HECLA MINING CO/DE/, 424B1, 1994-05-05

HECLA MINING CO/DE/
424B1, 1994-05-05
GOLD AND SILVER ORES

Previous: GIBSON GREETINGS INC, SC 13G/A, 1994-05-05

Next: CALIFORNIA ENERGY CO INC, 10-Q, 1994-05-05

<PAGE> 1

424(b)(1)
NO. 33-76472
PROSPECTUS

6,500,000 SHARES

[LOGO] HECLA MINING COMPANY

COMMON STOCK
------------------------
All of the shares of Common Stock, par value $0.25 per share (the "Common
Stock"), offered hereby (the "Shares") are being sold by Hecla Mining Company, a
Delaware corporation (the "Company").

The Common Stock is listed on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "HL." On May 4, 1994, the last reported sale price of
the Common Stock on the NYSE was $10 1/8 per share. See "Price Range of Common
Stock."

SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS
RELEVANT TO CONSIDERATION OF AN INVESTMENT IN THE SHARES.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Per Share............................... $9.125 $.55 $8.575
- ------------------------------------------------------------------------------------------------
Total(3)................................ $59,312,500 $3,575,000 $55,737,500
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated at $500,000.

(3) The Company has granted the Underwriters options exercisable within 30 days
after the date hereof to purchase up to 975,000 additional shares of Common
Stock solely to cover over-allotments, if any. If all such shares are
purchased, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $68,209,375, $4,111,250 and $64,098,125, respectively. See
"Underwriting."

------------------------
The Shares are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of certain legal
matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Shares
will be made in New York, New York on or about May 11, 1994.

------------------------
MERRILL LYNCH & CO. SALOMON BROTHERS INC
------------------------
The date of this Prospectus is May 4, 1994.
<PAGE> 2

(PHOTO 1)
AUGUST 1993

GROUSE CREEK GOLD PROJECT
UNDER CONSTRUCTION

MARCH 1994
(PHOTO 2)

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE> 3

PROSPECTUS SUMMARY

This Summary does not purport to be complete and is qualified in its
entirety by reference to, and should be read in conjunction with, the more
detailed information and consolidated financial statements and notes thereto
included elsewhere or incorporated by reference in this Prospectus. Unless
indicated otherwise or the context otherwise requires: (i) the information
contained in this Prospectus assumes that the Underwriters' over-allotment
option is not exercised; (ii) references to "Hecla" or the "Company" refer to
Hecla Mining Company, a Delaware corporation, and its subsidiaries; (iii)
references to the "Common Stock" refer to the Common Stock, par value $0.25 per
share, of the Company and references to the "Shares" are to the 6,500,000 shares
of Common Stock being offered hereby; (iv) references to the "Offering" refer to
the Shares being offered hereby; and (v) references to "ounce" or "oz." refer to
a troy ounce. Terms not defined in this Summary are defined elsewhere herein or
in the "Glossary of Certain Mining Terms."

THE COMPANY

The Company, originally incorporated in 1891, is principally engaged in the
exploration, development, mining and processing of precious and non-ferrous
metals, including gold, silver, lead and zinc, and certain industrial minerals.
At December 31, 1993, the Company had approximately 1.9 million and 53.4 million
ounces of proven and probable gold and silver reserves, respectively (including
approximately 654,000 and 3.6 million ounces, respectively, as a result of the
Company's acquisition of Equinox Resources Ltd. in March 1994 as described
below).

The Company's principal metals properties include the La Choya gold mine,
located in Sonora, Mexico, which began operations in January 1994; the Lucky
Friday silver and lead mine, located near Mullan, Idaho, which is a significant
primary producer of silver in North America; the American Girl gold mine and the
Oro Cruz gold project, both located in Imperial County, California, which were
acquired in March 1994; the Republic gold mine, located in the state of
Washington; the Grouse Creek gold project, located near Challis, Idaho, which is
intended to be operational in the fourth quarter of 1994; the Rosebud gold
project, located in Pershing County, Nevada, which was acquired in March 1994;
and the Greens Creek mine, located near Juneau, Alaska, a polymetallic mine
placed on standby in 1993, in which Hecla owns a 29.7% interest.

As part of the Company's strategy to acquire and develop precious metals
properties, primarily in North America, the Company acquired on March 11, 1994,
Equinox Resources Ltd., a gold exploration and development company headquartered
in Vancouver, British Columbia ("Equinox"), in exchange for Common Stock worth
approximately $76.3 million on such date. The Company's principal reason for the
acquisition of Equinox was the opportunity to acquire the Rosebud gold project,
located in Pershing County, Nevada, in which Equinox had a 100% interest and the
American Girl gold mine, in which Equinox had a 47% interest and which is
operated by a joint venture partner. The Company believes that the Rosebud gold
project, which had proven and probable gold reserves of 512,000 contained ounces
as of December 31, 1993, has significant exploration and development potential.
Equinox's share of gold production at the American Girl gold mine in 1993 was
approximately 35,000 ounces.

The Company expects its gold production to increase from approximately
61,000 ounces in 1993 to approximately 117,000 ounces in 1994, with
approximately 43% of the expected 1994 gold production to come from the La Choya
gold mine. Assuming the timely commencement of production at the Grouse Creek
gold project in the fourth quarter of 1994, the Company's total 1994 gold
production could increase by up to 53,000 ounces (representing its 80% share of
the project) to a total of approximately 170,000 ounces. In addition, the
Company intends to develop the Rosebud gold project upon satisfactory completion
of a feasibility study which is currently expected to be finalized by late 1995.
Development of the Rosebud gold project could begin shortly thereafter with
production commencing in late 1996 at the earliest. The feasibility study will
assess the potential to produce approximately 70,000 to 80,000 ounces of gold
annually. See "Business -- Development Projects." As a result of the continued
development of the Grouse Creek gold project and the Equinox acquisition, the
Company believes that its 1995 attributable gold production will exceed 200,000
ounces.

