9,000 8,681 7,434 7,999
========= ========= ========= =========
Gold ounce production:
La Camorra 150 167 152 93
San Sebastian(1) 35 42 16 --
Greens Creek(2) 30 31 26 25
Other sources(3) -- -- 1 28
--------- --------- --------- ---------
Total gold ounces 215 240 195 146
========= ========= ========= =========

(1) Production commenced in May 2001 at the San Sebastian mine.

(2) Reflects our 29.73% portion.

(3) Includes production from the Rosebud mine, which completed operations in
the third quarter of 2000, and other sources.


-47-



Total cash and total production costs, and average metals prices were
as follows:

2002 2001 2000
------- ------- -------
Average costs per ounce of silver produced:
Total cash costs per ounce ($/oz.)(1,2) 2.25 3.57 4.02
Total production costs per ounce ($/oz.)(1,2) 3.68 5.09 5.49

Average costs per ounce of gold produced:
Total cash costs per ounce ($/oz.)(3) 137 133 211
Total production costs per ounce ($/oz.)(3) 206 200 275

Average Metals Prices:
Silver-Handy & Harman ($/oz.) 4.63 4.36 5.00
Gold-Realized ($/oz.) 303 280 284
Gold-London Final ($/oz.) 310 272 279
Lead-LME Cash ($/pound) 0.205 0.216 0.206
Zinc-LME Cash ($/pound) 0.353 0.402 0.512

(1) For the years ended December 31, 2002 and 2001, approximately $0.8
million and $0.4 million, respectively, of costs were classified as
care-and-maintenance costs and included in the determination of the
cost per ounce at Lucky Friday. Excluding the care-and-maintenance
costs, the total cash and total production costs per ounce total
$2.16 and $3.59, respectively, during 2002, and $3.52 and $5.04,
respectively, during 2001.

(2) The lower costs per silver ounce during 2002, compared to 2001, are
due in part to significant by-product credits from increased gold
production in the silver segment calculated pursuant to standards of
the Gold Institute.

(3) Costs per ounce of gold are based on the gold produced by the gold
segment only. Gold produced in the silver segment (San Sebastian and
Greens Creek) is treated as a by-product credit in calculating
silver costs per ounce.

In 2000, we shipped approximately 1,078,000 tons of product from the
Kentucky-Tennessee Clay Company, Kentucky-Tennessee Feldspar Corporation,
Kentucky-Tennessee Clay de Mexico (collectively the K-T Group), which included
ball clay, kaolin and feldspar, as well as approximately 61,000 tons of
specialty aggregates from the Colorado Aggregate division (CAC) of MWCA, Inc.,
and 130,000 cubic yards of landscape material from the Mountain West Products
division (MWP) of MWCA, Inc. In 2001, we shipped approximately 261,000 tons from
the industrial minerals group, including 20,000 tons from CAC. In 2002, we
shipped approximately 10,000 tons from CAC.


-48-



During 2000, in furtherance of our determination to focus operations on
silver and gold mining and to raise cash to retire debt and provide working
capital, our board of directors made the decision to sell the industrial
minerals segment. During 2000, we sold substantially all of the assets of MWP
and the landscape operations of CAC. In March 2001, we completed a sale of the
K-T Group and certain other minor inactive industrial minerals companies. In
March 2002, we completed a sale of the pet operations of CAC. Our management is
currently evaluating its available options with regard to the remaining portion
of the industrial minerals segment.

2002 COMPARED TO 2001

For the years ended December 31, 2002 and 2001, respectively, we
recorded net income, before preferred stock dividends, of approximately $8.6
million ($0.11 per common share) and $2.3 million ($0.03 per common share). Our
net income for 2002 includes a loss from discontinued operations of
approximately $2.2 million ($0.03 per common share), compared to income from
discontinued operations of approximately $11.9 million ($0.17 per common share)
during 2001. The income from discontinued operations in 2001 is principally due
to a gain of $12.7 recognized on the sale of the K-T Group.

For the years ended December 31, 2002 and 2001, respectively, we
recorded losses applicable to common shareholders of approximately $14.6 million
($0.18 per common share) and $5.7 million ($0.08 per common share). Included in
the losses applicable to common shareholders were preferred stock dividends of
$23.3 million and $8.0 million in 2002 and 2001, respectively. The 2002
dividends include a non-cash dividend charge of approximately $17.6 million
related to the completed preferred stock exchange offer.

SILVER OPERATIONS

For the year ended December 31, 2002, the silver segment reported
income from operations of $4.1 million compared to a loss from operations of
$8.6 million during 2001. Sales of products increased by $12.6 million and cost
of sales and other direct production costs as a percentage of sales from
products decreased to 67.4% during 2002 from 92.8% in 2001. The consolidated
improvements in the silver segment primarily are a result of increased
production from the lower cost San Sebastian mine, reduced production at the
higher cost Lucky Friday mine, lower overall unit costs at the Greens Creek mine
and higher average silver and gold prices, partly offset by lower average zinc
and lead prices.

For the year ended December 31, 2002, the San Sebastian mine, located
in the State of Durango, Mexico, reported sales of $23.5 million compared to
$7.8 million for the year ended December 31, 2001, a result of the commencement
of operations in May 2001 with full production reached during the second quarter
of 2002. During 2002, San Sebastian produced approximately 3.4 million ounces of
silver and 42,000 ounces of gold, respectively, at a low total cash cost of
$1.09 per silver ounce. The low cost per silver ounce is due in part to
significant by-product credits from gold production. For the years ended
December 31, 2002 and 2001, gold by-product credits were approximately $3.76 per
silver ounce and $4.61 per silver ounce, respectively.


-49-



The Greens Creek mine, a 29.73%-owned joint-venture arrangement with
Kennecott Greens Creek Mining Company located on Admiralty Island, near Juneau,
Alaska, reported sales of $23.3 million for the year ended December 31, 2002, as
compared to $20.3 million during 2001, primarily due to increased mill
throughput resulting in higher concentrate tons produced combined with better
recoveries in the gravity circuit, leading to improved lead/silver/gold
distributions. Our share of Greens Creek's silver production remained
approximately the same at 3.2 million ounces, compared to 3.3 million ounces,
for the years ended December 31, 2002 and 2001, while production of gold ounces
and lead and zinc tons increased by approximately 17%, 11% and 14%,
respectively. The total cash cost per silver ounce decreased from $2.41 during
2001 to $1.81 in 2002.

The Lucky Friday mine, located in northern Idaho and a producing mine
for us since 1958, reported sales of approximately $9.6 million for the year
ended December 31, 2002, as compared to $15.7 million during 2001. The reduction
in sales at the Lucky Friday mine is primarily due to the decision in October
2001 to reduce production due to low silver and lead prices.

With minimal additional development, we estimate the Lucky Friday mine
can sustain the lower production levels through 2004 and will continue to
operate as long as the cost of operating is less than putting the property on
care and maintenance. The total cash cost per silver ounce decreased from $5.27
in 2001 to $4.97 in 2002. For the years ended December 31, 2002 and 2001,
approximately $0.8 million and $0.4 million, respectively, of costs were
classified as care-and-maintenance costs and included in the determination of
the costs per ounce at Lucky Friday. Excluding the care-and-maintenance costs,
the total cash cost per ounce was $4.57 for 2002 and $5.14 for 2001. For the
year ending December 31, 2002, production totaled approximately 2.0 million
silver ounces and 10,000 tons of lead, as compared with total production for the
year ended December 31, 2001, of 3.2 million silver ounces and 21,000 tons of
lead, respectively.

GOLD OPERATIONS

We currently operate the La Camorra mine, located in the eastern
Venezuelan State of Bolivar, approximately 120 miles southeast of Puerto Ordaz.
At the present time, La Camorra is our sole gold operating unit.

Sales of product increased by $7.8 million and cost of sales and other
direct production costs as a percentage of sales from products decreased to
43.4% during the year 2002 from 46.8% in 2001. The improvement to sales, as well
as to cost of sales and other direct production costs as a percentage of sales,
during 2002 is primarily due to increased mine equipment availability and
improvements to the crushing, milling and adsorption capacities, allowing for
increases in tons milled and gold ounces produced. Also contributing to the
improvements were increases in the average realized price of gold, which
increased 8% during 2002 when compared to 2001.

CORPORATE MATTERS

For the year ended December 31, 2002, we reported a net income tax
benefit of approximately $2.9 million primarily due to the reversal of a
valuation allowance in Mexico for existing net operating loss carryforwards of
$3.0 million. The reversal of the valuation allowance


-50-



was principally due to the performance of the San Sebastian mine and the
existence of evidence the mine will be able to utilize existing net operating
loss carryforwards in 2003 and 2004. During 2001, no income tax benefit or
provision was recognized. For further information, see Note 6 in Notes to
Consolidated Financial Statements.

Provision for closed operations and environmental matters decreased
$0.4 million (or 31%) during 2002, compared with 2001, primarily due to
decreased expenditures relating to the Coeur d'Alene Basin litigation ($0.8
million), partly offset by a provision for future reclamation and other closure
costs at various closed properties recognized during the third quarter of 2002
($0.3 million).

Exploration expense increased $3.7 million (170%) during 2002, compared
to 2001, primarily due to increased exploration expenditures in Venezuela at the
La Camorra mine and Block B concessions ($1.9 million); in Mexico at or near the
San Sebastian mine ($1.1 million); at the Hollister Development Block in Nevada
($0.7 million); and at the Greens Creek mine in Alaska ($0.4 million). The
increases in exploration are partially offset by lower miscellaneous project
evaluation expenditures during 2002 ($0.2 million).

Interest expense decreased $2.1 million (or 53%) in 2002, compared with
2001, primarily the result of repayment of a $55.0 million term loan facility in
March 2001.

Miscellaneous expense decreased $1.1 million (or 37%) during 2002,
compared with 2001, primarily due to a foreign exchange gain ($0.9 million) in
2002, due to the devaluation of the Venezuelan bolivar and a positive foreign
exchange variance in Mexico, as well as a pension curtailment adjustment in 2001
related to the Lucky Friday Pension Plan associated with the cutback in
operations at the mine ($0.9 million). These positive factors are partially
offset by accruals for tax offset bonuses on employee stock option plans ($0.7
million) and legal, consulting and accounting expenses regarding our preferred
stock tender offer ($0.2 million) and various other corporate matters.

Interest and other income decreased $1.6 million (or 47%) during 2002,
compared with 2001, primarily due to decreased pension income ($1.9 million),
offset by a positive mark to market adjustment on our outstanding gold lease
rate swap ($0.3 million).

2001 COMPARED TO 2000

We recorded a loss from continuing operations, before preferred stock
dividends, of approximately $9.6 million, or $0.14 per common share, in 2001
compared to a loss from continuing operations, before an extraordinary charge
and preferred stock dividends, of approximately $84.8 million, or $1.27 per
common share, in 2000. After recognizing $11.9 million in income from
discontinued operations and $8.1 million (which has not been declared or paid)
in dividends to holders of our Series B preferred stock, our loss applicable to
common shareholders for 2001 was approximately $5.7 million, or $0.08 per common
share, compared to a loss of $92.0 million, or $1.38 per common share, in 2000
after recognition of $1.5 million in income from discontinued operations, a $0.6
million extraordinary charge for the write-off of debt issuance costs related to
extinguished debt, and $8.1 million (only $4.0 million of which was declared or
paid) in dividends to holders of our Series B preferred stock. Although we did


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not declare the dividends for the year 2001 and the third and fourth quarters of
2000, because these dividends are cumulative, the effects of the undeclared
dividends are reflected in the loss applicable to common shareholders.

During 2000, adjustments to the carrying value of mining properties
totaled $40.2 million, including an adjustment of $31.2 million to reduce the
carrying value of the Lucky Friday mine property, plant and equipment.
Additionally during 2000, we recorded adjustments of $4.4 million for
properties, plants and equipment and supply inventory at the Rosebud mine and
$4.7 million for previously capitalized development costs at the Noche Buena
gold property. During 2001, there were no adjustments to the carrying value of
mining properties.

Our provision for closed operations and environmental matters decreased
$18.7 million from $20.0 million in 2000 to $1.3 million in 2001. The reduction
resulted principally from a decrease at the Grouse Creek mine and the Bunker
Hill Superfund site of $17.8 million, primarily due to 2000 environmental and
reclamation accruals for future environmental and reclamation expenditures.

SILVER OPERATIONS

Sales of products decreased approximately $0.5 million from $44.3
million in 2000 to $43.8 million in 2001, primarily due to lower zinc and silver
prices, lower production at the Lucky Friday mine ($7.4 million) and decreased
hedging activities ($0.9 million) in the 2001 period. These factors were partly
offset by increased sales at the San Sebastian mine, due to the commencement of
operations in May 2001 ($7.8 million).

Cost of sales and other direct production costs increased approximately
$2.0 million, or 5.1%, from $38.7 million in 2000 to $40.7 million in 2001,
primarily due to decreased cost of sales at the Lucky Friday mine ($5.3 million)
resulting from decreased production of silver and lead, offset by increased cost
of sales at the San Sebastian mine ($6.2 million) and increased cost of sales at
the Greens Creek mine ($1.1 million) due to increased production. Cost of sales
and other direct production costs as a percentage of sales increased from 87.4%
in 2000 to 92.8% in 2001 primarily due to lower hedging revenues and lower
profit margins due to lower silver and zinc prices.

Depreciation, depletion and amortization decreased $0.2 million from
$10.8 million in 2000 to $10.6 million in 2001, principally due to decreased
depreciation at the Lucky Friday mine ($1.6 million), due to the write-down of
assets in December 2000, offset by increased depreciation at the San Sebastian
mine ($1.0 million), due to the commencement of operations in May 2001.

Cash operating, total cash and total production cost per silver ounce
decreased from $4.02, $4.02 and $5.49 in 2000 to $3.55, $3.57 and $5.09 in 2001,
respectively. The decreases in the cost per silver ounce were due primarily to
the addition of the low-cost San Sebastian mine, which commenced operations in
May 2001, and the positive impact of Greens Creek's increased silver production
during 2001, resulting from a higher silver grade and increased tons mined. The
full cost per ounce was also positively impacted by decreased per ounce
depreciation at the Lucky Friday mine due to the write-down of the majority of
property, plant and equipment in the fourth


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quarter of 2000. During the fourth quarter of 2001, approximately $0.4 million
of costs were classified as care-and-maintenance costs and included in the
determination of the cost per ounce at Lucky Friday. Excluding the $0.4 million
in costs, the cash operating, total cash and total production costs per ounce
total $3.49, $3.52 and $5.04, respectively, for 2001.

GOLD OPERATIONS

Sales of products increased by approximately $9.9 million, or 31.3%,
from $31.6 million in 2000 to $41.5 million in 2001, primarily a result of
increased production at the La Camorra mine ($16.6 million), partly offset by
the completion of mining activity at the Rosebud mine ($6.6 million) in the
third quarter of 2000.

Cost of sales and other direct production costs decreased approximately
$5.0 million, or 20.5%, from $24.4 million in 2000 to $19.4 million in 2001,
primarily due to decreased cost of sales at the Rosebud mine ($7.5 million), due
to the completion of mining activity in the third quarter of 2000, offset by
increased cost of sales from the La Camorra mine ($3.0 million) due to increased
production.

Cost of sales and other direct production costs as a percentage of
sales decreased from 77.3% in 2000 to 46.8% in 2001. The change was due to
increased production, increased gold ore grade and better efficiencies at the La
Camorra mine and decreased production and sales at the Rosebud mine due to the
completion of mining activity in 2000.

Depreciation, depletion and amortization increased $2.6 million, or
36%, from $7.3 million in 2000 to $9.9 million in 2001, principally due to
increased depreciation from the La Camorra mine due to increased production
($4.7 million), offset by decreased depreciation at the Rosebud mine ($2.0
million), due to the completion of mining activity in the third quarter of 2000.

Cash operating, total cash and total production cost per gold ounce
decreased from $208, $211 and $275 in 2000 to $133, $133 and $200 in 2001,
respectively. The decreases in cost per gold ounce were primarily attributable
to increased gold production at the La Camorra mine, as well as the completion
of mining activity in the third quarter of 2000 at the Rosebud mine.

DISCONTINUED OPERATIONS

We recorded income from discontinued operations of approximately $11.9
million, or $0.17 per common share, in 2001 compared to income of approximately
$1.5 million, or $0.02 per common share, in 2000. On March 27, 2001, we
completed a sale of the K-T Group for $62.5 million, subject to customary
post-closing adjustments, and recorded a gain of $12.7 million on the sale in
2001. Other factors contributing to the change include:

- decreased sales of approximately $53.4 million, a direct result of
the sale of the K-T Group ($47.8 million), as well as decreased
shipments at the MWCA, Inc., group ($5.6 million) due to the sale of
MWP in March 2000 and the landscape operation of CAC in June 2000;


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- decreased cost of sales of $47.0 million, directly due to the lower
sales at the K-T Group and the partial sale of MWCA, Inc., during
2000;

- decreased depreciation, depletion and amortization of $2.9 million,
due to the sale of the K-T Group and the partial sale of MWCA, Inc.,
in 2000;

- a loss of $1.0 million on the sale of MWP in 2000; and

- legal fees during 2001 associated with litigation concerning the
failed sale for the K-T Group in January 2001 ($0.8 million).

CORPORATE MATTERS

Exploration expense decreased $4.2 million, or 66%, from $6.3 million
in 2000 to $2.1 million in 2001. This decrease is principally due to reduced
exploration activity in Mexico ($1.4 million); decreased expenditures at the
Rosebud mine ($1.3 million), due to completion of operations in the third
quarter of 2000; and decreased expenditures at La Camorra and other South
American countries ($0.8 million).

Interest expense decreased $4.2 million in 2001 as compared to 2000,
primarily the result of the repayment of the $55.0 million term loan facility in
March 2001 and decreased loan fees during 2001 as compared to the 2000 period.

Interest and other income decreased $1.1 million from $4.6 million in
2000 to $3.5 million in 2001, principally a result of the gains recognized
during 2000 on the sale of assets and lower interest income in 2001.

Miscellaneous expense increased $1.1 million from $1.8 million in 2000
to $3.0 million in 2001, primarily due to a pension curtailment adjustment
related to the Lucky Friday Pension Plan associated with the cutback in
operations at the mine.

An extraordinary charge of $0.6 million was recorded in 2000 to write
off previously unamortized debt issuance costs associated with the
extinguishment of debt.

FINANCIAL CONDITION AND LIQUIDITY

Our financial condition improved during 2002, with a current ratio of
1.39 to 1 at December 31, 2002, compared to 0.99 to 1 at December 31, 2001. At
December 31, 2002, we held cash and cash equivalents of $19.5 million, an
increase of approximately $12.0 million from December 31, 2001. Additionally, in
January 2003 we announced the completion of an underwritten public offering for
23.0 million shares of our common stock, which resulted in net proceeds of
approximately $91.2 million.

We believe cash requirements over the next twelve months will be funded
through a combination of current cash, proceeds from the public offering
completed in January 2003, future cash flows from operations, amounts available
under existing loan agreements and/or future debt or equity security issuances.
Although we believe existing cash and cash equivalents


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are adequate, we cannot project the cash impact of possible future investment
opportunities or acquisitions, and our operating properties may require more
cash than forecasted.

CONTRACTUAL OBLIGATIONS AND CONTINGENT LIABILITIES AND COMMITMENTS

The table below presents our contractual obligations and commitments
primarily with regards to payment of debt, certain capital expenditures and
lease arrangements (in thousands):



Payments Due By Period
--------------------------------------------------------------------
Contractual obligations 2003 2004 2005 2006 2007 Total
-------- -------- -------- -------- -------- --------

Long-term debt $ 7,296 $ 2,332 $ 1,366 $ 959 $ -- $ 11,953

Capital expenditure commitments(1) 2,250 -- -- -- -- 2,250

Operating lease commitments 608 534 506 482 117 2,247
-------- -------- -------- -------- -------- --------
Total contractual cash obligations $ 10,154 $ 2,866 $ 1,872 $ 1,441 $ 117 $ 16,450
======== ======== ======== ======== ======== ========


(1) For further information, see Note 4 of Notes to Consolidated
Financial Statements.