3
<PAGE> 4

Although depressed silver prices have impacted the Company's silver
production in recent years, the Company believes that it is well positioned to
respond to an increase in silver prices, by expanding production at its Lucky
Friday mine by developing the Gold Hunter project and through the recommencement
of operations at the Greens Creek mine. In 1993, drilling in the southwest area
of the Greens Creek property encountered a significant additional mineralized
zone containing higher than mine average gold and silver content. Although there
can be no assurance that this additional material can be economically mined,
drilling is continuing to define the nature and extent of the resource. A
feasibility study currently is being undertaken in order to determine the
advisability of placing the mine back into operation. If the decision is made to
reopen the Greens Creek mine and production commences by 1997, when combined
with the potential for estimated increased silver production at the Lucky Friday
mine, the Grouse Creek project and the Rosebud project, the Company's
attributable share of annual silver production could exceed 8.0 million ounces
in 1997, compared to approximately 3.0 million ounces in 1993.

During the next several years, the Company intends to concentrate its
exploration efforts at or in the vicinity of its existing and proposed mining
properties, including Grouse Creek, La Choya, Republic, Greens Creek, Rosebud,
American Girl and Lucky Friday. The Company and its joint venture partners own
or control significant land positions surrounding these existing and proposed
mining operations. In addition, the Company will continue to evaluate
acquisition and exploration opportunities, primarily in North America.

The Company's industrial minerals businesses consist of Kentucky-Tennessee
Clay Company (ball clay and kaolin divisions), K-T Feldspar Corporation,
Mountain West Bark Products, Inc. (bark and scoria) and Colorado Aggregate
Company of New Mexico. Hecla's industrial minerals segment is a leading producer
of three of the four basic ingredients required to manufacture ceramic and
porcelain products, including sanitaryware, pottery, dinnerware, electric
insulators and ceramic tile. At current production rates, the Company has over
20 years of proven and probable reserves of ball clay, kaolin and feldspar.

The following table presents certain information regarding the Company's
metal mining and development properties, including their relative percentage
contributions to the Company's 1993 revenues:

<TABLE>
<CAPTION>
PERCENTAGE
OF
DATE OWNERSHIP 1993
NAME OF PROPERTY ACQUIRED INTEREST REVENUE(1)
--------------------------------------------------- -------- --------- ------------
<S> <C> <C> <C>
Lucky Friday....................................... 1958 100.0% 11.8%
Republic........................................... 1982 100.0% 22.6%
Greens Creek....................................... 1988 29.7% 4.2%
Cactus............................................. 1991 75.0% 3.5%
Grouse Creek(2).................................... 1991 80.0% --
La Choya(3)........................................ 1991 100.0% --
American Girl(4)(5)................................ 1994 47.0% --
Rosebud(4)......................................... 1994 100.0% --
</TABLE>

- ---------------
(1) Percentages exclude the contributions of the Company's industrial minerals
and specialty metals segments. The relative percentage contributions to the
Company's 1993 revenue by the industrial minerals and specialty metals
segments were 54.9% and 2.5%, respectively.

(2) The Grouse Creek project, which is presently under construction, is
scheduled to commence production in the fourth quarter 1994, with full
production achieved in 1995.

(3) The La Choya mine commenced operations in January 1994.

(4) The Company's interest in the American Girl mine and Rosebud project were
acquired in the March 11, 1994 acquisition of Equinox.

(5) Giving effect to the acquisition of Equinox, the American Girl mine would
have contributed 11.9% of the Company's consolidated revenues.

4
<PAGE> 5

The Company currently has outstanding $109,950,000 aggregate principal
amount of Liquid Yield Options Notes due 2004 (the "LYONs") which are currently
convertible into 20.824 shares of Common Stock per $1,000 principal amount of
LYONs. See "Description of LYONs." Pursuant to the terms of the indenture
governing the LYONs, on June 14, 1994, holders of LYONs may require the Company
to purchase LYONs held by them at a purchase price of $456.39 per $1,000
principal amount of LYONs. The purchase price may be paid, at the option of the
Company, in cash, in shares of Common Stock (valued at the market price of the
Common Stock) or in subordinated notes of the Company. Because of the Company's
need to utilize cash for planned capital expenditures, it is probable that,
absent consummation of the Offering, it will pay for any LYONs delivered to it
by issuing Common Stock. The Company is currently considering several
alternatives in an attempt to issue less shares of Common Stock than would be
the case if the Company was required to repurchase all of the outstanding LYONs
on June 14, 1994. See "Investment Considerations -- Common Stock Issuances
Related to LYONs" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition and Liquidity." As
described under "Use of Proceeds," the Company will use a substantial portion of
the proceeds of the Offering to redeem the LYONs.

For a discussion of recent developments involving the Company, including
results for the first quarter of 1994, the acquisition of Equinox and the sale
of a 20% joint venture interest in the Grouse Creek gold project, see "Recent
Developments."

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered Hereby............... 6,500,000 shares
Common Stock Outstanding:
Before the Offering (1).............. 40,580,248 shares
After the Offering................... 47,080,248 shares
Use of Proceeds........................... To provide funds to redeem the Company's LYONs on
or about June 14, 1994, and for other general
corporate purposes including the further
exploration and development of the Company's
mining properties. See "Use of Proceeds" and
"Management's Discussion and Analysis of
Financial Condition and Results of Operations
-- Financial Condition and Liquidity."
NYSE Symbol............................... HL
</TABLE>

- ---------------
(1) As of May 2, 1994; includes approximately 5.9 million shares of Common Stock
issued in connection with the Company's Equinox acquisition completed on
March 11, 1994 (see "Recent Developments -- Equinox Acquisition"); excludes
(a) 269,555 shares of Common Stock issuable upon exercise of outstanding
stock options (at an average exercise price of $10.62 per share); (b)
851,597 shares of Common Stock issuable upon exercise of outstanding
warrants (at an average exercise price of $13.44 per share), including
379,506 shares of Common Stock issuable upon exercise of outstanding
warrants with exercise prices less than the current market price (see
"Description of Capital Stock -- Warrants to Purchase Common Stock"); and
(c) 7,395,498 shares of Common Stock issuable upon conversion of the
Company's Series B Cumulative Convertible Preferred Stock (at a conversion
price of $15.55 per share).

INVESTMENT CONSIDERATIONS

For information concerning certain factors that should be considered by
prospective investors, see "Investment Considerations."

5
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL DATA

The consolidated financial data shown below as of December 31, 1993, and
each of the years in the five-year period ended December 31, 1993 (other than
the data under the caption "Segment Data") have been derived from, and should be
read in conjunction with, the Company's consolidated financial statements which
have been audited by Coopers & Lybrand. See "Index to Financial Statements."
This data does not reflect the acquisition and consolidation of Equinox, which
was completed on March 11, 1994, and which will be accounted for as a pooling of
interests. See "Supplemental Consolidated Financial Statements." For historical
financial information with respect to Equinox, reference is made to Equinox's
historical financial statements incorporated herein by reference. See
"Information Incorporated by Reference."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of products........................... $118,931 $152,106 $117,568 $100,651 $ 81,847
Gross profit................................ 11,105 20,857 11,554 3,870 446
Provision for closed operations and
environmental matters(1).................. (706) (2,970) (3,638) (12,670) (2,307)
Reduction in carrying value of mining
properties(2)............................. (3,308) -- -- (27,928) (200)
Loss from operations........................ (13,438) (1,258) (14,061) (55,043) (14,044)
Other gain (loss) on investments(3)......... (8,808) 78 212 (2,176) (144)
Net income (loss)........................... (20,449) 6,711 (15,430) (49,289) (11,735)
Preferred stock dividends................... -- -- -- -- (4,070)
Net income (loss) applicable to common
shareholders.............................. (20,449) 6,711 (15,430) (49,289) (15,805)
Net income (loss) per common share.......... (0.68) 0.22 (0.51) (1.60) (0.48)
Weighted average number of common shares
outstanding............................... 30,049 30,053 30,094 30,866 32,915
OTHER FINANCIAL DATA:
Depreciation, depletion and amortization.... $ 22,582 $ 25,502 $ 21,853 $ 14,312 $ 10,961
Capital expenditures........................ 45,732 33,718 18,885 23,176 52,671
Exploration expense......................... 10,297 8,430 5,693 7,659 4,353
SEGMENT DATA:
Sales of products
Gold operations........................... $ 48,194 $ 75,398 $ 51,772 $ 31,733 $ 21,375
Silver operations......................... 37,381 40,954 25,272 25,687 13,476
Industrial minerals operations............ 33,356 34,971 40,524 43,231 44,953
Specialty metals operations............... -- 783 -- -- 2,043
-------- -------- -------- -------- --------
Total............................. $118,931 $152,106 $117,568 $100,651 $ 81,847
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Gross profit (loss)
Gold operations........................... $ 20,822 $ 27,913 $ 12,824 $ 6,812 $ 5,241
Silver operations......................... (13,360) (5,225) (7,485) (7,954) (9,329)
Industrial minerals operations............ 3,643 2,203 6,215 5,012 5,038
Specialty metals operations............... -- (4,034) -- -- (504)
-------- -------- -------- -------- --------
Total............................. $ 11,105 $ 20,857 $ 11,554 $ 3,870 $ 446
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------------------------------
ACTUAL AS ADJUSTED(5)
-------- SUPPLEMENTAL(4) --------------
---------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................................... $ 77,621 $ 81,223 $ 88,028
Total assets........................................ 332,878 346,153 352,958
Long-term debt obligations.......................... 49,489 50,009 1,576
Shareholders' equity................................ 240,063 244,672 299,910
</TABLE>

6
<PAGE> 7

NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA

(1) The provision for closed operations and environmental matters for all
periods presented represents costs incurred in connection with the care and
maintenance of closed properties as well as costs related to environmental
and reclamation expenses. As further discussed in Note 8 of Notes to
Consolidated Financial Statements, the Company expensed $2.8 million, $8.6
million and $0.8 million in 1991, 1992 and 1993, respectively, principally
in connection with the clean-up of the Bunker Hill Superfund Site in
northern Idaho. In addition, the Company expensed $2.7 million in 1990,
principally in connection with such clean-up.

(2) Based on its periodic reviews of the status of various mining properties,
the Company determined in 1989, and again in 1992, that certain adjustments
were appropriate to properly reflect the estimated net realizable values of
several of its properties. These adjustments consisted primarily of
write-downs of various properties, plants and equipment totaling
approximately $3.3 million and $27.9 million in 1989 and 1992, respectively.
The write-down in 1989 related to the Company's interests in the Durita and
Escalante properties. As further discussed in Note 5 of Notes to
Consolidated Financial Statements, the adjustment in 1992 related to the
$13.5 million write-down of the Company's interest in the Apex facility,
which was designed to process germanium and gallium, and write-downs of
approximately $9.0 million related to the Consolidated Silver and Hog Heaven
silver properties, located in northern Idaho and northwest Montana,
respectively. The Lisbon Valley project in Utah, a joint venture which was
fully developed for uranium and vanadium production, was also written down
by approximately $3.5 million due to continued depressed uranium prices.
Other gold and silver properties written down in the 1992 adjustment
included the Creede and Hardscrabble properties totaling $1.5 million and
$0.4 million, respectively, both located in Colorado.

(3) During 1989, the Company sold 952,900 shares of Sunshine Mining Company
("Sunshine") common stock for $3.6 million, realizing a loss of $4.8
million. In connection with the Company's decision to liquidate its holdings
in Sunshine common stock, the Company transferred the remaining investment
to a current asset classification and recognized an additional loss of $4.2
million for the difference between the market value of the securities and
the remaining book value recorded on the Company's balance sheet. During
1992, the Company wrote down its common stock investment in Granduc Mines
Limited to current estimated market value. The resulting $2.1 million
write-down was recorded to reflect the decline in market value of the common
stock investment due to continued depressed metals prices. In January 1994,
the Company sold its entire interest in Granduc Mines Limited for net
proceeds of approximately $2.8 million. See "Recent Developments -- Granduc
Mines."

(4) Illustrates supplemental adjustments to give effect to the Equinox
acquisition on a pooling of interests basis as of December 31, 1993. See
"Condensed Supplemental Consolidated Financial Information."

(5) After giving effect to the Offering and the use of the net proceeds
therefrom. See "Use of Proceeds." Assuming all of the outstanding LYONs at
December 31, 1993 are redeemed by the Company through the use of a portion
of the proceeds from the sale of the Shares offered hereby, using the price
to the public of the Shares in the Offering, and assuming the redemption
occurred on January 1, 1993, pro forma 1993 net loss of the Company would
decrease by approximately $775,000 due to interest savings, net of amounts
capitalized, and pro forma net loss per common share would decrease by $0.09
per share to $0.39 per share, after giving effect to the additional shares
of Common Stock that would be outstanding.