We maintain reserves for costs associated with mine closure,
reclamation of land and other environmental matters. At December 31, 2002, our
reserves for these matters totaled $49.7 million, for which no contractual or
commitment obligations exist. Future expenditures related to closure,
reclamation and environmental expenditures are difficult to estimate, although
we anticipate we will make expenditures relating to these reserves over the next
five to ten years. During 2003, expenditures for environmental remediation and
reclamation are estimated to be in the range of $6.0 million and $8.0 million.

OPERATING ACTIVITIES

Operating activities provided approximately $20.2 million in cash
during 2002, primarily from cash provided by La Camorra, San Sebastian and
Greens Creek. Significant uses of cash included cash required for reclamation
activities and other noncurrent liabilities ($4.8 million), increases in
inventories ($3.9 million), increases in accounts and notes receivable ($3.5
million), offset by positive changes in accounts payable, payroll and other
accrued expenses ($2.3 million). Principal noncash elements included charges for
depreciation, depletion and amortization of $22.7 million, an increase in the
provision for reclamation and closure costs ($1.9 million), offset by a change
in deferred income taxes ($3.3 million).

INVESTING ACTIVITIES

Investing activities required $4.2 million in cash during 2002. The
major use of cash was additions to properties, plants and equipment ($11.2
million), primarily at the La Camorra ($5.8 million), Greens Creek ($2.9
million) and San Sebastian ($1.8 million) mines, as well as the initial payment
in September for the Block B exploration and mining lease in Venezuela ($0.5
million). In 2003, we estimate our capital expenditures will be in the range of
$15.0 to $25.0 million. The lower end of the range of capital expenditures in
2003 represents sustaining capital at our existing operations and equipment
acquisitions at the Hollister Development Block


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in Nevada. The upper end of the estimate includes other possible capital
projects, including commencement of a project to construct a shaft at the La
Camorra mine in Venezuela and other possible development activities. We will
also make payments totaling $2.3 million for our acquisition of the Block B
lease in Venezuela in 2003. There can be no assurance that our estimated capital
expenditures for 2003 will be in the range we have projected.

The cash used for additions to properties, plants and equipment was
partially offset by proceeds received on the sale of the corporate headquarters
building, located in Coeur d'Alene, Idaho, which was completed on April 8, 2002
($5.6 million), as well as the sale of the pet operations of CAC ($1.6 million)
during the first quarter of 2002.

FINANCING ACTIVITIES

During 2002, financing activities used approximately $4.0 million in
cash, primarily for the repayment of debt ($10.4 million). The repayment of debt
was partly offset by borrowings of $3.3 million and proceeds of $2.9 million for
common stock issued for outstanding warrants and employee stock options
exercised.

As of December 31, 2002, we had outstanding debt of $12.0 million,
including $7.3 million due over the next twelve months. The outstanding debt
included project financing facilities for the La Camorra mine in Venezuela ($3.5
million) and the Velardena mill at the San Sebastian mine in Mexico ($5.5
million), as well as a $3.0 million subordinated loan.

OTHER

Venezuela, the site of our La Camorra mine, recently experienced
political unrest in the form of street marches and demands that the current
president hold a referendum to determine whether to remove him from office. An
approximate two-month long general strike commenced in December 2002 and
continued into February 2003. The result of the strike included shortages of oil
and gas supplies in Venezuela and a severe economic downturn. We continued to
operate the La Camorra mine during the general strike and were able to obtain
adequate supplies, including oil and gas for our operations. The general strike
in Venezuela ended in early February, but oil and gas operations are not up to
full capacity. Although we believe we will be able to manage and operate our La
Camorra mine and related exploration projects successfully, due to the strike
and its ramifications on supplies of oil, gas and other products, there can be
no assurance that we will be able to operate without interruptions to our
operations.

Following the general strike in Venezuela, the Venezuelan government
announced its intent to implement exchange controls on foreign currency
transactions. Rules and regulations regarding the implementation of exchange
controls in Venezuela have not been finalized. Exchange controls may require us
to convert United States dollars into foreign currency. Management is currently
monitoring the finalization of exchange controls in Venezuela, and there can be
no assurance that the implementation of exchange controls will not affect our
operations in Venezuela.


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ENVIRONMENTAL

In August 2001, we entered into an Agreement in Principle with the
United States and the State of Idaho to settle the governments' claims for
natural resource damages and clean-up costs related to the historic mining
practices in the Coeur d'Alene Basin in northern Idaho. Due to a number of
changes that occurred since the signing of the Agreement in Principle, including
improvements in the environmental conditions at Grouse Creek and lower estimated
clean-up costs in the Coeur d'Alene Basin as well as our improved financial
condition, in 2002 we agreed with the United States and the State of Idaho to
discontinue utilizing the Agreement in Principle as a settlement vehicle.

However, we may participate in further settlement negotiations with the
United States and the State of Idaho in the future to limit our environmental
clean-up liabilities for historic mining practices in the Coeur d'Alene Basin.
Due to a number of uncertainties related to this matter, including the outcome
of pending litigation and the result of any settlement negotiations, we do not
have the ability to estimate what, if any, liability exists related to the Coeur
d'Alene Basin at this time. It is reasonably possible our ability to estimate
what, if any, liability we may have relating to the Coeur d'Alene Basin may
change in the near or long term depending on a number of factors. In addition,
an adverse ruling against us for liability and damages in this matter could have
a material adverse effect on us. For additional information, see Note 8 of Notes
to Consolidated Financial Statements.

Reserves for closure costs, reclamation and environmental matters
totaled $49.7 million at December 31, 2002. We anticipate that expenditures
relating to these reserves will be made over the next five to ten years.
Although we believe the reserve is adequate based on current estimates of
aggregate costs, we periodically reassess our environmental and reclamation
obligations as new information is developed. Depending on the results of the
reassessment, it is reasonably possible that our estimate of our obligations may
change in the near or long term.

Expenditures for environmental remediation and reclamation for 2003 are
estimated to be in the range of $6.0 million to $8.0 million, principally for
water management activities at the Grouse Creek property, the yard remediation
program at the Bunker Hill Superfund site and reclamation activities at other
locations.

EXPLORATION

Exploration expenditures for 2003 are estimated to be in the range of
$10.0 million to $15.0 million. In Venezuela, expenditures will focus on the
down-dip extension of the Main and Betzy veins at the La Camorra mine and
drilling and feasibility studies at Canaima and on the Block B concessions. In
Mexico, expenditures will focus on the San Sebastian and Cerro Pedernalillo
areas. Exploration in the United States will include expenditures at the
Hollister Development Block in Nevada and work at the Greens Creek mine in
Alaska to explore an area across the Gallagher fault.


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NEW ACCOUNTING PRONOUNCEMENTS

In August 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations," which amends SFAS No. 19, and establishes a uniform
methodology for accounting for estimated reclamation and abandonment costs. This
statement requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The statement was required to be adopted by
January 1, 2003, at which time we recorded an estimated present value of
reclamation liabilities of $5.9 million and increased the carrying value of
related assets by $3.8 million. Subsequently, reclamation costs will be
allocated to expense over the life of the related assets and will be adjusted
for changes resulting from the passage of time and changes to either the timing
or amount of the original present value estimate underlying the obligation. Also
on January 1, 2003, we recorded a gain of $1.1 million as a cumulative effect of
change in accounting principle for the difference between those amounts and the
amounts previously recorded in our consolidated financial statements.

The FASB also issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. It supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," for the disposal of
a segment of a business. It also amends APB No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provisions of this statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years, with early
application encouraged. The provisions of this statement generally are to be
applied prospectively. The adoption of this statement did not have a material
effect on our financial statements.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" (11 SFAS No. 145). SFAS No. 145 updates, clarifies and simplifies
existing accounting pronouncements, by rescinding SFAS No. 4, which required all
gains and losses from extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. As a
result, the criteria in Accounting Principles Board Opinion No. 30 will now be
used to classify those gains and losses. Additionally, SFAS No. 145 amends SFAS
No. 13 to require that certain lease modifications that have economic effects
similar to sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. Finally, SFAS No. 145 also makes technical
corrections to existing pronouncements. While those corrections are not
substantive in nature, in some instances, they may change accounting practice.
The provisions of SFAS No. 145 that amend SFAS No. 13 are effective for
transactions occurring after May 15, 2002, with all other provisions of SFAS No.
145 being required to be adopted by us in our consolidated financial statements
for the first quarter of fiscal year 2003. Our management


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currently believes that the adoption of SFAS No. 145 will not have a material
impact on our consolidated financial statements.

On July 30, 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing or other exit or disposal activity. SFAS
No. 146 replaces the prior guidance that was provided by EITF Issue No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
No. 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. Our management currently believes that the adoption of
SFAS No. 146 will not have a material impact on our consolidated financial
statements.

In October 2002, the FASB issued SFAS No. 147 "Acquisitions of Certain
Financial Institutions-an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9." SFAS No. 147 will not have any impact on our consolidated
financial statements.

In December 2002, the FASB issued SFAS No. 148 "Accounting for
Stock-Based Compensation, Transition and Disclosure, an amendment of FASB
Statement No. 123." SFAS No. 148 provides alternative methods of transition for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation. It also amends the disclosure provisions
of SFAS No. 123 to require prominent disclosure about the effects of reported
net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Finally, this statement amends APB Opinion
No. 28, "Interim Financial Reporting," to require disclosure about those effects
in interim financial information. The amendments to SFAS No. 123, which provides
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation is
effective for financial statements for fiscal years ending after December 15,
2002. The amendment to SFAS No. 123 relating to disclosures and the amendment to
Opinion 28 is effective for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. Management
does not intend to adopt the fair value accounting provisions of SFAS No. 123
and currently believes that the adoption of SFAS No. 148 will not have a
material impact on our financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting for Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45
clarifies the requirements for a guarantor's accounting for and disclosure of
certain guarantees issued and outstanding. It also requires a guarantor to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. This interpretation also
incorporates without reconsideration the guidance in FASB


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Interpretation No. 34, which is being superseded. The adoption of FIN 45 will
not have a material effect on our consolidated financial statements and will be
applied prospectively.

In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin (ARB) No. 51, Consolidated Financial Statements" (FIN 46). FIN
46 clarifies the application of ARB No. 51 to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. The
adoption of FIN 46 will not have a material effect on our consolidated financial
statements.

OTHER

Holders of the preferred shares are entitled to receive cumulative cash
dividends at the annual rate of $3.50 per share payable quarterly, when and if
declared by the board of directors and have voting rights related to certain
amendments to our Certificate of Incorporation. As of January 31, 2002, we had
not declared and paid the equivalent of six quarterly dividends, entitling
holders of the preferred shares to elect two directors at our annual
shareholders' meeting. On May 10, 2002, holders of the preferred shares, voting
as a class, elected two additional directors. One of our two directors elected
by holders of Series B preferred stock resigned from our board of directors in
October 2002 to avoid any appearance of conflict of interest as a result of a
new position as a research analyst. In order to fill the resulting vacancy, the
remaining director elected by the holders of Series B preferred stock will name
a new director, currently anticipated to be named during 2003.

The Hecla Mining Company Retirement Plan and the Lucky Friday Pension
Plan (the benefit plans) are employee benefit plans in which certain employees
can participate. During 2001, Copper Mountain Trust (succeeded to by merger by
Union Bank of California, NA), the trustee for the benefit plans, purchased our
common stock at the instruction of the benefit plan's independent fiduciary,
Consulting Fiduciaries, Inc. In connection with the purchase, each plan received
the right to request we register the shares of common stock held by each plan.

We filed Registration Statements with the Securities and Exchange
Commission (SEC) covering 3,394,883 shares of our common stock held by the
benefit plans and 2.0 million shares of our common stock issuable upon exercise
of warrants issued to Great Basin Gold Ltd. (Great Basin) pursuant to an Earn-in
Agreement discussed in Note 4 of Notes to Consolidated Financial Statements. The
Registration Statements became effective in January 2003. In addition, the
benefit plans sold 2.0 million common shares as part of an underwritten public
offering for 25.0 million shares of our common stock completed in January 2003.
The benefit plans realized net proceeds of approximately $8.0 million from the
sale. The benefit plans may sell their remaining 1,394,883 shares at any time
after April 20, 2003, as part of their normal investment strategy. For
additional information regarding the public offering, see Note 10 of Notes to
Consolidated Financial Statements.

As of December 31, 2002, we have reviewed and modified our assumptions
regarding our benefit plans based upon current market conditions and our current
compensation structure.


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We have reduced the discount rates utilized in determining the future pension
liability from 7.0% to 6.5%, decreased our expected rate of return on pension
assets from 9% to 8% and increased the estimated future salary increases
assumption from 3% to 4%. We do not believe these assumptions will have a
material impact on the amount of pension income to be recognized in 2003 as
compared to 2002.

During 2002, certain post retirement benefit obligations were
transferred to the benefit plans. As a result of the transfer, approximately
$1.3 million of accrued post retirement benefit obligations were transferred to
the pension plans, which reduced the net prepaid pension benefit by $1.3
million.

For information on hedged positions and derivative instruments, see
Item 7A - Quantitative and Qualitative Disclosure About Market Risk.





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Item 7A. Quantitative and Qualitative Disclosure About Market Risk

The following discussion about our risk-management activities includes
forward-looking statements that involve risk and uncertainties, as well as
summarize the financial instruments and derivative instruments held by us at
December 31, 2002, which are sensitive to changes in interest rates and
commodity prices and are not held for trading purposes. Actual results could
differ materially from those projected in the forward-looking statements. In the
normal course of business, we also face risks that are either nonfinancial or
nonquantifiable (See Part I, Item 1 - Risk Factors).

INTEREST-RATE RISK MANAGEMENT

At December 31, 2002, our debt was subject to changes in market
interest rates and was sensitive to those changes. We currently have no
derivative instruments to offset the risk of interest rate changes. We may
choose to use derivative instruments, such as interest rate swaps to manage the
risk associated with interest rate changes.

The following table presents principal cash flows (in thousands) for
debt outstanding at December 31, 2002, by maturity date and the related average
interest rate. The variable rates are estimated based on implied forward rates
in the yield curve at the reporting date.



Expected Maturity Date
--------------------------------------------------- Fair
2003 2004 2005 2006 2007 Total Value
------- ------- ------- ------- ------- ------- -------

Subordinated debt $ 2,000 $ 1,000 $ -- $ -- $ -- $ 3,000 $ 3,000

Average interest rate 5.4% 6.6% -- -- --

Project financing debt $ 3,000 $ 500 $ -- $ -- $ -- $ 3,500 $ 3,500

Average interest rate 3.9% 5.1% -- -- --

Project financing debt $ 2,296 $ 832 $ 1,366 $ 959 $ -- $ 5,453 $ 5,453

Average interest rate 13% 13% 13% 13% --


COMMODITY-PRICE RISK MANAGEMENT

We use commodity forward sales commitments, commodity swap contracts
and commodity put and call option contracts to manage our exposure to
fluctuations in the prices of certain metals which we produce. Contract
positions are designed to ensure that we will receive a defined minimum price
for certain quantities of our production. We use these instruments to reduce
risk by offsetting market exposures. We are exposed to certain losses, generally
the amount by which the contract price exceeds the spot price of a commodity, in
the event of nonperformance by the counterparties to these agreements. The
instruments held by us are not leveraged and are held for purposes other than
trading. We intend to physically deliver metal in accordance with the terms of
the forward sales contracts in place at December 31, 2002. As such, we have
elected to designate these contracts as normal sales in accordance with SFAS No.
138 and as a result, these contracts are not required to be accounted for as
derivatives under SFAS No. 133.


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The following table provides information about our forward sales
contracts at December 31, 2002. The table presents the notional amount in
ounces, the average forward sales price and the total-dollar contract amount
expected by the maturity dates, which occur between March 31, 2003, and December
31, 2004.

Expected Expected Estimated
Maturity Maturity Fair
2003 2004 Value
-------- -------- --------
Forward contracts:
Gold sales (ounces) 54,502 48,928
Future price (per ounce) $ 288 $ 288
Contract amount (in $000s) $ 15,710 $ 14,103 $ (6,480)
Estimated % of annual production
committed to contracts 25% 25%

In addition to the above contracts, we have a quarterly Gold Lease Rate
Swap at a fixed rate of 1.5% on 93,729 ounces of the above gold forward
contracts. The ounces covered under the swap are adjusted each quarter, in
accordance with the expiration of the gold forward contracts. At December 31,
2002, the fair market value of the Gold Lease Rate Swap was approximately
$307,000, which represents the amount the counterparty would have to pay us if
the contract was terminated. At December 31, 2002, the current lease rate was
0.75%.





-63-



Item 8. Supplementary Financial Data

The following table sets forth supplementary financial data for us for
each quarter of the years ended December 31, 2002 and 2001, derived from
unaudited financial statements. The data set forth below should be read in
conjunction with and is qualified in its entirety by reference to our
Consolidated Financial Statements.



Supplementary Financial Data
(dollars in thousands except for per share amounts)
First Second Third Fourth
2002 Quarter Quarter Quarter Quarter Total
- ---------------------------- --------- --------- --------- --------- ---------

Sales of products(1) $ 23,383 $ 28,663 $ 27,790 $ 25,864 $ 105,700
Gross profit(1) $ 3,734 $ 7,857 $ 6,414 $ 5,710 $ 23,715
Net income $ 486 $ 4,755 $ 1,533 $ 1,865 $ 8,639
Preferred stock dividends $ (2,012) $ (2,013) $ (18,568) $ (660) $ (23,253)
Income (loss) applicable to
common shareholders $ (1,526) $ 2,742 $ (17,035) $ 1,205 $ (14,614)
Basic and diluted income
(loss) per common share $ (0.02) $ 0.04 $ (0.20) $ 0.01 $ (0.18)

2001
- ---------------------------
Sales of products(1) $ 16,417 $ 24,561 $ 22,501 $ 21,768 $ 85,247
Gross profit(1) $ 852 $ 2,358 $ 270 $ 1,239 $ 4,719
Net income (loss) $ 9,535 $ (1,555) $ (2,456) $ (3,184) $ 2,340
Preferred stock dividends $ (2,012) $ (2,013) $ (2,013) $ (2,012) $ (8,050)
Income (loss) applicable to
common shareholders $ 7,523 $ (3,568) $ (4,469) $ (5,196) $ (5,710)
Basic and diluted income
(loss) per common share $ 0.11 $ (0.06) $ (0.06) $ (0.07) $ (0.08)


(1) During 2000, in furtherance of our determination to focus our
operations on silver and gold mining and to raise cash to reduce debt
and provide working capital, our board of directors made the decision
to sell our industrial minerals segment. As such, the industrial
minerals segment has been recorded as a discontinued operation.