7
<PAGE> 8

SUMMARY CONDENSED SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth certain condensed supplemental consolidated
financial information of the Company and Equinox to illustrate the effects of
their combination accounted for as a pooling-of-interests. Accordingly, the
financial information of the Company and Equinox (as adjusted) has been combined
on a pooling-of-interests basis, as described elsewhere herein, for all periods
presented. This supplemental information should be read in conjunction with the
historical financial statements and selected financial data of the Company and
Equinox, including the notes thereto, which are included elsewhere, or
incorporated by reference, herein, and in conjunction with the Supplemental
Consolidated Financial Statements, including the notes thereto, included
elsewhere herein. The supplemental consolidated financial information does not
purport to represent what the combined financial information actually would have
been had the combination occurred at the beginning of the periods presented or
to project the combined financial position or results of operations of the
combined companies for any future date or period.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1991 1992 1993
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of products.......................................... $117,568 $101,621 $ 92,888
Gross profit (loss)........................................ 11,554 3,033 (779)
Net loss applicable to common shareholders................. (15,521) (55,276) (21,852)
Net loss per common share.................................. (0.46) (1.59) (0.57)
Cash dividends per common share............................ -- -- --
Weighted average number of common shares outstanding....... 33,579 34,778 38,010
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1991 1992 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................ $ 36,281 $ 21,264 $ 81,223
Total assets............................................... 276,856 236,130 346,153
Long-term debt obligations................................. 80,322 71,219 50,009
Shareholders' equity....................................... 158,095 117,438 244,672
</TABLE>

8
<PAGE> 9

RESERVE DATA(1)

<TABLE>
<CAPTION>
HECLA'S
SHARE ORE GRADE
OF --------------------------------------------- CONTAINED OUNCES
RESERVES GOLD SILVER LEAD ZINC ----------------------
(TONS) (OZ./TON) (OZ./TON) (PERCENT) (PERCENT) GOLD SILVER
---------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PRODUCING PROPERTIES(2)
La Choya................. 6,138,000 0.037 -- -- -- 225,500 --
American Girl(3)......... 1,814,200 0.078 -- -- -- 141,837 --
Republic................. 103,533 0.430 2.69 -- -- 44,373 278,183
Lucky Friday............. 414,315 -- 14.40 14.30 3.00 -- 5,976,380
Greens Creek(4).......... 1,911,000 0.140 16.00 4.70 14.40 267,540 30,576,000
--------- ----------
Subtotal................................................................... 679,250 36,830,563
--------- ----------
DEVELOPMENT PROJECTS
Grouse Creek(5).......... 12,104,000 0.055 1.07 -- -- 671,200 12,972,800
Rosebud(6)............... 1,984,000 0.258 1.81 -- -- 512,000 3,591,000
--------- ----------
Subtotal................................................................... 1,183,200 16,563,800
--------- ----------
Total...................................................................... 1,862,450 53,394,363
--------- ----------
--------- ----------
</TABLE>

- ---------------
(1) The reserve data is presented as of December 31, 1993 and includes reserves
as of such date for properties acquired in the Equinox acquisition completed
on March 11, 1994. The Company's estimates of proven and probable reserves
for the properties it operates are based upon a gold price of $375 per
ounce, a silver price of $4.50 per ounce, a zinc price of $0.44 per pound
and a lead price of $0.23 per pound. For more detailed information
concerning the Company's reserves and the ownership, operation and
development of the Company's properties, see "Business." Estimates of proven
and probable reserves at the Greens Creek mine were prepared by the mine
manager and are based upon a gold price of $350 per ounce, a silver price of
$4.75 per ounce, a zinc price of $0.57 per pound and a lead price of $0.28
per pound. Estimates of proven and probable reserves at the American Girl
gold mine (including the Oro Cruz gold project) were prepared by the mine
manager and are based upon a gold price of $380 per ounce.

(2) The reserves at Cactus were mined out in February 1992, operations at Yellow
Pine were completed in August 1992 and the Company's interest in Galena was
sold in June 1992. Therefore, Cactus, Yellow Pine and Galena are not shown
as producing properties. See "-- Company Production Data."

(3) The American Girl mine was acquired in the Equinox acquisition in March
1994. Includes reserve information from the Oro Cruz project. See
"Business -- Metals Segment -- Producing Properties -- American Girl
Mine/Oro Cruz Gold Project." The American Girl mine and the Oro Cruz project
are presented on a 47% basis pursuant to joint venture arrangements in
effect as of January 1, 1994.

(4) The Company's interest in the Greens Creek mine is 29.7%. In April 1993,
operations at Greens Creek were suspended by the mine manager due to the
depressed market prices for the various metals produced at the mine. See
"Business -- Suspended Operations -- Greens Creek Mine."

(5) Presented on an 80% basis pursuant to the Company's joint venture agreements
with Great Lakes. See "Recent Developments -- Sale of Grouse Creek Joint
Venture Interest."

(6) The Rosebud gold project was acquired in the Equinox acquisition in March
1994.

9
<PAGE> 10

COMPANY PRODUCTION DATA(1)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1989 1990 1991 1992 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
GOLD (ounces)
Republic..................... 74,335 81,397 77,736 58,343 49,601
Cactus(2).................... 44,567 45,005 40,434 27,212 7,316
Yellow Pine(3)............... -- 57,747 17,542 2,013 --
Other Gold Production........ 8,292 12,129 11,516 10,086 3,798
--------- --------- --------- --------- ---------
Total Gold Produced..... 127,194 196,278 147,228 97,654 60,715
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted Average Cash Production
Cost per ounce(4)............ $179 $180 $191 $188 $212
Weighted Average Full Production
Cost per ounce(4)............ $223 $253 $279 $258 $268
SILVER (ounces)
Lucky Friday................. 1,904,038 1,894,944 1,850,531 2,031,779 2,122,738
Greens Creek(5).............. 1,446,365 2,144,389 2,178,141 1,959,368 551,107
Galena(6).................... 770,136 768,716 815,763 323,786 --
Escalante(7)................. 1,626,965 784,919 -- -- --
Other Silver Production...... 611,337 617,263 482,417 415,915 300,853
--------- --------- --------- --------- ---------
Total Silver Produced... 6,358,841 6,210,231 5,326,852 4,730,848 2,974,698
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted Average Cash Production
Cost per ounce(4)............ $4.29 $3.71 $4.50 $4.51 $5.45
Weighted Average Full Production
Cost per ounce(4)............ $7.55 $5.45 $5.67 $5.89 $6.85
OTHER (tons)
Total Lead Produced............... 18,779 22,199 23,957 25,986 21,093
Total Zinc Produced............... 8,812 13,697 15,070 15,598 7,838
Total Industrial Minerals
Shipped......................... 709,895 711,295 823,214 879,034 887,676
</TABLE>

- ---------------
(1) The table presents for each period indicated: (a) the Company's annual
production for the primary metal produced at each of the Company's
then-operating mines; (b) the weighted average annual cash and full
production costs per ounce, for the primary metals produced, which costs
have been reduced by credits from the sale of by-product metals; and (c) the
annual production tonnage of lead, zinc and total industrial minerals.

(2) The mining operations at Cactus were completed in February 1992. Minimal
gold recovery from the heap is expected in 1994, after which time recovery
operations are expected to be completed.

(3) Mining operations at Yellow Pine were suspended during 1989 and completed in
1992.

(4) Weighted average cash production costs per ounce include all direct and
indirect cash operating costs incurred at each operating mine, net of
revenues earned from the production of by-product metals, divided by the
total ounces of primary metal produced. Weighted average full production
costs per ounce include all cash production costs, plus depreciation,
depletion and amortization relating to each operating mine, divided by total
ounces of the primary metal produced.

(5) The Company's current interest in the Greens Creek joint venture is 29.7%
and prior to that was approximately 28%. In April 1993, operations at Greens
Creek were suspended by the mine manager due to the depressed market prices
for the various metals produced at the mine. See "Business -- Suspended
Operations -- Greens Creek Mine."

(6) In June 1992, the Company sold its 25% interest in the Galena silver mine.

(7) Commercial production at Escalante was completed in August 1990.

10
<PAGE> 11

COMBINED PRODUCTION DATA(1)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1992 1993
---------- ---------
<S> <C> <C>
GOLD (ounces)
Hecla.......................................................... 97,654 60,715
Equinox........................................................ 3,738 36,335
---------- ---------
Combined Total Gold Produced.............................. 101,392 97,050
---------- ---------
---------- ---------
SILVER (ounces)
Hecla.......................................................... 4,730,848 2,974,698
Equinox........................................................ 7,777 20,568
---------- ---------
Combined Total Silver Produced............................ 4,738,625 2,995,266
---------- ---------
---------- ---------
LEAD (tons)
Hecla.......................................................... 25,986 21,093
Equinox........................................................ 956 216
---------- ---------
Combined Total Lead Produced.............................. 26,942 21,309
---------- ---------
---------- ---------
ZINC (tons)
Hecla.......................................................... 15,598 7,838
Equinox........................................................ 4,292 474
---------- ---------
Combined Total Zinc Produced.............................. 19,890 8,312
---------- ---------
---------- ---------
</TABLE>

- ---------------
(1) The table presents the annual attributable production of gold, silver, lead
and zinc for the years indicated for each of the Company and Equinox and the
combined companies. The acquisition of Equinox was completed on March 11,
1994 and will be accounted for as a pooling-of-interests. See "Recent
Developments -- Equinox Acquisition."

11
<PAGE> 12

INVESTMENT CONSIDERATIONS

In addition to the other information set forth in the Prospectus,
prospective investors should carefully consider the following factors prior to
making any investment in the Shares.

RECENT LOSSES

The Company has experienced losses from operations for each of the last
five years. For the year ended December 31, 1993, the Company reported a net
loss of approximately $11.7 million (before preferred dividends of $4.1 million)
or $0.36 per common share compared to a net loss of $49.3 million or $1.60 per
common share for 1992. The 1993 net loss resulted primarily from decreases in
the Company's gold and silver production and the continued depressed average
prices of lead and zinc. The 1992 net loss includes an $11.8 million
environmental accrual, approximately $30.0 million for the write-down of the
Company's investments in various properties and assets and a charge of $1.6
million, or $0.05 a share, and a benefit of $1.5 million, or $0.05 a share, to
reflect accounting principle changes for certain postretirement employee
benefits and income taxes, respectively. If the current market prices of gold,
silver and lead do not increase, combined with the Company's preferred dividend
payment requirements, the Company expects to continue to experience net losses
applicable to common shareholders during the next three years.

DECLINE IN PRODUCTION

The Company's future gold production will be dependent upon the Company's
success in developing new reserves, including the continued development of the
Grouse Creek project as well as exploration efforts at the Republic and La Choya
gold mines and the Rosebud gold project. See "-- Project Development" and
"-- Exploration." The Company mined out its reserves at its Cactus and Yellow
Pine mines in 1992, and currently estimates that the gold reserves at the
Republic mine will be depleted in 1995. As a result, the Company's gold
production declined to approximately 61,000 ounces in 1993 from approximately
98,000 ounces in 1992 and approximately 147,000 ounces in 1991.

The Company's total silver production declined to approximately 3.0 million
ounces in 1993, compared to 4.7 million ounces in 1992, principally as a result
of the suspension of mining operations at the Greens Creek mine (in which the
Company owns a 29.7% interest) due to depressed metals prices. If metals prices
decline, the Company could determine that it is not economically feasible to
continue development of a project or continue commercial production at some of
its properties. See "-- Metal Price Volatility" and "Metals Prices."

PROJECT DEVELOPMENT

Currently, the Company's largest development property is the Grouse Creek
gold project which the Company anticipates will be placed into production during
the fourth quarter of 1994. The Company owns an 80% joint venture interest in
the Grouse Creek project. The Company currently estimates that its share of
future capital expenditures for the Grouse Creek gold project will total
approximately $50.0 million in 1994 and $3.4 million in 1995 assuming its joint
venture partner is able to make all of its required payments. See "-- Joint
Venture Arrangements" and "Recent Developments -- Sale of Grouse Creek Joint
Venture Interest."