Item 9. Changes and Disagreements with Accountants on Accounting and Financial
Disclosures

None




-64-



Part III

Item 10. Directors and Executive Officers of the Registrant

Information with respect to our directors and executive officers is set
forth as follows:

Age at
May 9, 2003 Position and Committee Assignments
----------- ----------------------------------
Phillips S. Baker, Jr. 43 President, Chief Operating Officer and
Chief Financial Officer(1)

Arthur Brown 62 Chairman of the Board and Chief
Executive Officer(1,6)

Michael H. Callahan 39 Vice President - Corporate Development

Ronald W. Clayton 44 Vice President - U.S. and Canadian
Operations


Thomas F. Fudge, Jr. 47 Vice President - Operations

Vicki Veltkamp 46 Vice President - Investor and Public
Relations

Lewis E. Walde 36 Vice President - Controller and
Treasurer

John E. Clute 68 Director(1,4,5)

Joe Coors, Jr. 60 Director(2,3,5)

Ted Crumley 57 Director(1,2,4,5)

Charles L. McAlpine 68 Director(3,4,5,7)

Jorge E. Ordonez C. 63 Director(2,3,4,7)

Dr. Anthony P. Taylor 61 Director(7,8)

- ---------------------------
(1) Member of Executive Committee
(2) Member of Finance Committee
(3) Member of Audit Committee
(4) Member of Directors Nominating Committee
(5) Member of Compensation Committee
(6) Member of Retirement Board
(7) Member of Technical Committee
(8) Elected by holders of Series B Preferred Stock

Phillips S. Baker, Jr. has been our President and Chief Operating
Officer since November 2001 and a director since November 2001. Prior to that,
Mr. Baker


-65-



was our Vice President - Chief Financial Officer from May 2001 to November 2001.
Prior to joining us, Mr. Baker served as Vice President and Chief Financial
Officer of Battle Mountain Gold Company (a gold mining corporation) from March
1998 to January 2001 and Vice President and Chief Financial Officer of Pegasus
Gold Corporation (a gold mining corporation) from January 1994 to January 1998.

Arthur Brown has been Chairman of our board of directors since June
1987 and has served as our Chief Executive Officer since May 1987. Prior to
that, Mr. Brown was our President from May 1986 to November 2001 and our Chief
Operating Officer from May 1986 to May 1987. Mr. Brown also serves as a director
for AMCOL International Corporation (an American industrial minerals company),
Idaho Independent Bank and Tango Minerals Company (a Canadian mining company).

On December 18, 2002, Arthur Brown announced that he would retire as
Chief Executive Officer effective in May 2003. Subject to formal Board approval,
we expect that he will be succeeded by Phillips Baker, currently our President.
Mr. Brown will remain as Chairman of the Board.

Michael H. Callahan has been our Vice President - Corporate Development
since February 2002 and President of Minera Hecla Venezolana since 2000. Prior
to that, Mr. Callahan was Director of Accounting and Information Services from
1999 to 2000. From 1997 to 1999 Mr. Callahan was the Financial Manager of Silver
Valley Resources. Mr. Callahan was also the Senior Financial Analyst for us from
1994 to 1996.

Ronald W. Clayton was appointed Vice President - U.S. Operations on
September 27, 2002. Prior to joining us, Mr. Clayton was Vice President -
Operations for Stillwater Mining Company from July 2000 to May 2002. Mr. Clayton
was also our Vice President - Metals Operations from May 2000 to July 2000. Mr.
Clayton also served as Manager of Operations and General Manager of our Rosebud,
Republic and Lucky Friday mines from 1987 to 2000.

Thomas F. Fudge, Jr. has been our Vice President - Operations since
June 2001. Prior to that, Mr. Fudge was our Manager of Operations from July 2000
to May 2001 and our Lucky Friday Unit Manager from 1995 to 2000.

Vicki Veltkamp has been our Vice President - Investor and Public
Relations since May 2000. Prior to that, Ms. Veltkamp has served in various
administrative functions with us from 1988 to 1993 and 1995 to 2000. Ms.
Veltkamp was Director of Corporate Communications for Santa Fe Pacific Gold from
1993 to 1995.

Lewis E. Walde has been our Vice President - Controller since June 2001
and our Treasurer since February 2002. Prior to that, Mr. Walde was our
Controller from May 2000 to May 2001, our Assistant Controller from January 1999
to April 2000 and held various accounting functions with us from June 1992 to
December 1998.

John E. Clute has served as a director since 1981. Mr. Clute has been a
Professor of Law at Gonzaga University School of Law from 2001 to the present.
Prior to that, Mr. Clute was the Dean of Gonzaga University School of Law from
1991 to 2001. Mr. Clute serves as a director of


-66-



The Jundt Growth Fund, Inc.; the Jundt Funds, Inc. (Jundt U.S. Emerging Growth
Fund, Jundt Opportunity Fund, Jundt Mid-Cap Growth Fund, Jundt Science &
Technology Fund and Jundt Twenty-Five Fund); American Eagle Funds, Inc.
(American Eagle Capital Appreciation Fund, American Eagle Large-Cap Growth Fund
and American Eagle Twenty Fund); and RealResume, Inc.

Joe Coors, Jr. has served as a director since 1990. Mr. Coors was the
Chairman of the Board and Chief Executive Officer of CoorsTek, Inc. (formerly
Coors Ceramics Company) (a ceramic corporation) from 1985 until his retirement
in 2001. Mr. Coors serves as a director of Children's Technology Group and the
Fellowship of Christian Athletes for the state of Colorado. Mr. Coors is the
Retired Chairman of the Air Force Memorial Foundation.

Ted Crumley has served as a director since 1995. Mr. Crumley has served
as the Senior Vice President and Chief Financial Officer of Boise (manufacturer
of paper and forest products) from 1994 to the present. Prior to that, Mr.
Crumley was Vice President and Controller of Boise from 1990 to 1994.

Charles L. McAlpine has served as a director since 1989. Concurrently,
Mr. McAlpine served as the President of Arimathaea Resources Inc. (a Canadian
gold exploration company) from 1982 to 1992. Mr. McAlpine serves as a director
of First Tiffany Resource Corporation, Goldstake Explorations Inc. (a Canadian
mining exploration corporation) and Postec Systems Inc.

Jorge E. Ordonez C. has served as a director since 1994. Mr. Ordonez
has served as the President and Chief Executive Officer of Ordonez Profesional
S.C. (a business and management consulting corporation specializing in mining)
from 1988 to present. Mr. Ordonez is a director of Altos Hornos de Mexico, S.A.
de C.V.; Minera Carbonifera Rio Escondido, S.A. de C.V.; Grupo Acerero del
Norte, S.A. de C.V.; and Fischer-Watt Gold Co., Inc. Mr. Ordonez received the
Mexican National Geology Recognition in 1989 and was elected to the Mexican
Academy of Engineering in 1990.

Dr. Anthony P. Taylor has served as a director since May 2002. Mr.
Taylor has been the President, CEO and Director of Millennium Mining Corporation
since January 2000; the President and Director of Oakhill Consultants since
October 1996; and the President and Director of Caughlin Preschool Corp. since
October 2001. Prior to that, Mr. Taylor was the Vice President - Exploration of
First Point US Minerals from May 1997 to December 1999 and the President of
Great Basin Exploration & Mining Co., Inc., from June 1990 to January 1996.

VACANCY

David Christensen, one of our two directors elected by holders of
Series B preferred stock, resigned from our board of directors in October 2002.
He joined Credit Suisse First Boston as a research analyst after he joined our
board and advised us that he wished to avoid any appearance of conflict of
interest as a result of his new position. In order to fill the resulting
vacancy, the remaining director elected by the holders of Series B preferred
stock will name a new director. It is currently anticipated the new director
will be named during 2003.


-67-



Information with respect to our directors is set forth under the
caption "Election of Common Shareholder Director" in our proxy statement to be
filed pursuant to Regulation 14A for the annual meeting scheduled to be held on
May 9, 2003 (the Proxy Statement), which information is incorporated herein by
reference.

Item 11. Executive Compensation

Reference is made to the information set forth under the caption
"Compensation of Executive Officers" in the Proxy Statement (except the Report
on the Compensation Committee on Executive Compensation set forth therein) to be
filed pursuant to Regulation 14A, which information is incorporated herein by
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Reference is made to the information set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement to be filed pursuant to Regulation 14A, which information is
incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Reference is made to the information set forth in the Proxy Statement
to be filed pursuant to Regulation 14A, which information is incorporated herein
by reference.

Item 14. Controls and Procedures

An evaluation was performed under the supervision and with the
participation of the management, including our Chief Executive Officer (CEO) and
Chief Financial Officer (CFO), of the effectiveness of the design and operation
of our disclosure controls and procedures. Based on that evaluation, management,
including the CEO and CFO, concluded our disclosure controls and procedures were
effective as of December 31, 2002, in ensuring that all material information
required to be filed in this annual report has been made known to them in a
timely fashion.

There have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls subsequent to
December 31, 2002.



-68-



Part IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) (1) Financial Statements

See Index to Financial Statements on Page F-1

(a) (2) Financial Statement Schedules

See Index to Financial Statements on Page F-1

(a) (3) Exhibits

See Exhibit Index following the Financial Statements

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter
ended December 31, 2002.






-69-



Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

HECLA MINING COMPANY


By /s/ Arthur Brown
------------------------------
Arthur Brown, Chairman, Chief
Executive Officer and Director

Date: 3/7/2003

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.




/s/ Phillips S. Baker, Jr. 3/7/2003 /s/ Theodore Crumley 3/7/2003
- ----------------------------------- -------- ----------------------- --------
Phillips S. Baker, Jr. Date Theodore Crumley Date
President, Chief Operating Officer, Director
Chief Financial Officer and
Director
(principal financial officer)


/s/ Arthur Brown 3/7/2003 /s/ Charles L. McAlpine 3/7/2003
- ----------------------------------- -------- ----------------------- --------
Arthur Brown Date Charles L. McAlpine Date
Chairman, Chief Executive Officer Director
and Director
(principal executive officer)


/s/ Lewis E. Walde 3/7/2003 /s/ Jorge E. Ordonez 3/7/2003
- ----------------------------------- -------- ----------------------- --------
Lewis E. Walde Date Jorge E. Ordonez Date
Vice President - Controller and Director
Treasurer
(principal accounting officer)


/s/ John E. Clute 3/7/2003 /s/ Anthony P. Taylor 3/7/2003
- ----------------------------------- -------- ----------------------- --------
John E. Clute Date Anthony P. Taylor Date
Director Director


/s/ Joe Coors, Jr. 3/7/2003
- ----------------------------------- --------
Joe Coors, Jr. Date
Director



-70-



Hecla Mining Company and Subsidiaries

CERTIFICATIONS


I, Arthur Brown, Chairman, Chief Executive Officer and Director of Hecla Mining
Company (Hecla), certify that:

1. I have reviewed this annual report on Form 10-K of Hecla Mining
Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the Evaluation Date);
and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):


-71-



Hecla Mining Company and Subsidiaries

CERTIFICATIONS (Continued)


a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: 3/7/2003


s/ Arthur Brown
---------------------------------
Arthur Brown
Chairman, Chief Executive Officer and Director




-72-



Hecla Mining Company and Subsidiaries

CERTIFICATIONS


I, Arthur Brown, Chairman, Chief Executive Officer and Director of Hecla Mining
Company ("Hecla"), certify that to the best of my knowledge:

1. This annual report of Hecla on Form 10-K ("report") fully complies with
the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

2. The information contained in the report fairly presents, in all
material respects, the financial condition and results of operations of
Hecla.


Date: 3/7/2003


/s/ Arthur Brown
---------------------------------
Arthur Brown
Chairman, Chief Executive Officer and Director




-73-



Hecla Mining Company and Subsidiaries

CERTIFICATIONS


I, Phillips S. Baker, Jr., President, Chief Operating Officer, Chief Financial
Officer and Director of Hecla Mining Company (Hecla), certify that:

1. I have reviewed this annual report on Form 10-K of Hecla Mining
Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the Evaluation Date);
and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):


-74-



Hecla Mining Company and Subsidiaries

CERTIFICATIONS (Continued)


a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.


Date: 3/7/2003


/s/ Phillips S. Baker, Jr.
-----------------------------------
Phillips S. Baker, Jr.
President, Chief Operating Officer, Chief Financial Officer and Director





-75-




Hecla Mining Company and Subsidiaries

CERTIFICATIONS


I, Phillips S. Baker, Jr., President, Chief Operating Officer, Chief Financial
Officer and Director of Hecla Mining Company ("Hecla"), certify that to the best
of my knowledge:

1. This annual report of Hecla on Form 10-K ("report") fully complies with
the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

2. The information contained in the report fairly presents, in all
material respects, the financial condition and results of operations of
Hecla.



Date: 3/7/2003


/s/ Phillips S. Baker, Jr.
----------------------------------
Phillips S. Baker, Jr.
President, Chief Operating Officer, Chief Financial Officer and Director




-76-



Index to Financial Statements


Page
Financial Statements ----
- --------------------
Reports of Independent Accountants F-2 to F-4

Consolidated Balance Sheets at December 31, 2002 and 2001 F-5

Consolidated Statements of Operations and Comprehensive Loss
for the Years Ended December 31, 2002, 2001 and 2000 F-6

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000 F-7

Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 2002, 2001 and 2000 F-8

Notes to Consolidated Financial Statements F-9 to F-47


Financial Statement Schedules*
- ------------------------------





*Financial statement schedules have been omitted as they are not applicable






F-1



Report of Independent Certified Public Accountants
- --------------------------------------------------

The Board of Directors and Shareholders of
Hecla Mining Company

We have audited the accompanying consolidated balance sheets of Hecla Mining
Company as of December 31, 2002, and 2001, and the related consolidated
statements of operations and comprehensive loss, cash flows and changes in
shareholders' equity for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of the Greens Creek Joint Venture, a 29.73 percent
owned subsidiary, which statements reflect total assets and revenues
constituting 31.1 percent and 22.1 percent, respectively, of the related
consolidated totals as of and for the year ended December 31, 2002, and 33.7
percent and 26.3 percent, respectively, of the related consolidated totals as of
and for the year ended December 31, 2001. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to the amounts included for the Greens Creek Joint Venture, is based
solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the reports of
the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Hecla Mining Company at December
31, 2002, and 2001 and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments and hedging
activities in 2001.

/s/ BDO Seidman, LLP

February 4, 2003
Spokane, Washington


F-2



Report of Independent Accountants
- ---------------------------------

To the Board of Directors and Shareholders
of Hecla Mining Company:

In our opinion, the consolidated statements of operations and comprehensive
loss, of cash flows and of changes in shareholders' equity for the year ended
December 31, 2000 (appearing on pages F-5 through F-47 of the Hecla Mining
Company 2002 Form 10-K) present fairly, in all material respects, the results of
operations and cash flows of Hecla Mining Company and its subsidiaries for the
year ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.





/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 28, 2001


F-3



Report of Independent Accountants
- ---------------------------------

To the Management Committee of the Greens Creek Joint Venture:

In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in venturers' equity and of cash flows present fairly, in
all material respects, the financial position of Greens Creek Joint Venture (the
"Venture") at December 31, 2002 and 2001, and the results of its operations and
its cash flows for the years then ended (not separately presented herein) in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Venture's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.



/s/ PricewaterhouseCoopers LLP
Salt Lake City, Utah
January 16, 2003



F-4



Hecla Mining Company and Subsidiaries

Consolidated Balance Sheets
(In thousands, except share data)
----------



December 31,
-----------------------
2002 2001
--------- ---------

ASSETS
Current assets:
Cash and cash equivalents $ 19,542 $ 7,560
Accounts and notes receivable 10,154 6,648
Inventories 14,758 10,868
Deferred income taxes 2,700 --
Other current assets 1,780 1,426
Net assets of discontinued operations -- 2,714
--------- ---------
Total current assets 48,934 29,216
Investments 76 69
Restricted investments 6,428 6,375
Properties, plants and equipment, net 92,365 104,593
Deferred income taxes 300 --
Other noncurrent assets 12,038 12,863
--------- ---------

Total assets $ 160,141 $ 153,116
========= =========

LIABILITIES

Current liabilities:
Accounts payable and accrued expenses $ 11,731 $ 7,938
Accrued payroll and related benefits 7,603 7,832
Current portion of long-term debt 7,296 7,043
Accrued taxes 1,572 787
Current portion of accrued reclamation and closure costs 7,005 6,026
--------- ---------
Total current liabilities 35,207 29,626
Deferred income taxes -- 300
Long-term debt 4,657 11,948
Accrued reclamation and closure costs 42,718 46,455
Other noncurrent liabilities 5,629 6,823
--------- ---------
Total liabilities 88,211 95,152
--------- ---------

COMMITMENTS AND CONTINGENCIES (NOTES 3, 4, 5, 7 AND 8)

SHAREHOLDERS' EQUITY

Preferred stock, $0.25 par value, authorized 5,000,000 shares;
issued 2002 - 753,402 shares and 2001 - 2,300,000 liquidation
preference 2002 - $44,262 and 2001 - $127,075 188 575
Common stock, $0.25 par value, authorized 200,000,000 shares in
2002 and 100,000,000 shares in 2001; issued 2002 - 86,187,468
shares and issued 2001 - 73,068,796 shares 21,547 18,267
Capital surplus 405,959 404,354
Accumulated deficit (355,544) (364,183)
Accumulated other comprehensive income (loss) (36) 173
Less stock held by grantor trust; 2002 - 20,442 common shares and
2001 - 102,114 common shares (66) (330)
Less stock held as unearned compensation; issued 2001 - 19,035
common shares -- (6)
Less treasury stock, at cost; 2002 - 8,274 common shares and
2001 - 62,116 common shares (118) (886)
--------- ---------

Total shareholders' equity 71,930 57,964
--------- ---------

Total liabilities and shareholders' equity $ 160,141 $ 153,116
========= =========


The accompanying notes are an integral part of the consolidated
financial statements.


F-5



Hecla Mining Company and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss
(Dollars and shares in thousands, except per share amounts)
----------



Year Ended December 31,
-------------------------------------
2002 2001 2000
--------- --------- ---------

Continuing operations:
Sales of products $ 105,700 $ 85,247 $ 75,850

Cost of sales and other direct production costs 59,449 60,053 63,088
Depreciation, depletion and amortization 22,536 20,475 18,091
--------- --------- ---------
81,985 80,528 81,179
--------- --------- ---------
Gross profit (loss) 23,715 4,719 (5,329)
--------- --------- ---------

Other operating expenses:
General and administrative 7,121 7,219 7,303
Exploration 5,825 2,157 6,332
Depreciation and amortization 116 265 282
Provision for closed operations and environmental matters 898 1,310 20,029
Reduction in carrying value of mining properties -- -- 40,240
--------- --------- ---------
13,960 10,951 74,186
--------- --------- ---------
Income (loss) from operations 9,755 (6,232) (79,515)
--------- --------- ---------

Other income (expense):
Interest and other income 1,865 3,491 4,609
Miscellaneous expense (1,859) (2,954) (1,809)
Interest expense (1,816) (3,887) (8,119)
--------- --------- ---------
(1,810) (3,350) (5,319)
--------- --------- ---------
Income (loss) from continuing operations before income taxes
and items shown below 7,945 (9,582) (84,834)
Income tax benefit (provision) 2,918 -- (13)
--------- --------- ---------
Income (loss) from continuing operations before items shown below 10,863 (9,582) (84,847)
Discontinued operations:
Income (loss), net of income tax (2,224) (743) 2,572
Gain (loss) on disposal, net of income tax -- 12,665 (1,043)
Extraordinary charge, net of income tax -- -- (647)
--------- --------- ---------
Net income (loss) 8,639 2,340 (83,965)
Preferred stock dividends (23,253) (8,050) (8,050)
--------- --------- ---------
Loss applicable to common shareholders $ (14,614) $ (5,710) $ (92,015)
========= ========= =========

Net income (loss): $ 8,639 $ 2,340 $ (83,965)
Cumulative effect of a change in accounting principle -- (136) --
Change in derivative contracts (256) 256 --
Unrealized holding gains (losses) on securities 9 (26) 13
Reclassification adjustment for losses included in net income
(loss) 38 39 --
Change in foreign currency items -- 4,898 --
--------- --------- ---------

Comprehensive income (loss) $ 8,430 $ 7,371 $ (83,952)
========= ========= =========

Basic and diluted income (loss) per common share:
Loss from continuing operations $ (0.15) $ (0.25) $ (1.39)
Income (loss) from discontinued operations (0.03) 0.17 0.02
Extraordinary charge -- -- (0.01)
--------- --------- ---------
Basic and diluted loss per common share $ (0.18) $ (0.08) $ (1.38)
========= ========= =========

Weighted average number of common
shares outstanding - basic and diluted 80,250 69,396 66,791
========= ========= =========


The accompanying notes are an integral part of the consolidated
financial statements.