The Company's estimated capital expenditures for the Grouse Creek gold
project are based upon currently available data and could increase or decrease
depending upon a number of factors beyond the Company's control. In addition,
the Company will not be able to commence production until virtually all of the
capital expenditures have been incurred. Thus, if capital expenditures are
higher than currently estimated, the Company may not be able to begin mining
operations until such time as additional financing is arranged, and there can be
no assurance that additional financing will be available.

Particularly in development projects, reserve estimates are, to a large
extent, based upon data from drill holes and different results may be
encountered when the ore bodies are exposed and mining begins. Although the
Company has engaged in feasibility and engineering activities at Grouse Creek,
Rosebud and its other

12
<PAGE> 13

development projects, including testing to determine recovery rates of metals
from the ore, since development projects usually have no prior operating history
it is possible that the Company may experience different economic returns from
such projects than it currently forecasts. It is not unusual in new mining
operations to experience unexpected problems during the development phase. As
described under "-- Mining Risks and Insurance," the business of mining is
subject to a number of risks and hazards, and there can be no assurance that
these risks and hazards can be avoided in the development of these projects.

EXPLORATION

Mineral exploration, particularly for gold and silver, is highly
speculative in nature, involves many risks and frequently is nonproductive.
There can be no assurance that the Company's 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 the Company's exploration
programs will result in the expansion or replacement of existing reserves which
are being depleted by current production.

METAL PRICE VOLATILITY

Because a significant portion of the Company's revenues are derived from
the sale of gold, silver, lead and zinc, the Company's earnings are directly
related to the prices of these metals. Gold, silver, lead and zinc prices
fluctuate widely and are affected by numerous factors beyond the Company's
control, including expectations for inflation, speculative activities, the
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. The aggregate effect of these factors, all of which are
beyond the Company's control, is impossible for the Company to predict. If the
market price for these metals falls below the Company's full production costs
and remains at such level for any sustained period, the Company will experience
additional losses and may determine to discontinue the development of a project
or mining at one or more of its properties. As described above under "-- Recent
Losses," the Company has experienced losses from operations in each of the last
five years due, in part, to depressed metals prices. While the Company has
periodically used limited hedging techniques to reduce a portion of the
Company's exposure to the volatility of gold, silver and zinc prices, there can
be no assurance that it will be able to do so as effectively in the future. For
a history of recent gold, silver, lead and zinc prices, see "Metals Prices."

COMPETITION FOR PROPERTIES

Because mines have limited lives based on proven ore reserves, the Company
is continually seeking to replace and expand its reserves. The Company
encounters strong competition from other mining companies in connection with the
acquisition of properties producing or capable of producing gold, silver, lead,
zinc and industrial minerals. As a result of this competition, some of which is
with companies with greater financial resources than the Company, the Company
may be unable to acquire attractive mining properties on terms it considers
acceptable. In addition, there are a number of uncertainties inherent in any
program relating to the location of economic ore reserves, the development of
appropriate metallurgical processes, the receipt of necessary governmental
permits and the construction of mining and processing facilities. Accordingly,
there can be no assurance that the Company's programs will yield new reserves to
replace and expand current reserves.

RESERVES

The ore reserve figures presented or incorporated by reference in this
Prospectus are, in large part, estimates made by the Company's technical
personnel, and no assurance can be given that the indicated level of recovery of
these metals will be realized. Reserves estimated for properties that have not
yet commenced production may require revision based on actual production
experience. Market price fluctuations of the

13
<PAGE> 14

Company's metals, as well as increased production costs or reduced recovery
rates, may render ore reserves containing relatively lower grades of
mineralization uneconomic and may ultimately result in a restatement of
reserves. Moreover, short-term operating factors relating to the ore reserves,
such as the need for sequential development of ore bodies and the processing of
new or different ore grades, may adversely affect the Company's profitability in
any particular accounting period.

The metal prices used to determine mineral reserves at a particular mine
are typically set by the company managing the mine. These metal prices may vary
depending on each company's assessment of metal prices over the near term and
other factors that such company believes relevant. Hecla sets metal prices for
its mineral reserve calculations which approximate current market prices but
these metals prices may vary from current market prices based on a number of
factors likely to influence metal prices over the near term. The Company's
estimates of proven and probable reserves at December 31, 1993 for the
properties it operates are based on a gold price of $375 per ounce, a silver
price of $4.50 per ounce, a zinc price of $0.44 per pound and a lead price of
$0.23 per pound. Proven and probable reserves at the American Girl mine at
December 31, 1993, which are calculated by the mine manager, are based upon a
gold price of $380 per ounce. Proven and probable reserves at December 31, 1993
at the Greens Creek mine, which are calculated by the mine manager, are based
upon a gold price of $350 per ounce, a silver price of $4.75 per ounce, a zinc
price of $0.57 per pound, and a lead price of $0.28 per pound, which prices are
set by the manager.

JOINT VENTURE ARRANGEMENTS

The Grouse Creek gold project, the Greens Creek mine, the American Girl
gold mine (including the Oro Cruz gold project) and certain of the Company's
other mining properties are operated through joint ventures. The Company owns an
undivided interest in the assets of the ventures and, pursuant to its joint
venture agreements, is severally liable for its share of the liabilities of the
ventures. Under the joint venture agreements, the joint venture participants are
entitled to indemnification from the other joint venture participants and are
liable only for the liabilities of the joint ventures in proportion to their
interest therein. If the joint venture participant fails to honor its obligation
(including as a result of insolvency), the Company could incur losses in excess
of its pro rata share of the joint venture. In the event any joint venture
participant defaults in its obligations under the terms of a joint venture
agreement, each agreement provides certain rights and remedies to the remaining
joint venture 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 parties' share of products from the
joint venture properties or sale of the joint venture interest in order to
exercise a set-off and thereby satisfy the obligations of the defaulting
participant. Based on the information available to the Company with respect to
each of its joint venture participants, the Company has no reason to believe
that any of its joint venture participants in the above-described projects will
be unable to meet its financial obligations under the terms of the respective
joint venture agreements.

The Company's estimates of its development costs and capital expenditures
assume that its joint venture participants will not default in their obligations
to contribute their respective portions of such costs and expenditures. If there
is such a default, there can be no assurance that the Company will have the
resources available to contribute additional capital to these projects.
Accordingly, there can be no assurance that the Company's cash flow from
operations and its capital resources will be sufficient to achieve planned
levels of expenditures. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition and Liquidity."

With respect to the Grouse Creek gold project, the Company's joint venture
participant is Great Lakes Minerals Inc. of Toronto ("Great Lakes") and the
Company acts as the project manager and will become the mine manager once
operations commence. Generally, the manager for a particular project controls
day-to-day operating decisions and most other major decisions for the project.
At the Greens Creek mine, one of the Company's joint venture participants,
Kennecott Greens Creek Mining Company ("Kennecott"), acts as the mine manager,
see "Business -- Metals Segments -- Suspended Operations" and at the American
Girl gold mine, the Company's joint venture participant, MK Gold Company ("MK
Gold"), acts as the mine manager. See "Business -- Metals Segment -- Producing
Properties -- American Girl Gold Mine/Oro Cruz Gold

14
<PAGE> 15

Project." Disagreement with a joint venture participant as to the major
decisions affecting a project's operations may have an adverse impact on the
project.

GOVERNMENT REGULATION, ENVIRONMENTAL MATTERS AND LEGAL PROCEEDINGS

The Company's activities are subject to extensive federal, state, local and
foreign laws and regulations controlling not only the mining of and exploration
for mineral properties, but also the possible effects of such activities upon
the environment. Permits from a variety of regulatory authorities are required
for many aspects of mine operation and reclamation. Future legislation and
regulations could cause additional expense, capital expenditures, restrictions
and delays in the development of the Company's properties, the extent of which
cannot be predicted. In the context of environmental permitting, including the
approval of reclamation plans, the Company must comply with known standards,
existing laws and regulations which may entail greater or lesser costs and
delays depending on the nature of the activity to be permitted and how
stringently the regulations are implemented by the permitting authority. While
it is possible that the costs and delays associated with the compliance with
such laws, regulations and permits could become such that the Company would not
proceed with the development or operation of a mine, the Company is not aware of
any material environmental constraint affecting its existing mines or
development properties that would preclude the economic development or operation
of any specific mine or property. Further, the Company is not aware of any
current environmental law or regulation that would reasonably be expected to
have a material adverse effect on the Company's business or financial condition.

As further described in Note 8 of Notes to Consolidated Financial
Statements, the Company has been notified by the United States Environmental
Protection Agency ("EPA") that it has been designated by the EPA as a
potentially responsible party with respect to several Superfund sites. At
December 31, 1993, the Company's allowance for Superfund site remedial action
costs was approximately $10.7 million, which the Company believes is adequate
based on current estimates of aggregate costs. In addition, as further described
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition and Liquidity" and Note 8 of Notes to
Consolidated Financial Statements, the Company is also a defendant in two
actions alleging that the Company is liable for approximately $25 million of
compensatory damages in the aggregate, and the jury trial for one of these
actions, for which punitive damages are also claimed, commenced in May 1994.
Although the ultimate disposition of these matters and various other pending
legal actions and claims is not presently determinable, it is the opinion of the
Company's management, based upon the information available at this time, that
the outcome of these suits and proceedings will not have a material adverse
effect on the results of operations and financial condition of the Company and
its subsidiaries.

For a discussion of the Company's remediation activities and pending
environmental claims, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition and Liquidity" and
Note 8 to the Company's Consolidated Financial Statements included elsewhere
herein (see "Index to Financial Statements").

PENDING LEGISLATION

In 1992, the U.S. Congress considered a number of proposed amendments to
the General Mining Law of 1872, as amended (the "General Mining Law"), which
governs mining claims and related activities on federal lands. A holding fee of
$100 per claim was imposed upon unpatented mining claims located on federal
lands. In addition, a variety of legislation is now pending before the U.S.
Congress to further amend the General Mining Law. The pending legislation would,
among other things, impose royalties and new reclamation, environmental controls
and restoration requirements. Each of the current legislative proposals would
impose some form of royalty payable to the U.S. Government on the value of
minerals extracted from certain federal lands. The extent of any such changes is
not presently known and the potential impact on the Company as a result of
congressional action is difficult to predict. Although a majority of the
Company's existing mining operations occur on private or patented property, the
proposed changes to the General Mining Law could adversely affect the Company's
ability to economically develop mineral resources on federal lands.
Approximately 43% of the proven and probable gold reserves and approximately 20%
of the proven and probable silver

15
<PAGE> 16

reserves located at the Grouse Creek project are located on fully patented
mining claims. The balance of such proven and probable reserves are located
within mineral claims for which the Company has applied for patents and has
received a first half of Mineral Entry Final Certificate. Upon the determination
of the mineral character of these claims by a Federal Mine Examiner, the Company
believes patents will be issued to the Company covering these claims. Although
there can be no assurance as to the ultimate impact of legislative action on
these claims or the Company's ability to patent these claims under the existing
General Mining Law, the Company believes that the pending legislation to amend
the General Mining Law will not adversely affect the right of the Company to
receive patents for the Grouse Creek unpatented mining claims. The proven and
probable reserves at the Oro Cruz and Rosebud properties are located on claims
that are unpatented.

TITLE TO PROPERTIES

The validity of unpatented mining claims, which constitute a significant
portion of the Company's undeveloped property holdings in the United States, is
often uncertain and may be contested. Although the Company has attempted to
acquire satisfactory title to its undeveloped properties, the Company, in
accordance with mining industry practice, does not generally obtain title
opinions until a decision is made to develop a property, with the attendant risk
that some titles, particularly titles to undeveloped properties, may be
defective.

MINING RISKS AND INSURANCE

The business of mining is generally subject to a number of risks and
hazards, including environmental hazards, industrial accidents, labor disputes,
encountering unusual or unexpected geologic formations, cave-ins, 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 possible legal liability. Although the Company maintains
insurance within ranges of coverage consistent with industry practice, no
assurance can be given that such insurance will be available at economically
feasible premiums. Insurance against environmental risks (including potential
for pollution or other hazards as a result of disposal waste products occurring
from exploration and production) is not generally available to the Company or to
other companies within the industry. To the extent the Company is subject to
environmental liabilities, the payment of such liabilities would reduce the
funds available to the Company. Should the Company be unable to fund fully the
cost of remedying an environmental problem, the Company might be required to
suspend operations or enter into interim compliance measures pending completion
of the required remedy.