F-6



Hecla Mining Company and Subsidiaries

Consolidated Statements of Cash Flows
(In thousands)
----------



Year Ended December 31,
----------------------------------
2002 2001 2000
-------- -------- --------

Operating activities:
Net income (loss) $ 8,639 $ 2,340 $(83,965)
Noncash elements included in net income (loss):
Depreciation, depletion and amortization 22,652 20,740 22,363
Extraordinary charge -- -- 647
(Gain) loss on sale of discontinued operations -- (12,665) 1,043
Gain on disposition of properties, plants and equipment (329) (338) (1,460)
Reduction in carrying value of mining properties -- -- 40,240
Provision for reclamation and closure costs 1,931 1,061 17,601
Deferred income taxes benefit (3,300) -- --
Change in net assets of discontinued operations -- 1,234 1,347
Change in assets and liabilities:
Accounts and notes receivable (3,506) 4,516 6,486
Inventories (3,890) (1,738) (108)
Other current and noncurrent assets 575 (1,435) 100
Accounts payable and accrued expenses 1,581 417 (1,266)
Accrued payroll and related benefits 312 3,100 669
Accrued taxes 395 (1,401) 97
Accrued reclamation and closure costs and other noncurrent
liabilities (4,825) (7,793) (9,528)
-------- -------- --------
Net cash provided (used) by operating activities 20,235 8,038 (5,734)
-------- -------- --------

Investing activities:
Proceeds from sale of discontinued operations 1,585 59,761 9,562
Additions to properties, plants and equipment (11,219) (17,890) (15,210)
Proceeds from disposition of properties, plants and equipment 5,710 545 2,671
Proceeds from the sale of investments -- -- 283
Increase in restricted investments (3) (107) (270)
Purchase of investments and change in cash surrender
value of life insurance, net -- 406 1,354
Other, net (285) (173) 381
-------- -------- --------
Net cash provided (used) by investing activities (4,212) 42,542 (1,229)
-------- -------- --------

Financing activities:
Common stock issued for warrants and stock option plans 2,925 428 35
Issuance of common stock, net of offering costs 72 5,462 --
Dividends paid on preferred stock -- -- (6,037)
Payments for debt issuance costs -- -- (1,811)
Borrowings on debt 3,317 15,909 80,524
Repayments on debt (10,355) (66,192) (67,094)
-------- -------- --------
Net cash provided (used) by financing activities (4,041) (44,393) 5,617
-------- -------- --------

Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents 11,982 6,187 (1,346)
Cash and cash equivalents at beginning of year 7,560 1,373 2,719
-------- -------- --------
Cash and cash equivalents at end of year $ 19,542 $ 7,560 $ 1,373
======== ======== ========

Supplemental disclosure of cash flow information:
Cash paid during year for:
Interest, net of amount capitalized $ 1,174 $ 2,888 $ 8,376
======== ======== ========
Income tax payments (refunds), net $ 9 $ (68) $ 54
======== ======== ========


SEE NOTES 4 AND 10 FOR NONCASH INVESTING AND FINANCING ACTIVITIES.

The accompanying notes are an integral part of the consolidated
financial statements.


F-7



Hecla Mining Company and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity

For the Years Ended December 31, 2002, 2001 and 2000
(Dollars and shares in thousands, except per share amounts)
---------------




Preferred Stock Common Stock
------------------------- ------------------------- Capital
Shares Amount Shares Amount Surplus
--------- --------- --------- --------- ---------

Balances, December 31, 1999 2,300 $ 575 66,845 $ 16,711 $ 400,205
Net loss
Preferred stock dividends ($1.75 per share)
Stock issued to directors 8 2 19
Stock issued and held by grantor trust 7 2 12
Other comprehensive income
--------- --------- --------- --------- ---------

Balances, December 31, 2000 2,300 575 66,860 16,715 400,236
Net income
Stock issued to directors 7 2 5
Stock issued and held by grantor trust 25 6 38
Stock disbursed by grantor trust (204)
Stock issued under stock option and warrant plans 408 102 325
Stock issued for cash, net of issuance costs 5,750 1,437 3,940
Issuance of restricted stock 19 5 14
Amortization of unearned compensation
Other comprehensive income
--------- --------- --------- --------- ---------

Balances, December 31, 2001 2,300 575 73,069 18,267 404,354
Net income
Preferred stock exchange (1,547) (387) 10,826 2,707 (2,320)
Stock issued as compensation 429 108 332
Stock issued to directors 73 18 52
Stock disbursed by grantor trust (264)
Stock issued under stock option and warrant plans 1,733 433 2,493
Warrants issued under warrant plans 1,936
Issuance of restricted stock 57 14 42
Amortization of unearned compensation
Stock issued as contribution to benefit plan (666)
Other comprehensive loss
--------- --------- --------- ---------- ---------

Balances, December 31, 2002 753 $ 188 86,187 $ 21,547 $ 405,959
========= ========= ========= ========== =========



[WIDE TABLE CONTINUED FROM ABOVE]



Accumulated Stock
Other Held by
Accumulated Comprehensive Grantor Unearned Treasury
Deficit Income (Loss) Trust Compensation Stock
--------- --------- --------- --------- ---------

Balances, December 31, 1999 $(278,533) $ (4,871) $ (500) $ -- $ (886)
Net loss (83,965)
Preferred stock dividends ($1.75 per share) (4,025)
Stock issued to directors
Stock issued and held by grantor trust (14)
Other comprehensive income 13
--------- --------- --------- --------- ---------

Balances, December 31, 2000 (366,523) (4,858) (514) -- (886)
Net income 2,340
Stock issued to directors
Stock issued and held by grantor trust (20)
Stock disbursed by grantor trust 204
Stock issued under stock option and warrant plans
Stock issued for cash, net of issuance costs
Issuance of restricted stock (19)
Amortization of unearned compensation 13
Other comprehensive income 5,031
--------- --------- --------- --------- ---------

Balances, December 31, 2001 (364,183) 173 (330) (6) (886)
Net income 8,639
Preferred stock exchange
Stock issued as compensation
Stock issued to directors
Stock disbursed by grantor trust 264
Stock issued under stock option and warrant plans
Warrants issued under warrant plans
Issuance of restricted stock (56)
Amortization of unearned compensation 62
Stock issued as contribution to benefit plan 768
Other comprehensive loss (209)
--------- --------- --------- --------- ---------

Balances, December 31, 2002 $(355,544) $ (36) $ (66) $ -- $ (118)
========= ========= ========= ========= =========


The accompanying notes are an integral part of the consolidated
financial statements.


F-8



Hecla Mining Company and Subsidiaries
Notes to Consolidated Financial Statements


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation -- The accompanying consolidated financial
statements include our accounts, our wholly owned subsidiaries and a
proportionate share of the accounts of the joint ventures in which we
participate. All significant intercompany transactions and accounts are
eliminated in consolidation.

Our revenues and profitability are largely dependent on world prices
for silver, gold, lead and zinc, which fluctuate widely and are affected by
numerous factors beyond our control, including inflation and worldwide forces of
supply and demand. The aggregate effect of these factors is not possible to
accurately predict.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ materially
from those estimates.

B. Business and Concentrations of Credit Risk -- We are engaged in
mining and mineral processing activities, including exploration, extraction,
processing and reclamation. Our principal products are metals, primarily silver,
gold, lead and zinc. Substantially all of our operations are conducted in the
United States, Mexico and Venezuela. Sales of metals products are made to
domestic and foreign custom smelters and metal traders.

We sell substantially all of our metallic concentrates to smelters
which are subject to extensive regulations including environmental protection
laws. We have no control over the smelters' operations or their compliance with
environmental laws and regulations. If the smelting capacity available to us was
significantly reduced because of environmental requirements or otherwise, it is
possible that our silver operations could be adversely affected. Industrial
minerals are sold principally to domestic retailers and wholesalers.

In February 2003, the Venezuelan government announced that foreign
currency exchange controls would be implemented in Venezuela. We currently
operate our La Camorra mine and various exploration projects in Venezuela. Rules
and regulations regarding the implementation of exchange controls in Venezuela
have not been finalized. Exchange controls may require us to sell products in
currencies other than the United States dollar or may require us to convert
United States dollars into foreign currency. Management is currently monitoring
the finalization of exchange controls in Venezuela, and there can be no
assurance that the implementation of exchange controls will not affect our
operations in Venezuela.

Our financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents and trade accounts
receivable. We place our cash and


F-9



temporary cash investments with institutions of high credit-worthiness. At
times, such investments may be in excess of the federal insurance limit. We
routinely assess the financial strength of our customers and, as a consequence,
believe that our trade accounts receivable credit risk exposure is limited.

At December 31, 2001, we had factored accounts receivable without
recourse of $0.5 million. At December 31, 2002, we had no factored receivables.
Factored accounts receivable are eliminated from the balance of accounts
receivable when sold.

C. Inventories -- Inventories are stated at the lower of average cost
or estimated net realizable value.

D. Investments -- Marketable equity securities are categorized as
available for sale and carried at quoted market value.

Realized gains and losses on the sale of securities are recognized on a
specific identification basis. Unrealized gains and losses are included as a
component of accumulated other comprehensive loss, net of related deferred
income taxes, unless a permanent impairment in value has occurred, which is then
charged to operations.

Restricted investments primarily represent investments in money market
funds and bonds of U.S. Government Agencies. These investments are restricted
primarily for reclamation funding or surety bonds.

E. Properties, Plants and Equipment -- Properties, plants and equipment
are stated at the lower of cost or estimated net realizable value. Maintenance,
repairs and renewals are charged to operations. Betterments of a major nature
are capitalized. When assets are retired or sold, the costs and related
allowances for depreciation and amortization are eliminated from the accounts
and any resulting gain or loss is reflected in operations. Idle facilities,
placed on a standby basis, are carried at the lower of net carrying value or
estimated net realizable value.

Our management reviews the net carrying value of all facilities,
including idle facilities, on a periodic basis. We estimate the net realizable
value of each property based on the estimated undiscounted future cash flows
that will be generated from operations at each property, the estimated salvage
value of the surface plant and equipment and the value associated with property
interests. These estimates of undiscounted future cash flows are dependent upon
estimates of metal to be recovered from proven and probable ore reserves, future
production costs and future metals prices over the estimated remaining mine
life. If undiscounted cash flows are less than the carrying value of a property,
an impairment loss is recognized based upon the estimated expected future net
cash flows from the property discounted at an interest rate commensurate with
the risk involved.

Management's estimates of metals prices, proven and probable ore
reserves, and operating, capital and reclamation costs are subject to risks and
uncertainties of change affecting the recoverability of our investment in
various projects. Although management has made a reasonable estimate of these
factors based on current conditions and information, it is reasonably


F-10



possible that changes could occur in the near term which could adversely affect
management's estimate of net cash flows expected to be generated from its
operating properties and the need for asset impairment write-downs.

Management's calculations of proven and probable ore reserves are based
on engineering and geological estimates including minerals prices and operating
costs. Changes in the geological and engineering interpretation of various
orebodies, minerals prices and operating costs may change our estimates of
proven and probable ore reserves. It is reasonably possible that certain of our
estimates of proven and probable ore reserves will change in the near term
resulting in a change to amortization and reclamation accrual rates in future
reporting periods.

Depreciation is based on the estimated useful lives of the assets and
is computed using straight-line and unit-of-production methods. Depletion is
computed using the unit-of-production method.

F. Mine Exploration and Development -- Exploration costs and secondary
development costs at operating mines are charged to operations as incurred.
Major mine development expenditures, including primary development costs are
capitalized at operating properties and at new mining properties not yet
producing where proven and probable ore reserves have been identified.

G. Reclamation of Mining Areas -- All our operations are subject to
reclamation and closure requirements. Minimum standards for mine reclamation
have been established by various governmental agencies, which affect certain
operations.

A reserve for mine reclamation costs has been established for restoring
certain abandoned and disturbed mining areas based upon estimates of cost to
comply with existing reclamation standards. Mine reclamation costs for operating
properties have been accrued using the unit-of-production method and charged to
cost of sales and other direct production costs.

The estimated amount of metals or minerals to be recovered from a mine
site is based on internal and external geological data and is reviewed by
management on a periodic basis. Changes in such estimated amounts will be
accounted for prospectively from the date of the change unless there is a
current impairment of an asset's carrying value and a decision is made to
permanently close the property, in which case it is recognized currently and
charged to provision for closed operations and environmental matters. It is
reasonably possible our estimate of our ultimate accrual for reclamation costs
will change in the near term due to possible changes in laws and regulations,
and interpretations thereof, and changes in cost estimates.

H. Remediation of Mining Areas -- We accrue costs associated with
environmental remediation obligations at the most likely estimate when it is
probable that such costs will be incurred and they are reasonably estimable.
Accruals for estimated losses from environmental remediation obligations
generally are recognized no later than completion of the remedial feasibility
study and are charged to provision for closed operations and environmental
matters. Costs of future expenditures for environmental remediation are not
discounted to their present value unless subject to a contractually obligated
fixed payment schedule. Such costs are based


F-11



on management's current estimate of amounts that are expected to be incurred
when the remediation work is performed within current laws and regulations.
Recoveries of environmental remediation costs from other parties are recorded as
assets when their receipt is deemed probable.

It is reasonably possible that, due to uncertainties associated with
defining the nature and extent of environmental contamination, application of
laws and regulations by regulatory authorities and changes in remediation
technology, the ultimate cost of remediation could change in the future. We
periodically review accrued liabilities for such remediation costs as evidence
becomes available indicating that our remediation liability has potentially
changed.

I. Income Taxes -- We record deferred tax liabilities and assets for
the expected future income tax consequences of events that have been recognized
in our financial statements. Deferred tax liabilities and assets are determined
based on the temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the temporary differences are expected to reverse.

J. Basic and Diluted Loss Per Common Share -- Basic earnings per share
(EPS) is calculated by dividing loss applicable to common shareholders by the
weighted average number of common shares outstanding for the year. Diluted EPS
reflects the potential dilution that could occur if potentially dilutive
securities were exercised or converted to common stock. Due to the losses
applicable to common shareholders in 2002, 2001 and 2000, potentially dilutive
securities were excluded from the calculation of diluted EPS, as they were
antidilutive. Therefore, there was no difference in the calculation of basic and
diluted EPS in 2002, 2001 or 2000.

K. Revenue Recognition -- Sales of metal products sold directly to
smelters are recorded when title and risk of loss transfer to the smelter at
current metals spot prices. Recorded values are adjusted to month-end metals
prices until final settlement. Sales of metal in products tolled (rather than
sold to smelters) are recorded at contractual amounts when title and risk of
loss transfer to the buyer. Sales of industrial minerals are recognized as the
minerals are shipped and title transferred.

L. Interest Expense -- Interest costs incurred during the construction
of qualifying assets are capitalized as part of the asset cost.

M. Cash Equivalents -- We consider cash equivalents to consist of
highly liquid investments with a remaining maturity of three months or less when
purchased.

N. Foreign Currency Translation -- We operate in Mexico with our wholly
owned subsidiary, Minera Hecla, S.A. de C.V. (Minera Hecla). We also operate in
Venezuela with our wholly owned subsidiary, Minera Hecla Venezolana, C.A. The
functional currency for Minera Hecla and Minera Hecla Venezolana is the U.S.
dollar. Accordingly, we translate the monetary assets and liabilities of these
subsidiaries at the period-end exchange rate while nonmonetary assets and
liabilities are translated at historical rates. Income and expense accounts are
translated at the average exchange rate for each period. Translation adjustments
and transaction gains and losses are included in the net income or loss for any
period.


F-12



O. Risk Management Contracts -- We use derivative financial instruments
as part of an overall risk-management strategy. These instruments are used as a
means of hedging exposure to precious metals prices. We do not hold or issue
derivative financial instruments for speculative trading purposes.

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 was amended in June 2000 with the
issuance of SFAS 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities." SFAS 133, which we adopted effective January 1, 2001,
requires that derivatives be recognized as assets or liabilities and be measured
at fair value. Gains or losses resulting from changes in the fair value of
derivatives in each period are to be accounted for either in current earnings or
other comprehensive income depending on the use of the derivatives and whether
they qualify for hedge accounting. The key criterion for hedge accounting is
that the hedging relationship must be highly effective in achieving offsetting
changes in the fair value or cash flows of the hedging instruments and the
hedged items.

At December 31, 2002, our hedging contracts, used to reduce exposure to
precious metals prices, consisted of forward sales contracts and a gold lease
rate swap. We intend to physically deliver metal in accordance with the terms of
the forward sales contracts. As such, we have accounted for these contracts as
normal sales in accordance with SFAS 138 and as a result, these contracts are
not required to be accounted for as derivatives under SFAS 133. We recorded a
cumulative effect of a change in accounting principle in other comprehensive
income of approximately $0.1 million loss related to the gold lease rate swap
upon adoption of SFAS 133 on January 1, 2001. This amount is being amortized
over the physical settlement of ounces subject to the gold lease rate swap.
During the next twelve months, approximately $40,000 is expected to be amortized
to the income statement.

P. Accounting for Stock Options -- We measure compensation cost for
stock option plans using the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." We also provide the required disclosures of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123).

Q. New Accounting Pronouncements -- In August 2001, the FASB issued
SFAS No. 143 "Accounting for Asset Retirement Obligations," which amends SFAS
No. 19, and establishes a uniform methodology for accounting for estimated
reclamation and abandonment costs. This statement requires the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. On
January 1, 2003, we recorded the estimated present fair value of our reclamation
liabilities of $5.9 million and increased the carrying value of their related
assets by $3.8 million. Reclamation costs will be expensed over the life of the
related assets and will be adjusted for changes resulting from the passage of
time and changes to either the timing or amount of the original present fair
value estimate underlying the obligation. On January 1, 2003, we recorded a gain
of $1.1 million as a


F-13



cumulative effect of change in accounting principle for the difference between
those amounts and the amounts previously recorded in our consolidated financial
statements.

In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets. It
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions," for the disposal of
a segment of a business. It also amends APB No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. This Statement became effective for us
on January 1, 2002, and did not have a material effect on our financial
statements.

In April 2002, the FASB issued SFAS No. 145 "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 updates, clarifies and simplifies existing accounting
pronouncements, by rescinding SFAS No. 4, which required all gains and losses
from extinguishments of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effects. As a result, the criteria
in Accounting Principles Board Opinion No. 30 will now be used to classify those
gains and losses. Additionally, SFAS No. 145 amends SFAS No. 13 to require that
certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
Finally, SFAS No. 145 also makes technical corrections to existing
pronouncements. While those corrections are not substantive in nature, in some
instances, they may change accounting practice. The provision of SFAS No. 145
that amends SFAS No. 13 is effective for transactions occurring after May 15,
2002, with all other provisions of SFAS No. 145 being required to be adopted by
the Company in its consolidated financial statements for the first quarter of
fiscal 2003. Management currently believes that the adoption of SFAS No. 145
will not have a material impact on the Company's consolidated financial
statements.

In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing or other exit or disposal activity. SFAS
No. 146 replaces the prior guidance that was provided by EITF Issue No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
No. 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. Management currently believes the adoption of SFAS No.
146 will not have a material impact on our consolidated financial statements.

In October 2002, the FASB issued SFAS No. 147 "Acquisitions of Certain
Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9." SFAS No. 147 has no impact on our consolidated financial
statements.


F-14



In December 2002, the FASB issued SFAS No. 148 "Accounting for
Stock-Based Compensation, Transition and Disclosure, an amendment of FASB
Statement No. 123." SFAS No. 148 provides alternative methods of transition for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation. It also amends the disclosure provisions
of SFAS No. 123 to require prominent disclosure about the effects of reported
net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Finally, this Statement amends APB Opinion
No. 28, Interim Financial Reporting, to require disclosure about those effects
in interim financial information. The amendments to SFAS No. 123, which provides
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation is
effective for financial statements for fiscal years ending after December 15,
2002. The amendment to SFAS No. 123 relating to disclosures and the amendment to
Opinion 28 is effective for financial reports containing condensed financial
statements for interim periods beginning after December 15, 2002. Management
does not intend to adopt the fair value accounting provisions of SFAS 123 and
currently believes that the adoption of SFAS No. 148 will not have a material
impact on our financial statements.

In November 2002, the FASB issued FASB Interpretation No. 45
"Guarantor's Accounting for Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45
clarifies the requirements for a guarantor's accounting for and disclosure of
certain guarantees issued and outstanding. It also requires a guarantor to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. This interpretation also
incorporates without reconsideration the guidance in FASB Interpretation No. 34,
which is being superseded. The adoption of FIN 45 will not have a material
effect on our consolidated financial statements and will be applied
prospectively.

In January 2003, the FASB issued FASB Interpretation No. 46
"Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin ("ARB") No. 51, Consolidated Financial Statements" (FIN 46).
FIN 46 clarifies the application of ARB No. 51 to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
The adoption of FIN 46 will not have a material effect on our consolidated
financial statements.

NOTE 2: DISCONTINUED OPERATIONS

In furtherance of our determination to focus operations on silver and
gold mining and to raise cash to retire debt and provide working capital, our
board of directors made the decision to sell the industrial minerals segment in
2000.

In March 2000, we sold substantially all the assets of our Mountain
West Products division (MWP) of MWCA, Inc., for $8.5 million in cash. The sale
of MWP resulted in a loss on disposal of $1.0 million during 2000. In June 2000,
we completed a sale of the landscape operations of the


F-15



Colorado Aggregate division (CAC) of MWCA, Inc., for $1.1 million in cash. The
sale of the landscape operations did not result in a gain or loss.

In March 2001, we completed a sale of the Kentucky-Tennessee Clay
Company, K-T Feldspar Corporation, K-T Clay de Mexico and certain other minor
inactive industrial minerals companies (collectively the K-T Group) for $62.5
million. We recorded a gain on the sale of the K-T Group of $12.7 million during
2001. The proceeds from the sale were used to repay a term loan facility of
$55.0 million, and to repay amounts outstanding under a $2.0 million revolving
bank agreement. The remaining net proceeds were available for general corporate
purposes.

In March 2002, we completed a sale of the pet operations of CAC for
approximately $1.6 million in cash. The sale of the pet operations did not
result in a gain or loss. At December 31, 2002, we still owned and operated a
minor portion of the industrial minerals segment. Our management is currently
evaluating available options with regard to the remaining portion of the
industrial minerals segment. At December 31, 2002, the remaining net assets of
this segment have been reclassified from net assets of discontinued operations
to their respective categories of inventory and accrued reclamation.





F-16



The net assets of discontinued operations at December 31, 2001, were
$2.7 million, primarily consisting of inventories ($2.1 million), properties,
plants and equipment ($0.6 million) and accrued reclamation ($0.1 million). A
summary of operating results of discontinued operations for the three years
ended December 31 is as follows (in thousands):

2002 2001 2000
-------- -------- --------

Sales of products $ 4,221 $ 21,625 $ 75,054
-------- -------- --------
Cost of sales 5,145 20,082 67,114
Depreciation, depletion and amortization 116 1,099 3,990
-------- -------- --------
5,261 21,181 71,104
-------- -------- --------
Gross profit (loss) (1,040) 444 3,950
-------- -------- --------

Other operating expenses:
General and administrative -- 86 355
Exploration -- 174 242
-------- -------- --------
-- 260 597
-------- -------- --------

Income (loss) from operations (1,040) 184 3,353
-------- -------- --------

Other income (expense):
Interest and other income -- 1 9
Miscellaneous expense (1,178) (923) (516)
Interest expense (6) (5) (59)
-------- -------- --------
(1,184) (927) (566)
-------- -------- --------

Income (loss) from discontinued
operations before income taxes
and gain (loss) on disposal (2,224) (743) 2,787
Income tax provision -- -- (215)
-------- -------- --------
Income (loss) from discontinued
operations before gain (loss)
on disposal (2,224) (743) 2,572
Gain (loss) on disposal, net of
income tax -- 12,665 (1,043)
-------- -------- --------

Net income (loss) from discontinued
operations $ (2,224) $ 11,922 $ 1,529
======== ======== ========

The following is sales information for discontinued operations by
geographic area for the years ended December 31 (in thousands):

2002 2001 2000
-------- -------- --------
United States $ 4,141 $ 15,497 $ 52,293
Canada -- 1,336 4,225
Mexico -- 2,950 12,771
Taiwan 44 376 1,275
Venezuela -- 564 1,000
Italy -- 197 849
Other foreign 36 705 2,641
-------- -------- --------

$ 4,221 $ 21,625 $ 75,054
======== ======== ========


F-17



The following is sales information for discontinued operations by
country of origin for the years ended December 31 (in thousands):

2002 2001 2000
-------- -------- --------
United States $ 4,221 $ 19,037 $ 64,309
Mexico -- 2,588 10,745
-------- -------- --------
$ 4,221 $ 21,625 $ 75,054
======== ======== ========

Our industrial minerals operations lease various facilities and
equipment under noncancelable operating lease arrangements. Rent expense
incurred for these operating leases during the years ended December 31, 2002,
2001 and 2000 was approximately $0.1 million, $0.7 million and $3.6 million,
respectively.

NOTE 3: INVENTORIES

Inventories consist of the following (in thousands):

December 31,
---------------------
2002 2001
-------- --------
Concentrates, bullion, metals in transit
and other products $ 7,034 $ 4,211
Materials and supplies 7,724 6,657
-------- --------

$ 14,758 $ 10,868
======== ========

At December 31, 2002, we had forward sales commitments through December
31, 2004 for 103,430 ounces of gold at an average price of $288.25 per ounce. We
intend to physically deliver metals in accordance with the terms of the forward
sales contracts. As such, we have elected to designate the contracts as normal
sales in accordance with SFAS 138 and as a result, these contracts are not
required to be accounted for as derivatives under SFAS 133. We are exposed to
certain losses, generally the amount by which the contract price exceeds the
spot price of a commodity, in the event of nonperformance by the counterparties
to these agreements. The London AM gold price at December 31, 2002, was $342.75
per ounce.

We have a quarterly Gold Lease Rate Swap at a fixed rate of 1.5% on
93,729 ounces of the above gold forward contracts. The ounces covered under the
swap are adjusted each quarter, in accordance with the expiration of the gold
forward contracts. At December 31, 2002, the fair market value of the Gold Lease
Rate Swap was approximately $307,000, which represents the amount the
counterparty would have to pay us if the contract was terminated. At December
31, 2002, the current lease rate was 0.75%.


F-18



NOTE 4: PROPERTIES, PLANTS AND EQUIPMENT

The major components of properties, plants and equipment are (in thousands):

December 31,
---------------------
2002 2001
-------- --------
Mining properties $ 15,495 $ 8,271
Development costs 109,627 111,827
Plants and equipment 166,584 168,210
Land 760 925
-------- --------
292,466 289,233
Less accumulated depreciation,
depletion and amortization 200,101 184,640
-------- --------

Net carrying value $ 92,365 $104,593
======== ========

During the second quarter of 2002, we sold our headquarters building in
Coeur d'Alene, Idaho, for $5.6 million in cash. In connection with the sale, we
entered into a lease agreement with the purchaser to lease a portion of the
building. The lease calls for monthly payments of approximately $39,000 through
April 2004, at which time we have an option to reduce the amount of leased space
for an additional three years. The purchaser of the building also has an option
to terminate the lease agreement with us during the first two years of the lease
agreement, subject to certain payments to us.

The sale of the building resulted in a gain of $0.6 million, which we
are amortizing over the current lease period of five years. During 2002, we
recognized approximately $90,000 of gain on the sale.

On August 2, 2002, we, through our wholly owned subsidiary, Hecla
Ventures Corporation, entered into an earn-in agreement with Rodeo Creek Gold,
Inc., a wholly owned subsidiary of Great Basin Gold Ltd. (Great Basin),
concerning exploration, development and production on Great Basin's Hollister
Development Block gold property, located on the Carlin Trend in Nevada. An
"earn-in" agreement is an agreement under which a party must take certain
actions in order to "earn" an interest in an entity. The agreement provides us
with an option to earn a 50% working interest in the Hollister Development Block
in return for funding a two-stage, advanced exploration and development program
leading to commercial production. We estimate the cost to achieve our 50%
interest in the Hollister Development Block to be approximately $21.8 million.
Upon earn-in, we will be the operator of the mine.

Pursuant to the Earn-in Agreement, we and Great Basin each have agreed
to issue a series of warrants to the other party, to purchase one another's
common stock exercisable within two years at prevailing market prices at the
time of issuance of the warrant. At execution of the agreement, we issued a
warrant to purchase 2.0 million shares of our common stock to Great Basin and
Great Basin issued warrants to purchase 1.0 million shares of its common stock
to us. The warrant to purchase our common stock is exercisable on or before
August 1, 2004, at $3.73


F-19



per share. The warrants we issued to Great Basin were recorded at their
estimated fair value of $1.9 million. The estimated fair value of the Great
Basin warrants received was $0.2 million. The resulting difference was recorded
as an addition to properties, plants and equipment.

The beneficial owner of the warrant to purchase our common stock is
Great Basin Gold Ltd. The agreement obligates us to issue a warrant to purchase
an additional 1.0 million shares of our common stock, at the future current
market value, to Great Basin if and when we decide to commence certain
development activities, and an additional warrant to purchase 1.0 million shares
of our common stock, at the future current market value, following completion of
such activities, if undertaken. Great Basin will issue warrants to purchase
500,000 shares of its common stock to us immediately upon receipt of the second
and third warrants to purchase our stock. In addition to the foregoing, we will
pay to Great Basin from our share of commercial production a sliding scale
royalty that is dependent on the cash operating profit per ounce of gold
equivalent production.

In March 2002, we acquired the Block B exploration and mining lease
near El Callao in the Venezuelan State of Bolivar from CVG-Minerven (a
Venezuelan government-owned gold mining company). Pursuant to the agreement with
CVG-Minerven, we paid CVG-Minerven $500,000 in September 2002. In March 2003, we
are obligated to make an additional payment of $1.25 million, with a final
payment of $1.0 million due in September 2003. We will also pay CVG-Minerven a
royalty of 2% to 3% (depending on the gold price) on production from Block B.

In the fourth quarter of 2000, we recorded an adjustment of $31.2
million to reduce the carrying value of the Lucky Friday mine property, plant
and equipment in accordance with Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The adjustment at Lucky Friday was necessitated due
to continued low silver and lead prices combined with further declines in silver
and lead prices during the fourth quarter of 2000. In July 2001, we announced
that operations at the Lucky Friday mine would be reduced, effective October
2001, due to continued low silver and lead prices.

Additionally, during the second quarter of 2000, we recorded
adjustments of $4.4 million for properties, plants and equipment and supply
inventory at the Rosebud mine, and $4.7 million for previously capitalized
deferred development costs at the Noche Buena gold property. The $4.4 million
adjustment at the Rosebud mine was necessitated by the planned closure of the
Rosebud mine. The Rosebud mine completed mining activity in July 2000 and
milling activities in August 2000. At the Noche Buena property, we suspended
activities in 1999 due to a low price for gold. Based upon the continuation of
the lower gold price, an adjustment to the carrying value of the Noche Buena
property was recorded.


F-20



NOTE 5: ENVIRONMENTAL AND RECLAMATION ACTIVITIES

The liabilities accrued for our reclamation and closure costs at
December 31, 2002, and 2001, were as follows (in thousands):

Operating properties: 2002 2001
-------- --------
Greens Creek $ 2,763 $ 2,176
La Camorra 1,279 891
San Sebastian 983 79
Lucky Friday 734 631

Nonoperating properties:
Idaho related claims 39,049 43,842
Republic 2,435 2,965
All other sites 2,480 1,897
-------- --------
Total 49,723 52,481
Amount reflected as current (7,005) (6,026)
-------- --------
Amount reflected as long-term $ 42,718 $ 46,455
======== ========

During 2000, we recorded charges of $16.4 million for future
environmental and reclamation expenditures at the Grouse Creek property, the
Bunker Hill Superfund site and other idle properties. During the fourth quarter
of 2000, an Administrative Order on Consent was entered into with the U.S.
Environmental Protection Agency, requiring us to commence dewatering of the
tailings impoundment at Grouse Creek in 2001. Due to the Administrative Order on
Consent, updated cost estimates were determined in accordance with AICPA
Statement of Position 96-1, "Environmental Remediation Liabilities." At the
Bunker Hill Superfund site, estimated future costs were increased based upon
results of sampling activities completed through 2000 and current cost estimates
to remediate residential yards and commercial properties.

The activity in our accrued reclamation and closure cost liability for
the years ended December 31, 2002 and 2001 was as follows (in thousands):

Balance at January 1, 2001 $ 58,710
Accruals for estimated costs 1,062
Payment of reclamation obligations (7,291)
--------
Balance at December 31, 2001 52,481
Accruals for estimated costs 2,514
Payment of reclamation obligations (5,272)
--------
Balance at December 31, 2002 $ 49,723
========

For additional information regarding environmental matters, see Note 8
of Notes to Consolidated Financial Statements.


F-21



NOTE 6: INCOME TAXES

Major components of our income tax provision (benefit) for the years
ended December 31, 2002, 2001 and 2000, relating to continuing operations are as
follows (in thousands):

2002 2001 2000
------- ------- -------
Current:
Federal $ -- $ -- $ --
Foreign 382 -- 13
------- ------- -------
Total current income tax provision
(benefit) 382 -- 13
------- ------- -------

Deferred:
Federal -- -- --
Foreign (3,300) -- --
------- ------- -------

Total deferred income tax provision
(benefit) (3,300) -- --
------- ------- -------

Total income tax provision (benefit) $(2,918) $ -- $ 13
======= ======= =======

For the year ended December 31, 2002, a deferred income tax benefit of
approximately $3.3 million was recognized. Management recognized the benefit
because it believes we are more likely than not to realize the value of some of
the existing net operating loss carryforwards in Mexico resulting from the
performance of the San Sebastian mine.

For the year ended December 31, 2002, and 2001, the income tax
provision related to discontinued operations was zero. For the year ended
December 31, 2000, the income tax provision related to discontinued operations
was $215,000.

Domestic and foreign components of income (loss) from continuing
operations before income taxes, discontinued operations and extraordinary
charges, for the years ended December 31, 2002, 2001 and 2000, are as follows
(in thousands):

2002 2001 2000
-------- -------- --------
Domestic $(11,234) $(19,822) $(79,645)
Foreign 19,179 10,240 (5,189)
-------- -------- --------

Total $ 7,945 $ (9,582) $(84,834)
======== ======== ========


F-22



The components of the net deferred tax asset (liability) were as
follows (in thousands):

December 31,
-----------------------
2002 2001
---------- ----------
Deferred tax assets:
Accrued reclamation costs $ 16,906 $ 18,231
Investment valuation differences 1,357 1,357
Postretirement benefits other than pensions 1,551 1,437
Deferred compensation 386 902
Foreign net operating losses 9,583 7,579
Federal net operating losses 112,634 109,627
State net operating losses 12,687 12,264
Properties, plants and equipment -- 2,747
Tax credit carryforwards 1,989 1,989
Miscellaneous 1,668 1,479
---------- ----------
Total deferred tax assets 158,761 157,612
Valuation allowance (150,165) (153,214)
---------- ----------
Net deferred tax assets 8,596 4,398
---------- ----------
Deferred tax liabilities:
Pension costs (4,010) (4,398)
Properties, plants and equipment (1,130) --
Other (456) (300)
---------- ----------
Total deferred tax liability (5,596) (4,698)
---------- ----------
Net deferred tax asset (liability) $ 3,000 $ (300)
========== ==========





F-23



We recorded a valuation allowance to reflect the estimated amount of
deferred tax assets, which may not be realized principally due to the expiration
of net operating losses and tax credit carryforwards. The changes in the
valuation allowance for the years ended December 31, 2002, 2001 and 2000, are as
follows (in thousands):

2002 2001 2000
---------- ---------- ----------
Balance at beginning of year $ (153,214) $ (167,109) $ (139,852)
Increase due to exclusion of
net deferred tax liability
associated with discontinued
operations -- -- (3,266)

Increase related to
nonutilization of net
operating loss carryforwards
and nonrecognition of
deferred tax assets due to
uncertainty of recovery -- -- (23,991)

Decrease related to
recognition of foreign
deferred tax asset 3,000 -- --

Decrease related to
expiration of foreign net
operating loss carryforwards
and an adjustment to foreign
property, plant and equipment 49 13,895 --
---------- ---------- ----------
Balance at end of year $ (150,165) $ (153,214) $(167,109)
========== ========== =========

The annual tax provision (benefit) is different from the amount that
would be provided by applying the statutory federal income tax rate to our
pretax income (loss). The reasons for the difference are (in thousands):

2002 2001 2000
------------ ------------ -------------
Computed "statutory"
(benefit)/provision $ 2,701 34% $(3,258) (34)% $(28,844) (34)%
Reduction of valuation
allowance on Mexican
loss carryforward (3,000) (38) -- -- -- --
Nonutilization of net
operating losses and
effect of foreign taxes (2,619) (33) 3,258 34 28,857 34
------------ ------------ -------------

$(2,918) (37)% $ -- --% $ 13 --%
============ ============ =============

As of December 31, 2002, for income tax purposes, we have net operating
loss carryforwards of $331.3 million and $283.1 million for regular and
alternative minimum tax purposes, respectively. These operating loss
carryforwards substantially expire over the next 15 to 20 years, the majority of
which expire between 2006 and 2021. In addition, we have foreign


F-24



tax operating loss carryforwards of approximately $28.2 million, which expire
between 2003 and 2012. Approximately $17.4 million of regular tax loss
carryforwards are subject to limitations in any given year due to mergers. We
have approximately $0.9 million in alternative minimum tax credit carryforwards
eligible to reduce future regular tax liabilities.

NOTE 7: LONG-TERM DEBT AND CREDIT AGREEMENT

Long-term debt consists of the following (in thousands):

December 31,
---------------------
2002 2001
-------- --------
Revolving bank debt $ -- $ 2,800
Project financing debt 8,953 13,191
Subordinated bank debt 3,000 3,000
-------- --------
11,953 18,991
Less current portion (7,296) (7,043)
-------- --------
$ 4,657 $ 11,948
======== ========

Future minimum debt repayments associated with long-term debt as of
December 31, 2002, are as follows (in thousands):

Year ending December 31
-----------------------
2003 $ 7,296
2004 2,332
2005 1,366
2006 959
--------
Total long-term debt repayments $ 11,953
========

In March 2002, we entered into a $7.5 million revolving bank agreement
due in March 2004. Amounts under the bank agreement are available for general
corporate purposes and are collateralized by our interest in the Greens Creek
Joint Venture. At December 31, 2002, there was no amount outstanding under the
revolving agreement.

In April 2002, we completed a sales transaction for our headquarters
building, terminating a $3.0 million revolving bank agreement collateralized by
the building. For additional information relating to the sale of the
headquarters building, see Note 4 of Notes to Consolidated Financial Statements.

At December 31, 2002 and 2001, our wholly owned subsidiary, Hecla
Resources Investments Limited (HRIL) had $3.5 million and $6.5 million
outstanding under a credit agreement used to provide project financing at the La
Camorra mine. The project financing


F-25



agreement is payable in semiannual payments through December 31, 2004, and had
an interest rate of 4.2% at December 31, 2002.

HRIL must maintain compliance with certain financial and other
restrictive covenants related to the available ore reserves and financial
performance of the La Camorra mine. We are required to maintain hedged gold
positions sufficient to cover all dollar loans, operating expenditures, taxes,
royalties and similar fees projected for the project. At December 31, 2002,
there were 103,430 ounces of gold sold forward. The forward sales agreement
assumes the ounces of gold committed to forward sales at the end of each quarter
thereafter can be leased at a rate of 1.5% for each following quarter. We
maintain a Gold Lease Rate Swap at a fixed rate of 1.5% on the outstanding
notional volume of the flat forward sale, with settlement being made quarterly
with us receiving the fixed rate and paying the current floating gold lease
rate.

In connection with the project financing agreement, we have outstanding
a $3.0 million subordinated loan agreement, repayable in three semiannual
payments beginning June 30, 2003. The entire $3.0 million subordinated loan was
outstanding at December 31, 2002 and 2001, $2.0 million of which is classified
as current at December 31, 2002. The loan agreement gives us the option to add
interest payments to the principal amount of the loan. At December 31, 2002, the
interest amount added to principal was approximately $0.6 million. The interest
rate on the subordinated debt was 5.8% as of December 31, 2002.

At December 31, 2002, our wholly owned subsidiary, Minera Hecla, S.A.
de C.V., (Minera Hecla) had $5.4 million outstanding under a project loan used
to acquire a processing mill at Velardena, Mexico, to process ore mined from the
San Sebastian mine located near Durango, Mexico. The credit facility is
nonrecourse to us. Under the terms of the credit facility, Minera Hecla will
make monthly payments of principal and interest over 63 months. The loan is
collateralized by the mill at Velardena and the Saladillo, Saladillo 1 and
Saladillo 5 mining concessions and bears interest at the rate of 13%.

NOTE 8: COMMITMENTS AND CONTINGENCIES

Bunker Hill Superfund Site

In 1994, we, as a potentially responsible party under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA),
entered into a consent decree with the Environmental Protection Agency (EPA) and
the State of Idaho, concerning environmental remediation obligations at the
Bunker Hill Superfund site located in Kellogg, Idaho. The 1994 Consent Decree
(the "1994 Decree") settled our response-cost liability under CERCLA at the
Bunker Hill 21-square mile site.

In August 2000, Sunshine Mining and Refining Company which was also a
party to the 1994 Decree, filed for Chapter 11 bankruptcy and in January 2001,
the Federal District Court approved a new Consent Decree between Sunshine, the
U.S. Government and the Coeur d'Alene Indian Tribe which settled Sunshine's
environmental liabilities in the Coeur d'Alene Basin lawsuits described below
and released Sunshine from further obligations under the 1994 Decree. In
response to a request by us and ASARCO Incorporated, the United States Federal
District Court in Idaho, having jurisdiction over the 1994 Decree, issued an
Order in September 2001


F-26



that the 1994 Decree should be modified in light of a significant change in
factual circumstances not reasonably anticipated by the mining companies at the
time they signed the 1994 Decree. In its Order, the Court reserved the final
ruling on the appropriate modification to the 1994 Decree until after the
issuance by the EPA of a Record of Decision ("ROD") on the Basin-wide Remedial
Investigation/Feasibility Study.

The EPA issued the ROD on the Basin in September 2002, proposing a $359
million Basin clean-up plan to be implemented over 30 years. The ROD also
establishes a review process at the end of the 30-year period to determine if
further remediation would be appropriate. Based on the 2001 Order issued by the
Court, we intend to seek relief from the work program under the 1994 Decree
within the Bunker Hill site. In addition, we and ASARCO negotiated a reduced
2002 work program with the EPA and the State of Idaho pending the outcome of the
dispute resolution over the 1994 Decree. We anticipate negotiating the 2003 work
program during the first half of 2003; however, we expect the work program for
2003 will be subject to a final decision on modification of the 1994 Decree by
the Court.

On February 2, 2003, ASARCO entered into a Consent Decree with the
United States relating to a transfer of certain assets to its parent
corporation, Grupo de Mexico, S.A. de C.V. The Consent Decree also addresses
ASARCO's environmental liabilities on a number of sites in the United States,
including the Bunker Hill site. The provisions of the Consent Decree could limit
ASARCO's annual obligation at the Bunker Hill site for 2003 to 2005. In
addition, in February 2003, we were advised that ASARCO had reached an agreement
with the Coeur d'Alene Indian Tribe settling the Tribe's claims against ASARCO
for damages to natural resources. We believe the settlement will have no
material effect on any liability we may have for the Tribe's claims.

As of December 31, 2002, we have estimated and accrued a liability for
remedial activity costs at the Bunker Hill site of $8.3 million. These estimated
expenditures are anticipated to be made over the next three to five years.
Although we believe the accrual is adequate based upon our current estimates of
aggregate costs, it is reasonably possible that our estimate may change in the
future due to the assumptions and estimates inherent in the accrual.

Coeur d'Alene River Basin Environmental Claims

Coeur d'Alene Indian Tribe Claims

In July 1991, the Coeur d'Alene Indian Tribe brought a lawsuit, under
CERCLA, in Idaho Federal District Court against us, ASARCO and a number of other
mining companies asserting claims for damages to natural resources downstream
from the Bunker Hill site over which the Tribe alleges some ownership or
control. In February 2003, ASARCO reached an agreement with the Coeur d'Alene
Tribe settling the Tribe's claim against ASARCO. The Tribe's natural resource
damage litigation has been consolidated with the United States' litigation
described below.

U.S. Government Claims

In March 1996, the United States filed a lawsuit in Idaho Federal
District Court against certain mining companies that conducted historic mining
operations in the Silver Valley of


F-27



northern Idaho, including us. The lawsuit asserts claims under CERCLA and the
Clean Water Act and seeks recovery for alleged damages to or loss of natural
resources located in the Coeur d'Alene River Basin in northern Idaho for which
the United States asserts it is the trustee under CERCLA. The lawsuit claims
that the defendants' historic mining activity resulted in releases of hazardous
substances and damaged natural resources within the Basin. The suit also seeks
declaratory relief that we and other defendants are jointly and severally liable
for response costs under CERCLA for historic mining impacts in the Basin outside
the Bunker Hill site. We have asserted a number of defenses to the United
States' claims.

As discussed above, in May 1998, the EPA announced that it had
commenced a Remedial Investigation/Feasibility Study under CERCLA for the entire
Basin, including Lake Coeur d'Alene, in support of its response cost claims
asserted in its March 1996 lawsuit. In October 2001, the EPA issued its proposed
clean-up plan for the Basin. The EPA issued the ROD on the Basin in September
2002, proposing a $359 million Basin clean-up plan to be implemented over 30
years. The ROD also establishes a review process at the end of the 30-year
period to determine if further remediation would be appropriate.

The first phase of the trial commenced on the consolidated Coeur
d'Alene Indian Tribe's and the United States' claims on January 22, 2001, and
was concluded on July 30, 2001. In the first phase of the trial, the Court was
to determine the extent of liability, if any, of the defendants for the
plaintiffs' CERCLA claims. The Court was also asked to determine the liability
of the United States for its historic involvement in the Basin. No decision on
the issues before the Court in the first phase of the litigation has been
issued. If liability is determined in the first phase, a second trial is
anticipated to be scheduled during 2003 to address damages and remedy selection.
Two of the defendant mining companies, Coeur d'Alene Mines Corporation and
Sunshine Mining and Refining Company, settled their liabilities under the
litigation during the first quarter of 2001. We and ASARCO are the only
defendants remaining in the United States' litigation.

During 2000 and into 2001, we were involved in settlement negotiations
with representatives of the U.S. Government and the Coeur d'Alene Indian Tribe.
We also participated with certain of the other defendants in the litigation in a
State of Idaho led settlement effort. On August 16, 2001, we entered into a now
terminated Agreement in Principle with the United States and the State of Idaho
to settle the governments' claims for natural resource damages and clean-up
costs related to the historic mining practices in the Coeur d'Alene Basin in
northern Idaho. That Agreement in Principle covered the potential settlement of
liability relating not only to the Coeur d'Alene River Basin, but also other
Idaho related claims for which separate provision has already been made (see
Note 5). The total undiscounted amount of the potential settlement was $138.0
million. Due to a number of changes that have occurred since the signing of the
Agreement in Principle, including improvements in the environmental conditions
at Grouse Creek and lower estimated clean-up costs in the Coeur d'Alene Basin as
well as our improved financial condition, the terms of the multiple properties
settlement approach set forth in the Agreement in Principle no longer appears
favorable to us. Therefore, the United States, the State of Idaho and we have
agreed to discontinue utilizing the Agreement in Principle as a settlement
vehicle. However, we may participate in further settlement negotiations with the
United States, the State of Idaho and the Coeur d'Alene Indian Tribe in the
future. Due to a number of uncertainties related to this matter, including the
outcome of pending litigation and


F-28



the result of any settlement negotiations, we do not have the ability to
estimate what, if any, liability we may have related to the Coeur d'Alene Basin
at this time.

It is reasonably possible that our ability to estimate what, if any,
liability we may have relating to the Coeur d'Alene Basin may change in the near
or long term depending on a number of factors. In addition, an adverse ruling
against us for liability and damages in this matter could have a material
adverse effect on us.

Class Action Litigation

On or about January 7, 2002, a class action complaint was filed in the
Idaho District Court, County of Kootenai, against several corporate defendants,
including Hecla. We were served with the complaint on January 29, 2002. The
complaint seeks certification of three plaintiff classes of Coeur d'Alene Basin
residents and current and former property owners to pursue three types of
relief: various medical monitoring programs, real property remediation and
restoration programs, and damages for diminution in property value, plus other
damages and costs. On April 23, 2002, we filed a motion with the Court to
dismiss the claims for relief relating to any medical monitoring programs and
the remediation and restoration programs. At a hearing before the Idaho District
Court on our and other defendants' motions held October 16, 2002, the Judge
struck the complaint filed by the plaintiffs in January 2002 and instructed the
plaintiffs to re-file the complaint limiting the relief requested by the
plaintiffs to wholly private damages. The Court also dismissed the medical
monitoring claim as a separate cause of action and stated that any requested
remedy that encroached upon the EPA's cleanup in the Silver Valley would be
precluded by the pending Federal Court case described above. The plaintiffs
re-filed their amended complaint on January 9, 2003. As ordered by the Court,
the amended complaint omits any cause of action for medical monitoring and no
longer requests relief in the form of real property remediation or restoration
programs. We believe the complaint is subject to challenge on a number of bases
and intend to vigorously defend this litigation.

Insurance Coverage Litigation

In 1991, we initiated litigation in the Idaho District Court, County of
Kootenai, against a number of insurance companies that provided comprehensive
general liability insurance coverage to us and our predecessors. We believe the
insurance companies have a duty to defend and indemnify us under their policies
of insurance for all liabilities and claims asserted against us by the EPA and
the Tribe under CERCLA related to the Bunker Hill site and the Basin in northern
Idaho. In 1992, the Idaho State District Court ruled that the primary insurance
companies had a duty to defend us in the Tribe's lawsuit. During 1995 and 1996,
we entered into settlement agreements with a number of the insurance carriers
named in the litigation. We have received a total of approximately $7.2 million
under the terms of the settlement agreements. Thirty percent of these
settlements were paid to the EPA to reimburse the U.S. government for past costs
under the Bunker Hill site Consent Decree. Litigation is still pending against
one insurer with trial suspended until the underlying environmental claims
against us are resolved or settled. The remaining insurer in the litigation,
along with a second insurer not named in the litigation, is providing us with a
partial defense in all Basin environmental litigation. As of December 31, 2002,
we have not reduced our accrual for reclamation and closure costs to reflect the
receipt of any potential insurance proceeds.


F-29



Other Claims

In 1999 and 2000, three lawsuits were filed against our then
subsidiary, Kentucky-Tennessee Clay Company (K-T Clay), based upon damages
incurred by animal feed producers, when the Food and Drug Administration
determined trace elements of dioxin were present in poultry as a result of ball
clay from K-T Clay being added to poultry feed. Dioxin was determined to be
inherently present in ball clays generally.

In March 2001, prior to trial, K-T Clay settled the most significant of
claims against K-T Clay through a settlement payment substantially funded by K-T
Clay's insurance carrier. K-T Clay contributed $230,000 toward the settlement.
In July 2002, K-T Clay, through its insurance carrier, negotiated settlements of
both remaining lawsuits. The settlement payments have been funded 100% by K-T
Clay's insurance carrier. Based on the settlement agreements, the respective
courts dismissed both remaining lawsuits.

On November 17, 2000, we entered into an agreement with Zemex U.S.
Corporation guaranteed by its parent, Zemex Corporation of Toronto, Canada, to
sell the stock of K-T Clay and K-T Mexico, which included the ball clay and
kaolin operations, for a price of $68.0 million. On January 18, 2001, Zemex U.S.
Corporation failed to close on the transaction, and on January 22, 2001, we
brought suit in the United States District Court for the Northern District of
Illinois, Eastern Division, against the parent, Zemex Corporation, under its
guarantee for its subsidiary's failure to close on the purchase and meet its
obligations under the November 2000 agreement. On January 18, 2003, the parties
reached an agreement to settle our claims in full for $3,950,000, pursuant to
which Zemex has paid.

In March 2002, Independence Lead Mines Company (Independence), the
holder of a net 18.52% interest in the Gold Hunter or DIA unitized area of the
Lucky Friday mine, notified us of certain alleged defaults by us under the 1968
Lease Agreement between the unit owners (Independence and us under the terms of
the 1968 DIA Unitization Agreement) as lessors and defaults by us as lessee and
operator of the properties. We are a net 81.48% interest holder under these
Agreements. Independence alleges that we violated the "prudent operator
obligations" implied under the lease by undertaking the Gold Hunter project and
violated certain other provisions of the Agreement with respect to milling
equipment and calculating net profits and losses. Under the Lease Agreement, we
have the exclusive right to manage, control and operate the DIA properties, and
our decisions with respect to the character of work are final. On June 17, 2002,
Independence filed a lawsuit in Idaho State District Court seeking termination
of the Lease Agreement and requesting unspecified damages. We believe that we
have fully complied with all obligations of the 1968 Lease Agreement and will be
able to successfully defend our right to operate the property under the Lease
Agreement.

In Mexico, our subsidiary, Minera Hecla, S.A. de C.V. (Minera Hecla),
is involved in litigation in Mexico City concerning a lien on certain major
components of the Velardena mill at the San Sebastian mine that predated the
sale of the mill to Minera Hecla. The unpaid amount of the lien is in dispute.
At the time of the purchase, the lien amount was believed to be approximately
$590,000 and that amount was deposited with the court. The lien holder now
alleges the amount owed is approximately $2,017,000, plus accrued interest. The
lien holder has tried with limited success to remove the mill components subject
to the lien. On January 23, 2003,


F-30



Minera Hecla deposited $145,000 which represented the amount of accrued interest
since the date of sale and Minera Hecla requested that the court cancel the
lien. The lien holder opposed the request made by Minera Hecla. In February
2003, the court in Mexico City issued a decision that the lien was fully
satisfied with the deposit made by Minera Hecla on January 23, 2003, and the
court cancelled the lien.

In a related legal proceeding in Mexico, there is currently pending an
appeal in Mexico of the $2,017,000 judgment against the mill's prior owner, BLM
Minera Mexicana (BLM), which underlies the lien. However, the decision by the
court in Mexico City in February 2003 held that the lien on the mill mentioned
above does not guarantee the $2,017,000 judgment against BLM as the lien holder
alleged. Based upon that decision, Minera Hecla and the Velardena mill will not
be subject to any further attachment by the lien holder in its pending action
against BLM.

We are subject to other legal proceedings and claims not disclosed
above which have arisen in the ordinary course of our business and have not been
finally adjudicated. Although there can be no assurance as to the ultimate
disposition of these other matters, it is the opinion of our management that the
outcome of these other proceedings will not have a material adverse effect on
our financial condition.







F-31



NOTE 9: EMPLOYEE BENEFIT PLANS

We sponsor defined benefit pension plans covering substantially all
employees and provide certain postretirement benefits, principally health care
and life insurance benefits for qualifying retired employees. The following
tables provide a reconciliation of the changes in the plans' benefit obligations
and fair value of assets over the two-year period ended December 31, 2002, and a
statement of the funded status as of December 31, 2002 and 2001 (in thousands):



Pension Benefits Other Benefits
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------

Change in benefit obligation:
Benefit obligation at beginning of year $ 41,095 $ 45,994 $ 2,618 $ 2,377
Service cost 534 822 9 24
Interest cost 2,814 2,707 183 166
Participant transfers in 79 -- -- --
Plan amendments -- 2,027 (58) --
Actuarial (gain) loss 4,712 (1,678) (397) 177
Divestitures -- (4,044) -- --
Settlements 900 (1,934) (900) --
Curtailments -- (501) -- --

Benefits paid (3,063) (2,298) (79) (126)
-------- -------- -------- --------
Benefit obligation at end of year 47,071 41,095 1,376 2,618

Change in plan assets:
Fair value of plan assets at
beginning of year 52,109 67,285 -- --
Actual return on plan assets 11,231 (6,496) -- --
Divestitures -- (4,027) -- --
Employer contributions 120 64 79 126
Settlements -- (2,419) -- --
Benefits paid (3,063) (2,298) (79) (126)
-------- -------- -------- --------
Fair value of plan assets at end of year 60,397 52,109 -- --

Funded status at end of year 13,326 11,014 (1,376) (2,618)
Unrecognized net actuarial gain (5,563) (3,333) (252) (153)
Unrecognized transition obligation 12 35 -- --
Unrecognized prior-service cost 2,189 2,687 134 209
-------- -------- -------- --------
Net amount recognized in consolidated
balance sheets $ 9,964 $ 10,403 $ (1,494) $ (2,562)
======== ======== ======== ========


The following table provides the amounts recognized in the consolidated balance sheets
as of December 31, 2002 and 2001 (in thousands):

Pension Benefits Other Benefits
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------

Other noncurrent assets:
Prepaid benefit costs $ 11,792 $ 12,067 $ -- $ --
Other noncurrent liabilities:
Accrued benefit liability (1,828) (1,664) (1,494) (2,562)
-------- -------- -------- --------
Net amount recognized $ 9,964 $ 10,403 $ (1,494) $ (2,562)
======== ======== ======== ========



F-32



The benefit obligation and prepaid benefit costs were calculated by
applying the following weighted average assumptions:



Pension Benefits Other Benefits
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------


Discount rate 6.50% 7.00% 6.50% 7.00%
Expected rate on plan assets 8.00% 9.00% -- --
Rate of compensation increase 4.00% 3.50% -- --


Net periodic pension cost (income) for the plans consisted of the
following in 2002, 2001 and 2000 (in thousands):



Pension Benefits Other Benefits
---------------------------------------- ----------------------------------------
2002 2001 2000 2002 2001 2000
---------- ---------- ---------- ---------- ---------- ----------

Service cost $ 534 $ 822 $ 1,406 $ 9 $ 24 $ 24
Interest cost 2,814 2,707 2,989 183 166 169
Expected return on plan assets (4,585) (5,593) (5,192) -- -- --
Amortization of transition
asset (obligation) 23 (711) (426) -- -- --
Amortization of unrecognized
prior service cost 439 246 315 75 75 75
Amortization of unrecognized net
gain (loss) from earlier periods 15 (450) (420) (18) (22) (14)
---------- ---------- ---------- ---------- ---------- ----------
Net periodic pension cost (income) (760) (2,979) (1,328) 249 243 254

Curtailment loss -- 395 -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net periodic benefit cost (income)
after curtailment $ (760) $ (2,584) $ (1,328) $ 249 $ 243 $ 254
========== ========== ========== ========== ========= ==========


During 2002, certain postretirement benefit obligations were
transferred to the Hecla Mining Company and Lucky Friday Pension Plans. As a
result of the transfer, approximately $1.2 million of accrued postretirement
benefit obligations were transferred to the pension plans which reduced the net
prepaid pension benefit by $1.2 million.

During 2001, as part of the sale of the K-T Clay Group, we recognized a
$0.5 million pension curtailment gain on the Hecla Mining Company Pension Plan.
This gain was a result of the elimination of salaried employees at K-T Clay from
inclusion in the Hecla Mining Company Pension Plan. Also, as part of the K-T
Clay Group sale, $2.4 million in assets of the Hecla Mining Company Pension Plan
were transferred to the purchaser's pension plan to fund the liability of plan
participants that were employed by the K-T Clay Group at the time of the sale.
In addition, two hourly pension plans for hourly employees of the K-T Clay Group
were transferred to the purchaser in their entirety as part of the sale of the
K-T Clay Group.

As a result of a reduction in the workforce at the Lucky Friday mine
during 2001, we recorded a pension curtailment loss of approximately $0.9
million associated with the Lucky Friday Hourly Pension Plan.

For the year ended December 31, 2000, the net periodic pension cost
related to the defined benefit plans of the industrial minerals segment, which
is reported as a discontinued operation as of December 31, 2000, was $0.1
million. These plans were transferred as part of the sale of the K-T Clay Group
during 2001.


F-33



The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for pension plans with accumulated benefit obligations
in excess of plan assets were $1,436,000, $1,436,000 and zero, respectively, as
of December 31, 2002, and $1,303,000, $1,303,000 and zero, respectively, as of
December 31, 2001.

We have a nonqualified Deferred Compensation Plan, which permits
eligible officers, directors and key employees to defer a portion of their
compensation. In November 1998, we amended the plan to permit participants to
transfer all or a portion of their deferred compensation amounts into a Hecla
common stock account to be held in trust until distribution. As of December 31,
2002 and 2001, a total of 20,442 and 102,114 shares, respectively, of our common
stock are held in the grantor trust. Shares held in the grantor trust are valued
at fair value at the time of issuance, are recorded in the contra equity account
"Stock held by grantor trust," and are legally outstanding for registration
purposes and dividend payments. The shares held in the grantor trust are
considered outstanding for purposes of calculating loss per share. The deferred
compensation, together with company matching amounts and accumulated interest,
is distributable in cash after retirement or termination of employment, and at
December 31, 2002 and 2001, amounted to approximately $1.0 and $2.3 million,
respectively. During 2001, the plan was terminated and amounts were distributed
during 2002 with the remaining balance to be distributed in 2003.

In 2002, a new Deferred Compensation Plan was approved by our
shareholders and allows eligible officers and key employees to defer a portion
or all of their compensation. A total of 6.0 million shares of common stock are
authorized under this plan. Deferred amounts may be allocated to either an
investment account or a stock account. The investment account is similar to a
cash account and bears interest at the prime rate. In the stock account,
quarterly deferred amounts and a 10% matching amount are converted into stock
units equal to the average closing price of our common stock over a quarterly
period. At the end of each quarterly period, participants are eligible to elect
to convert a portion of their investment account into either the stock account,
with no matching contribution, or participants may utilize the investment
account to purchase discounted stock options. During 2002, participants
purchased approximately 6,740 discounted stock options under the Plan. As of
December 31, 2002, the deferred compensation, together with matching amounts and
accumulated interest, is distributable based upon distribution dates as elected
by the participants, and amounted to approximately $0.1 million.

We have an employees' Capital Accumulation Plan, which is available to
all salaried and certain hourly employees after completion of two months of
service. Employees may contribute from 2% to 15% of their compensation to the
plan. We make a matching contribution of 25% of an employee's contribution up
to, but not exceeding, 6% of the employee's earnings. Our contribution was
approximately $88,000 in 2002, $102,000 in 2001, and $232,700 in 2000. Our
contribution for 2001 was paid through the issuance of 53,842 shares of our
treasury stock.

We have an employee's 401(k) plan, which is available to all hourly
employees at the Lucky Friday mine after completion of six months of service.
Employees may contribute from 2% to 15% of their compensation to the plan. We
make a matching contribution of 25% of an


F-34



employee's contribution up to, but not exceeding, 5% of the employee's earnings.
Our contribution was approximately $19,000 in 2002, $40,000 in 2001, and $60,000
in 2000.

NOTE 10: SHAREHOLDERS' EQUITY

Preferred Stock

We are authorized to issue 5,000,000 shares of preferred stock, par
value $0.25 per share. The preferred stock is issuable in series with such
voting rights, if any, designations, powers, preferences and other rights and
such qualifications, limitations and restrictions as may be determined by our
board of directors or a duly authorized committee thereof, without stockholder
approval. The board may fix the number of shares constituting each series and
increase or decrease the number of shares of any series.

Holders of the preferred shares are entitled to receive cumulative cash
dividends at the annual rate of $3.50 per share payable quarterly, when and if
declared by our board of directors and have voting rights related to certain
amendments to our Certificate of Incorporation. As of January 31, 2002, we had
not declared and paid the equivalent of six quarterly dividends, entitling
holders of the preferred shares to elect two directors at our annual
shareholders' meeting. On May 10, 2002, holders of the preferred shares, voting
as a class, elected two additional directors. One of these directors has since
resigned and the remaining director is anticipated to fill the vacancy during
2003.

The preferred shares are convertible, in whole or in part, at the
option of the holders thereof, into shares of common stock at an initial
conversion price of $15.55 per share of common stock. The preferred shares are
redeemable at our option at $50.00 per share (plus $0.35 per share if redeemed
between July 1, 2002 and June 30, 2003), plus all dividends in arrears up to the
date fixed for redemption.

On June 13, 2002, we announced our intent to offer to holders of our
preferred shares an exchange of each of their preferred shares for seven shares
of our common stock. A total of 1,546,598 shares, or 67.2%, of the total number
of preferred shares outstanding were validly tendered and exchanged into
10,826,186 shares of our common stock. As of December 31, 2002, 753,402 shares
of preferred stock remained outstanding.

As a result of this exchange, we incurred a non-cash dividend charge of
approximately $17.6 million, which represents the difference between the value
of the common stock issued in the exchange offer and the value of the shares
that were issuable under the stated conversion terms of the preferred stock. The
non-cash dividend charge had no impact on our total shareholders' equity, as the
offset was an increase in common stock and surplus. As a result of the completed
exchange offer, the total of cumulative preferred dividends was $23.3 million
for the year ended December 31, 2002. Beginning in 2003, the $8.0 million annual
cumulative preferred dividends that have historically been included in the
calculation of earnings applicable to common shareholders will be reduced to
approximately $2.6 million. The completed exchange offering also eliminated
$11.2 million of previously undeclared and unpaid preferred stock dividends.


F-35



The preferred shares rank senior as to dividends and upon liquidation
to the common stock and any outstanding shares of Series A Preferred Shares. The
preferred shares have a liquidation preference of $50.00 per share plus all
undeclared and unpaid dividends. Such preference totaled $44,262,000 at December
31, 2002.

Shareholder Rights Plan

Each share of our common stock is accompanied by a preferred stock
purchase right (Right) that trades with the share of common stock. Upon the
terms and subject to the conditions of our Rights Agreement dated as of May 10,
1996 (Rights Agreement), a holder of a Right is entitled to purchase one
one-hundredth of a share of preferred stock at an exercise price of $50, subject
to adjustment, in several circumstances, including upon merger. The Rights are
currently represented by the certificates for our common stock and are not
separately transferable. Transferable rights certificates will be issued at the
earlier of (i) the 10th day after the public announcement that any person or
group has acquired beneficial ownership of 15% or more of our common stock (an
Acquiring Person) or (ii) the 10th day after a person commences, or announces an
intention to commence, a tender or exchange offer the consummation of which
would result in any person or group becoming an Acquiring Person. The 15%
threshold for becoming an Acquiring Person may be reduced by the board of
directors to not less than 10% prior to any such acquisition.

All the outstanding Rights may be redeemed by us for $0.01 per Right
prior to such time that any person or group becomes an Acquiring Person. Under
certain circumstances, the board of directors may decide to exchange each Right
(except Rights held by an Acquiring Person) for one share of common stock. The
Rights will expire on May 19, 2006, unless earlier redeemed. Additional details
regarding the Rights are set forth in the Rights Agreement filed with the
Securities and Exchange Commission on May 10, 1996.

Stock Based Plans

At December 31, 2002, executives, key employees and directors had been
granted options to purchase our common shares or were credited with common
shares under the stock based plans described below. We have adopted the
disclosure-only provisions of SFAS 123. No compensation expense has been
recognized in 2002, 2001 or 2000 for unexercised options related to the stock
option plans. Had compensation cost for our stock option plans been determined
based on the fair market value at the grant date for awards in 2002, 2001 and
2000 consistent with the provisions of SFAS 123, our loss and per share loss
applicable to common shareholders would have been increased to the pro forma
amounts indicated below (in thousands, except per share amounts):


F-36



2002 2001 2000
-------- -------- --------
Loss applicable to common shareholders:
As reported $ 14,614 $ 5,710 $ 92,015

Stock-based employee compensation
expense included in reported loss (796) (164) (9)


Total stock-based employee
compensation expense determined under
fair value based method for all awards 2,353 944 931
-------- -------- --------
Pro forma $ 16,171 $ 6,490 $ 92,937
======== ======== ========

Loss applicable to common
shareholders per share:
As reported $ 0.18 $ 0.08 $ 1.38
Pro forma $ 0.20 $ 0.09 $ 1.39

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:

2002 2001 2000
-------- -------- --------
Expected dividend yield 0.00% 0.00% 0.00%
Expected stock price volatility 78.89% 61.24% 49.03%
Risk-free interest rate 2.09% 4.68% 6.74%
Expected life of options 3.0 years 4.3 years 4.1 years

The weighted average fair value of options granted in 2002, 2001 and
2000 was $1.38, $0.47 and $0.51, respectively.

We adopted a nonstatutory stock option plan in 1987. The plan provides
that options may be granted to certain officers and key employees to purchase
common stock at a price of not less than 50% of the fair market value at the
date of grant. The plan also provides that options may be granted with a
corresponding number of stock appreciation rights and/or tax offset bonuses to
assist the optionee in paying the income tax liability that may exist upon
exercise of the options. All of the outstanding stock options under the 1987
plan were granted at an exercise price equal to the fair market value at the
date of grant and with an associated tax offset bonus. Outstanding options under
the 1987 plan are immediately exercisable for periods up to ten years. During
2002, 2001 and 2000, respectively, 46,000, 8,000 and 23,500 options to acquire
shares expired under the 1987 plan. The ability to grant further options under
the plan expired on February 13, 1997.


F-37



Our officers and employees, designated by the committee of the board
designated to administer the plan who are responsible for or who contribute to
our management, growth and profitability are eligible to be granted awards under
the Hecla Mining Company 1995 Stock Incentive Plan (1995 Stock Incentive Plan).
Stock options, including incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock and performance units are available
for grant under the 1995 Stock Incentive Plan by the committee in its
discretion. The 1995 Stock Incentive Plan as amended in 2002 authorizes the
issuance of up to 6,000,000 shares of our common stock pursuant to the grant or
exercise of awards under the plan. The board committee that administers the 1995
Stock Incentive Plan has broad authority to fix the terms and conditions of
individual agreements with participants, including the duration of the award and
any vesting requirements. The 1995 Stock Incentive Plan will terminate 15 years
after the effective date of the plan.

At the time an award is made under the 1995 Stock Incentive Plan or at
any time thereafter, the committee may grant to the participant receiving such
award the right to receive a cash payment in an amount specified by the
committee, to be paid at such time or times as the award results in compensation
income to the participant, for the purpose of assisting the participant to pay
the resulting taxes, all as determined by the committee and on such other terms
and conditions as the committee shall determine.

During 2002, 2001 and 2000, respectively, options to acquire 1,095,000,
698,000 and 481,000 shares were granted to our officers and key employees of
which 1,095,000, 641,000 and 385,000, respectively, of these options were
granted with vesting requirements. Under the vesting requirements for 2002, 33%
of the shares subject to options were purchaseable and were available on the
date of the grant, with an additional 33% made available on July 22, 2002, due
to the stock price remaining $1.00 above the grant price for ten consecutive
days. The remaining 33% will become available on the first to occur of the
second anniversary of grant or when the stock price remains $2.00 above the
grant price for ten consecutive days. For the options granted during 2002, there
is no tax offset bonus provision. During 2002, 2001 and 2000, respectively,
4,000, 114,500 and 947,500 options to acquire shares expired under the 1995
plan.

In March 2002, 431,277 shares of our common stock were issued to key
personnel for incentive compensation earned during the year ended December 31,
2001, under the 1995 Stock Incentive Plan.

In November 2001, 76,142 shares of our restricted common stock were
issued to one of our officers as a component of the officer's base salary for
the twelve-month period commencing December 1, 2001. These shares were issued
under the 1995 Stock Incentive Plan.

At December 31, 2002, there were 2,192,581 shares available for future
grant under the 1995 plan.

In 1995, we adopted the Hecla Mining Company Stock Plan for Nonemployee
Directors (the Directors' Stock Plan), which may be terminated by our board of
directors at any time. Each nonemployee director was credited with 1,000 shares
of our common stock on May 30 of each year. On July 18, 2002, holders of our
common stock approved an amendment to the


F-38



Directors' Stock Plan to change the number of shares of common stock to be
delivered to each nonemployee director annually from 1,000 shares to that number
of shares determined by dividing $10,000 by the average closing price for our
common stock on the New York Stock Exchange for the prior calendar year. This
amendment was retroactive to our board of directors approval of the amendment on
May 10, 2002. Nonemployee directors joining our board of directors after May 30
of any year are credited with a pro-rata number of shares based upon the date
they join the Board.

All credited shares are held in trust for the benefit of each director
until delivered to the director. Delivery of the shares from the trust occurs
upon the earliest of (1) death or disability; (2) retirement; (3) a cessation of
the director's service for any other reason; or (4) a change in control. Subject
to certain restrictions, directors may elect to receive delivery of shares on
such date or in annual installments thereafter over 5, 10 or 15 years. The
shares of our common stock credited to nonemployee directors pursuant to the
Directors' Stock Plan may not be sold until at least six months following the
date they are delivered. The maximum number of shares of common stock which may
be granted pursuant to the Directors' Stock Plan, was increased from 120,000 to
1,000,000 in 2002. During 2002, 2001 and 2000, respectively, 72,681, 7,000 and
8,000 shares were credited to the nonemployee directors. During 2002, 2001 and
2000, $70,000, $7,000 and $9,000, respectively, were charged to operations
associated with the Directors' Stock Plan. At December 31, 2002, there were
849,589 shares available for grant in the future under the plan.

Transactions concerning stock options pursuant to all of the
above-described stock option plans are summarized as follows:

Weighted Average
Shares Exercise Price
--------- ----------------
Outstanding, December 31, 1999 2,307,915 $ 5.39

Year ended December 31, 2000
Granted 481,000 $ 1.31
Exercised -- $ --
Expired (973,415) $ 4.40
---------

Outstanding, December 31, 2000 1,815,500 $ 4.85

Year ended December 31, 2001
Granted 698,000 $ 1.13
Exercised -- $ --
Expired (122,500) $ 2.41
---------

Outstanding, December 31, 2001 2,391,000 $ 3.89

Year ended December 31, 2002
Granted 1,095,000 $ 3.25
Exercised (634,330) $ 1.85
Expired (50,000) $ 9.75
---------
Outstanding, December 31, 2002 2,801,670 $ 3.99
=========


F-39



The following table displays exercisable stock options and the weighted
average exercise price of the exercisable options as of December 31, 2002, 2001
and 2000:

2002 2001 2000
---------- ---------- ----------

Exercisable options 2,467,714 1,701,400 1,322,533
Weighted average exercise price $ 4.09 $ 4.62 $ 5.36

The following table presents information about the stock options
outstanding as of December 31, 2002:



Weighted Average
------------------------------
Range of Remaining
Shares Exercise Price Exercise Price Life (years)
--------------- --------------- ------------------------------

Exercisable options 488,001 $ 1.13 - $ 1.31 $ 1.15 4
Exercisable options 323,500 $ 2.88 - $ 2.88 $ 2.88 6
Exercisable options 667,713 $ 3.23 - $ 3.48 $ 3.25 3
Exercisable options 775,000 $ 5.63 - $ 8.00 $ 5.86 5
Exercisable options 213,500 $ 8.63 - $ 9.63 $ 8.91 2
---------------
Total exercisable options 2,467,714 $ 1.13 - $ 9.63 $ 4.09 4

Unexercisable options 333,956 $ 3.23 - $ 3.48 $ 3.25 3
---------------
Total all options 2,801,670 $ 1.13 - $ 9.63 $ 3.99 4
===============


For the year ended December 31, 2002, approximately $0.7 million was
recognized for tax offset bonus expenditures and accruals on employee stock
option plans. No amounts were charged to operations in connection with the stock
option plans in 2001 or 2000.

Common Stock Offerings

In January 2003, we completed an underwritten public offering of 23.0
million newly issued shares of our common stock. Net proceeds from the offering
totaled approximately $91.2 million, which will be used to fund future
exploration and development, working capital requirements, capital expenditures,
possible future acquisitions and for other general corporate purposes. The
public offering also included 2.0 million shares held by the Hecla Mining
Company Retirement Plan and the Lucky Friday Pension Plan (the Benefit Plans).
The benefit plans realized net proceeds of approximately $8.0 million from the
sale of the 2.0 million shares included in the public offering.

We also filed a Registration Statement with the Securities and Exchange
Commission covering 1,394,883 shares of our common stock held by the benefit
plans and 2,000,000 shares of our common stock issuable upon exercise of
warrants issued to Great Basin Gold Ltd. (Great Basin) pursuant to an Earn-in
Agreement discussed in Note 4. The Registration Statement became effective in
January 2003.

In August 2001, we issued 5,749,883 shares of our common stock in a
private placement transaction for the benefit of the Hecla Mining Company
Retirement Plan and the Lucky Friday


F-40



Pension Plan for approximately $5.5 million. Proceeds from the private placement
were available for general corporate purposes.

In connection with a May 1999 stock offering, we issued warrants to
purchase 1,603,998 shares of our common stock exercisable until May 11, 2002.
Each warrant entitled the holder to purchase one share of common stock at an
exercise price equal to the lesser of (i) $3.19, or (ii) 102% of the volume
weighted average price on the NYSE for each trading day during the ten
consecutive trading days immediately preceding the date that notice of exercise
is given to us. During 2002 and 2001, warrants to purchase 1,098,801 and 408,000
shares, respectively, were exercised. Proceeds of $1.8 million and $0.4 million,
respectively, were realized from the exercise of the warrants in 2002 and 2001.







F-41



NOTE 11: BUSINESS SEGMENTS

We are organized and managed primarily on the basis of our principal
products being produced from our operating units. Three of our operating units
have been aggregated into the Silver segment, one into the Gold segment and one
operating unit has been designated as part of the Industrial Minerals segment.
During November 2000, the Industrial Minerals segment was designated as a
discontinued operation. For further discussion, see Note 2 - Discontinued
Operations. General corporate activities not associated with operating units, as
well as idle properties, are presented as Other. Interest expense is considered
a general corporate expense and is not allocated to segments.

The tables below present information about reportable segments as of
and for the years ended December 31 (in thousands). Information related to the
statement of operations data relates to continuing operations only. See Note 2
for information related to the Industrial Minerals segment operations.

2002 2001 2000
--------- --------- ----------
Net sales to unaffiliated customers:
Silver $ 56,404 $ 43,795 $ 44,277
Gold 49,296 41,452 31,573
--------- --------- ----------
$ 105,700 $ 85,247 $ 75,850
========= ========= ==========

Income (loss) from operations:
Silver $ 4,149 $ (8,640) $ (37,699)
Gold 13,741 11,525 (13,982)
Other (8,135) (9,117) (27,834)
--------- --------- ----------
$ 9,755 $ (6,232) $ (79,515)
========= ========= ==========

Capital expenditures (including
noncash additions):
Silver $ 4,690 $ 13,183 $ 6,670
Gold 5,814 4,692 4,592
Discontinued operations - - 145 3,921
Other 715 15 27
--------- --------- ----------
$ 11,219 $ 18,035 $ 15,210
========= ========= ==========

Depreciation, depletion and amortization:
Silver $ 11,263 $ 10,607 $ 10,809
Gold 11,273 9,868 7,282
Other 116 265 282
--------- --------- ----------
$ 22,652 $ 20,740 $ 18,373
========= ========= ==========


F-42



2002 2001 2000
--------- --------- ---------
Other significant noncash items:
Silver $ 1,117 $ 707 $ 31,759
Gold 4,420 354 9,241
Discontinued operations 135 -- 159
Other 296 44 17,329
--------- --------- ---------
$ 5,968 $ 1,105 $ 58,488
========= ========= =========

Identifiable assets:
Silver $ 82,522 $ 84,845 $ 81,572
Gold 40,004 40,489 42,667
Industrial Minerals 686 - - --
Discontinued operations -- 2,714 44,057
Other 36,929 25,068 26,540
--------- --------- ---------
$ 160,141 $ 153,116 $ 194,836
========= ========= =========

The following is sales information for continuing operations by
geographic area for the years ended December 31 (in thousands):

2002 2001 2000
--------- --------- ---------
United States $ 7,779 $ 15,895 $ 25,147
Canada 13,276 15,951 15,274
Mexico 22,929 12,018 6,193
United Kingdom 28,070 20,771 22,417
Japan 24,090 13,018 3,556
Other foreign 9,556 7,594 3,263
--------- --------- ---------
$ 105,700 $ 85,247 $ 75,850
========= ========= =========

The following is sales information for continuing operations by country
of origin for the years ended December 31 (in thousands):

2002 2001 2000
--------- --------- ---------
United States $ 33,439 $ 36,058 $ 51,019
Venezuela 48,730 41,406 24,780
Mexico 23,531 7,783 51
--------- --------- ---------
$ 105,700 $ 85,247 $ 75,850
========= ========= =========


F-43



The following is properties, plants and equipment information for
continuing operations by geographic area as of December 31 (in thousands):

2002 2001
--------- ---------
United States $ 64,031 $ 69,791
Venezuela 20,250 25,677
Mexico 8,084 9,125
--------- ---------
$ 92,365 $ 104,593
========= =========

Sales to significant metals customers as a percentage of total sales
from the Silver and Gold segments were as follows for the years ended December
31:

2002 2001 2000
--------- --------- ---------
Standard Bank London 24.8% 25.2% 24.9%
Met-Mex Penoles, S.A. de C.V. 21.7% 14.1% 8.2%
Mitsubishi International Corp. 19.9% 11.2% --%
Teck Cominco Ltd. 12.6% 16.3% 16.3%
HSBC Bank USA 6.1% 13.8% 15.5%

NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS

The following estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies. However,
considerable judgment is required to interpret market data and to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts we could realize in a current market
exchange.

The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value. Potential income tax ramifications related to the
realization of unrealized gains and losses that would be incurred in an actual
sale or settlement have not been taken into consideration.

The carrying amounts for cash and cash equivalents, accounts and notes
receivable, restricted investments and current liabilities are a reasonable
estimate of their fair values. Fair value for equity securities investments is
determined by quoted market prices as recognized in the financial statements.
Fair value of forward contracts and commodity swap contracts are supplied by our
counterparties and reflect the difference between the contract prices and
forward prices available on the date of valuation. The fair value of long-term
debt is based on the discounted value of contractual cash flows and at December
31, 2002, and 2001 approximates fair value. The discount rate is estimated using
the rates currently offered for debt with similar remaining maturities.


F-44



The estimated fair values of other financial instruments are as follows
(in thousands):

December 31,
-----------------------------------------
2002 2001
------------------- ------------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
--------- -------- --------- -------
Financial assets (liabilities):
Gold forward sales contracts $ -- $(6,480) $ 256 $ 576
Gold lease rate swap $ 307 $ 307 $ (56) $ (56)

NOTE 13: INCOME (LOSS) PER COMMON SHARE

The following table presents a reconciliation of the numerators and
denominators used in the basic and diluted income (loss) per common share
computations. Also shown is the effect that has been given to cumulative
preferred dividends in arriving at the losses applicable to common shareholders
in computing basic and diluted loss per common share (dollars and shares in
thousands, except per share amounts). A non-cash dividend of approximately $17.6
million was included in the 2002 amounts related to the completed preferred
stock exchange offering. For additional information relating to the exchange
offering, see Note 10 of Notes to Consolidated Financial Statements.

2002 2001 2000
--------- --------- ---------
Income (loss) before extraordinary
item and preferred stock dividends $ 8,639 $ 2,340 $ (83,318)
Less: Extraordinary item -- -- (647)
Less: Preferred stock dividends (23,253) (8,050) (8,050)
--------- --------- ---------
Basis and diluted loss applicable to
common shareholders $ (14,614) $ (5,710) $ (92,015)
========= ========= ==========

Basic and dilutive weighted average shares 80,250 69,396 66,791
--------- --------- ---------
Basic and diluted loss per common share $ (0.18) $ (0.08) $ (1.38)
========= ========= =========

These calculations of diluted losses per share exclude the effects of
convertible preferred stock ($37.7 million in 2002 and $115.0 million in 2001
and 2000), as well as common stock issuable upon the exercise of various stock
options and warrants, as their conversion and exercise would be antidilutive, as
follows:

2002 2001 2000
--------- --------- ---------
Stock Options 2,801,670 2,317,000 1,816,000

Warrants 2,000,000 1,098,801 1,506,998


F-45



NOTE 14: OTHER COMPREHENSIVE INCOME (LOSS)

Due to the availability of U.S. net operating losses and related
deferred tax valuation allowances, there is no tax effect associated with any
component of other comprehensive income (loss). The following table lists the
beginning balance, yearly activity and ending balance of each component of
accumulated other comprehensive income (loss) (in thousands):

Total
Unrealized Accumulated
Foreign Gains (Losses) Change in Other
Currency On Derivative Comprehensive
Items Securities Contracts(1) Income (Loss)
-------- -------- -------- --------
Balance December 31, 1999 $ (4,898) $ 27 $ -- $ (4,871)
2000 change -- 13 -- 13
-------- -------- -------- --------
Balance December 31, 2000 (4,898) 40 -- (4,858)
2001 change 4,898 (26) 159 5,031
-------- -------- -------- --------
Balance December 31, 2001 -- 14 159 173
2002 change -- 9 (218) (209)
-------- -------- -------- --------
Balance December 31, 2002 $ -- $ 23 $ (59) $ (36)
======== ======== ========= ========

(1) Included in the change in derivative contracts for the year ended December
31, 2001, is a $136,000 loss on the cumulative effect of adopting SFAS 133,
$39,000 of realization on gold lease swaps during 2001 and a fair value gain
adjustment on swaps outstanding at December 31, 2001, of $256,000. Included in
the change in derivative contracts for the year ended December 31, 2002, was
$38,000 of realization on gold lease swaps during 2002 and a fair value loss
adjustment on swaps expired in January 2002.

NOTE 15: INVESTMENT IN GREENS CREEK JOINT VENTURE

We hold a 29.73% interest in the Greens Creek mine through a
joint-venture arrangement. We record our portion of the assets and liabilities
of the Greens Creek mine on the proportionate consolidation method whereby
29.73% of the assets and liabilities of the Greens Creek mine are included in
our consolidated financial statements. The following summarized balance sheets
as of December 31, 2002 and 2001, and the related summarized statement of
operations for the years ended December 31, 2002 and 2001, are derived from the
audited financial statements of the Greens Creek Joint Venture. The financial
information below is presented on a 100% basis (in thousands).

Balance Sheet: 2002 2001
--------- ---------
Assets:
Current assets $ 22,945 $ 18,666
Property, plant and equipment, net 144,515 155,028
--------- ---------
Total assets $ 167,460 $ 173,694
========= =========
Liabilities and equity:
Liabilities $ 16,642 $ 14,813
Equity 150,818 158,881
--------- ---------
Total liabilities and equity $ 167,460 $ 173,694
========= =========


F-46



Summary of Operations: 2002 2001
--------- ---------
Net Revenue $ 85,429 $ 75,432
========= =========
Operating income (loss) $ 5,274 $ (3,694)
========= =========
Net income (loss) $ 5,437 $ (3,658)
========= =========

The Greens Creek mine is operated through a joint-venture arrangement,
and we own an undivided 29.73% interest in the assets of the venture. Under the
joint-venture agreement, the joint participants, including us, are entitled to
indemnification from the other participants and are severally liable only for
the liabilities of the participants in proportion to their interest therein. If
a participant defaults on its obligations under the terms of the joint venture,
we could incur losses in excess of our pro-rata share of the joint venture. In
the event any participant so defaults, the agreement provides certain rights and
remedies to the remaining participants. These include the right to force a
dilution of the percentage interest of the defaulting participant and the right
to utilize the proceeds from the sale of the defaulting party's share of
products, or its joint-venture interest in the properties, to satisfy the
obligations of the defaulting participant. Based on the information available to
us, we have no reason to believe that our joint-venture participants with
respect to Greens Creek mine will be unable to meet their financial obligations
under the terms of the agreement.




F-47



Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-K - December 31, 2002

Index to Exhibits


Number and Description of Exhibits
----------------------------------

3.1(a) Certificate of Incorporation of the Registrant as amended to
date.(2)

3.1(b) Certificate of Amendment of Certificate of Incorporation of
the Registrant, dated as of May 16, 1991.(2)

3.2 By-Laws of the Registrant as amended to date.(2)

4.1(a) Certificate of Designations, Preferences and Rights of
Series A Junior Participating Preferred Stock of the
Registrant.(2)

4.1(b) Certificate of Designations, Preferences and Rights of
Series B Cumulative Convertible Preferred Stock of
the Registrant.(2)

4.2 Rights Agreement dated as of May 10, 1996, between
Hecla Mining Company and American Stock Transfer
& Trust Company, which includes the form of Rights
Certificate of Designation setting forth the terms of the
Series A Junior Participating Preferred Stock of Hecla
Mining Company as Exhibit A and the summary of
Rights to Purchase Preferred Shares as Exhibit B.(2)

4.3 Stock Purchase Agreement dated as of August 27, 2001
between Hecla Mining Company and Copper Mountain
Trust.(2)

4.4 Warrant Agreement dated August 2, 2002 between Hecla
Mining Company and Great Basin Gold Ltd.(2)

4.5 Registration Rights Agreement dated August 2, 2002 between
Hecla Mining Company and Great Basin Gold Ltd.(2)

10.1(e) Fourth Amendment to Restated Credit Agreement
dated as of December 30, 1999, among NationsBank,
N.A. and Registrant.(2)





Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-K - December 31, 2002

Index to Exhibits


Number and Description of Exhibits
----------------------------------

10.2 Employment agreement dated June 1, 2000, between
Hecla Mining Company and Arthur Brown. (Registrant
has substantially identical agreements with each of
Messrs. Phillips S. Baker, Jr., Thomas F. Fudge, Lewis E.
Walde, and Michael H. Callahan, Ronald W. Clayton and
Ms. Vicki J. Veltkamp. Such substantially identical agreements
are not included as separate Exhibits.)(1,2)

10.3(a) Form of Executive Deferral Plan Master Document, as amended,
effective November 13, 1998.(1,2)

10.3(b) Form of Director Deferral Plan Master Plan Document effective
January 1, 1995.(1,2)

10.4(a) 1987 Nonstatutory Stock Option Plan of the Registrant.(1,2)

10.4(b) Hecla Mining Company 1995 Stock Incentive Plan as
amended.(1,2)

10.4(c) Hecla Mining Company Stock Plan for Nonemployee Directors as
amended.(1,2)

10.4(d) Hecla Mining Company Key Employee Deferred Compensation
Plan.(1,2)

10.5(a) Hecla Mining Company Retirement Plan for Employees and
Supplemental Retirement and Death Benefit Plan.(1,2)

10.5(b) Supplemental Excess Retirement Master Plan Documents.(1,2)

10.5(c) Hecla Mining Company Nonqualified Plans Master Trust
Agreement.(1,2)

10.6 Form of Indemnification Agreement dated May 27, 1987,
between Hecla Mining Company and each of its
Directors and Officers.(1,2)

10.7 Summary of Short-term Performance Payment Plan.(1,2)


-2-



Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-K - December 31, 2002

Index to Exhibits


Number and Description of Exhibits
----------------------------------

10.8(a) Amended and Restated Golden Eagle Earn-In Agreement
between Santa Fe Pacific Gold Corporation and Hecla
Mining Company dated as of September 6, 1996.(2)

10.8(b) Golden Eagle Operating Agreement between Santa Fe
Pacific Gold Corporation and Hecla Mining Company
dated as of September 6, 1996.(2)

10.8(c) First Amendment to the Amended and Restated Golden Eagle
Earn-in Agreement effective September 5, 2002 by and
between Echo Bay Mines Ltd. and Hecla Mining Company.(2)

10.9 Limited Liability Company Agreement of the Rosebud
Mining Company, LLC among Santa Fe Pacific Gold
Corporation and Hecla Mining Company dated as of
September 6, 1996.(2)

10.10 Restated Mining Venture Agreement among Kennecott
Greens Creek Mining Company, Hecla Mining Company
and CSX Alaska Mining Inc. dated May 6, 1994.(2)

10.11 Credit Agreement dated as of June 25, 1999, among
Monarch Resources Investments Limited as Borrower,
Monarch Minera Suramericana, C.A. as an additional
obligor and Standard Bank London Limited as
Collateral and Administrative Agent.(2)

10.12 Subordinated Loan Agreement dated as of June 25, 1999,
among Hecla Mining Company as Borrower and Standard
Bank London Limited as Initial Lender, Collateral and
Administrative Agent.(2)

10.13 Subordination Agreement dated as of June 25, 1999, among
NationsBank, N.A. as Senior Creditor, Standard Bank
London Limited as Subordinated Creditor and Hecla
Mining Company.(2)


-3-



Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-K - December 31, 2002

Index to Exhibits


Number and Description of Exhibits
----------------------------------

10.14 Subordinated Loan Agreement dated June 29, 2000, among
Hecla Mining Company as Borrower and Standard Bank
London Limited as Lender.(2)

10.15 Subordination Agreement dated June 29, 2000, among Hecla
Mining Company and Standard Bank London Limited as
Senior Creditor and Subordinated Creditor.(2)

10.16 Stock Purchase Agreement dated February 27, 2001, between
Hecla Mining Company and IMERYS USA, Inc.(2)

10.17 Form of Retention Agreement dated July 20, 2001, between
Hecla Mining Company and Arthur Brown. (Registrant has
substantially identical agreements, with each of Messrs.
Thomas F. Fudge, Lewis E. Walde and Ms. Vicki J.
Veltkamp.(1,2)

10.18 Real Estate Purchase and Sale Agreement between Hecla
Mining Company and JDL Enterprises, LLC dated
October 19, 2001.(2)

10.19 Retention Agreement dated November 6, 2001 between
Hecla Mining Company and Phillips S. Baker, Jr.(1,2)

10.20 Credit Agreement dated March 27, 2002 between Hecla
Mining Company and IIG Capital LLC.(2)

10.21 Earn-In Agreement dated August 2, 2002 between Hecla
Ventures Corp. and Rodeo Creek.(2)

10.22 Lease Agreement dated Setember 5, 2002 between Hecla
Mining Company and CVG-Minerven.(2)

11. Computation of weighted average number of common shares
outstanding. Attached

16.1 PricewaterhouseCoopers LLP's letter dated October 18,
2001, Registrant's former principal independent accountant.(2)


-4-



Hecla Mining Company and Wholly Owned Subsidiaries

Form 10-K - December 31, 2002

Index to Exhibits


Number and Description of Exhibits
----------------------------------

21. List of subsidiaries of the Registrant. Attached

23.1 Consent of PricewaterhouseCoopers LLP to incorporate
by reference its report dated March 28, 2001, on the
Consolidated Financial Statements of the Registrant in the
Registrant's Registration Statements on Form S-1, No.
333-100395, Form S-3, No. 33-72832, Form S-8, No. 33-7833,
No. 33-41833, No. 33-14758, No. 33-60095, No. 33-60099. Attached

23.2 Consent of BDO Seidman, LLP to incorporate by reference
its report dated February 4, 2003, on the Consolidated
Financial Statements of the Registrant in the Registrant's
Registration Statements on Form S-3, No. 33-72832,
Form S-1, No. 333-100395, and on Form S-8, No. 33-7833,
No. 33-41833, No. 33-14758 and No. 33-60099. Attached

- ------------------
1. Indicates a management contract or compensatory plan or arrangement.

2. These exhibits were filed in SEC File No. 1-8491 as indicated on the
following page and are incorporated herein by this reference thereto.









-5-



Corresponding Exhibit in Annual Report on
Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K, Proxy Statement
or Registration Statement, as Indicated Below;
Exhibit in All References are to SEC File No. 1-8491
this Report (except as otherwise indicated).
- ----------- ----------------------------------------------
3.1(a)&(b) 3.1 (10-K for 1987)
3.2 3(ii) (Current Report on Form 8-K dated
November 13, 1998)
4.1(a)&(b) 4.1(d)(e) and 4.5 (10-Q for June 30, 1993)
4.2 4 (Current Report on Form 8-K dated May 10, 1996)
4.3 4.3 (Form S-1 dated October 7, 2002)(File No. 333-100395)
4.4 4.4 (Form S-1 dated October 7, 2002)(File No. 333-100395)
4.5 4.5 (Form S-1 dated October 7, 2002)(File No. 333-100395)
10.2 10.2 (10-Q for September 30, 2000)
10.3(a) 10.3(a) (10-K for 1998)
10.3(b) 10.3(b) (10-K for 1994)
10.4(a) B (Proxy Statement dated March 20, 1987)
10.4(b) 99.1 (Preliminary Proxy Statement dated April 8, 2002)
10.4(c) 99.1 (Preliminary Proxy Statement dated April 8, 2002)
10.4(d) 4.3 (Form S-8 dated July 24, 2002)(File No. 333-96995)
10.5(a) 10.11(a) (10-K for 1985)
10.5(b) 10.5(b) (10-K for 1994)
10.5(c) 10.5(c) (10-K for 1994)
10.6 10.15 (10-K for 1987)
10.7 10.7 (10-K for 1994)
10.8(a) 10.11(a) (10-Q for September 30, 1996)
10.8(b) 10.11(b) (10-Q for September 30, 1996)
10.8(c) 10.6(c) (Form S-1 dated October 7, 2002)(File No. 333-100395)
10.9 10.12 (10-Q for September 30, 1996)
10.10 99A (10-Q for June 30, 1994)
10.11 10.3 (10-Q for June 30, 1999)
10.12 10.4 (10-Q for June 30, 1999)
10.13 10.5 (10-Q for June 30, 1999)
10.14 10.1 (10-Q for June 30, 2000)
10.15 10.2 (10-Q for June 30, 2000)
10.16 99 (Current Report on Form 8-K dated March 27, 2001)
10.17 10.19 (10-Q for June 30, 2001)
10.18 10.21 (10-K for 2001)
10.19 10.13 (Form S-1 dated January 8, 2003)(File No. 333-100395)
10.20 10.18 (Form S-1 dated October 7, 2002)(File No. 333-100395)
10.21 10.19 (Form S-1 dated October 7, 2002)(File No. 333-100395)
10.22 10.20 (Form S-1 dated October 7, 2002)(File No. 333-100395)
16.1 16.1 (Current Report on Form 8-K dated
October 12, 2001)


-6-