SMELTING CAPACITY

The Company sells substantially all of its metallic concentrates to
smelters which are subject to extensive regulations including environmental
protection laws. The Company has no control over the smelters' operations or
their compliance with environmental laws and regulations. If the smelting
capacity available to the Company was significantly further reduced because of
environmental requirements or otherwise, it is possible that the Company's
operations could be adversely affected.

FOREIGN OPERATIONS

The Company's La Choya gold mine is located in Sonora, Mexico. The Company
also has development projects and mining investments in Mexico, Canada and
Bolivia. Such projects and investments could be adversely affected by exchange
controls, currency fluctuations, taxation and laws or policies of the United
States affecting foreign trade, investment and taxation, which, in turn, could
affect the Company's current or future foreign operations.

COMMON STOCK ISSUANCES RELATED TO LYONS

The Company currently has outstanding $109,950,000 aggregate principal
amount at maturity of LYONs. See "Description of LYONs." The LYONs are
convertible at a rate of 20.824 shares of Common

16
<PAGE> 17

Stock per $1,000 principal amount of LYONs. In addition, on June 14, 1994,
pursuant to the terms of the indenture governing the LYONs, holders of LYONs may
require the Company to purchase LYONs held by them (the "Put Feature") at a
purchase price of $456.39 per $1,000 principal amount of LYONs (equal to the
issue price plus accrued original issue discount to such date). The purchase
price may be paid, at the option of the Company, in cash, in shares of Common
Stock valued at the market price of the Common Stock or in the Company's
Subordinated Extension Notes due 2004. Because of the Company's need to utilize
cash for planned capital expenditures, it is probable that, absent consummation
of the Offering, it will pay for any LYONs delivered to it pursuant to the Put
Feature by issuing Common Stock. The Company is unable to predict how many LYONs
it may be required to purchase pursuant to the Put Feature. If the Company were
required to purchase all of the LYONs on June 14, 1994 pursuant to the Put
Feature, assuming a market price of the Common Stock of $9 1/8 per share (the
price to the public of the Shares in the Offering), the Company would issue
approximately 5.5 million shares of Common Stock, representing approximately
11.9% of the Company's Common Stock outstanding after such issuance. The Company
cannot predict what effect the Put Feature will have on the market price of the
Common Stock. For a description of the Put Feature, see "Description of LYONs."
For a discussion of other alternatives being considered with respect to the
LYONs, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition and Liquidity."

METALS PRICES

The following table sets forth the average closing prices of the following
metals for 1980, 1985, and each year thereafter and the present year through
March 31, 1994.

<TABLE>
<CAPTION>
1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gold(1)
(per oz.).................... $612.56 $317.26 $367.51 $446.47 $437.05 $381.43 $383.46 $362.18 $343.73 $359.77 $384.30
Silver(2)
(per oz.).................... 20.63 6.14 5.47 7.01 6.53 5.50 4.82 4.04 3.94 4.30 5.29
Lead(3)
(per lb.).................... 0.41 0.18 0.18 0.27 0.30 0.30 0.37 0.25 0.25 0.18 0.22
Zinc(4)
(per lb.).................... 0.34 0.36 0.34 0.36 0.56 0.78 0.69 0.51 0.56 0.44 0.44
</TABLE>

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

On May 4, 1994, the closing prices of these metals were: gold -- $375.15
per oz.; silver -- $5.17 per oz.; lead -- $0.21 per lb.; and zinc -- $0.42 per
lb.

17
<PAGE> 18

THE COMPANY

The Company, originally incorporated in 1891, is principally engaged in the
exploration, development, mining and processing of precious and non-ferrous
metals, including gold, silver, lead and zinc, and certain industrial minerals.
At December 31, 1993, the Company had approximately 1.9 million and 53.4 million
ounces of proven and probable gold and silver reserves, respectively (including
approximately 654,000 and 3.6 million ounces, respectively, as a result of the
Company's acquisition on March 11, 1994 of Equinox, a gold exploration and
development company headquartered in Vancouver, British Columbia).

The Company's principal metals properties include the La Choya gold mine,
located in Sonora, Mexico, which began operations in January 1994; the Lucky
Friday silver and lead mine, located near Mullan, Idaho, which is a significant
primary producer of silver in North America; the American Girl gold mine and the
Oro Cruz gold project, both located in Imperial County, California, which were
acquired in March 1994 as part of the Equinox acquisition; the Republic gold
mine, located in the state of Washington; the Grouse Creek gold project, located
near Challis, Idaho, which is intended to be operational in the fourth quarter
of 1994; the Rosebud gold project, located in Pershing County, Nevada, which was
acquired in March 1994 as part of the Equinox acquisition; and the Greens Creek
mine, located near Juneau, Alaska, a polymetallic mine placed on standby in
1993, in which Hecla owns a 29.7% interest.

The Company's industrial minerals businesses consist of Kentucky-Tennessee
Clay Company (ball clay and kaolin divisions), K-T Feldspar Corporation,
Mountain West Bark Products, Inc. (bark and scoria) ("Mountain West Products")
and Colorado Aggregate Company of New Mexico. Hecla's industrial minerals
segment is a leading producer of three of the four basic ingredients required to
manufacture ceramic and porcelain products, including sanitaryware, pottery,
dinnerware, electric insulators and ceramic tile. At current production rates,
the Company has over 20 years of proven and probable reserves of ball clay,
kaolin and feldspar.

The Company's principal executive offices are located at 6500 Mineral
Drive, Coeur d'Alene, Idaho 83814-8788, telephone (208) 769-4100.

18
<PAGE> 19

RECENT DEVELOPMENTS

RECENT RESULTS

On April 29, 1994, the Company reported its financial results for the first
quarter of 1994, when the Company had a net loss of $5.7 million on revenue of
$27.7 million. After giving effect to the preferred dividend, the Company's loss
applicable to common shareholders was $7.7 million or $0.19 per common share.
For the first quarter of 1993, the net loss was $5.5 million, or $0.15 per
common share. First quarter 1994 results were adversely affected by
approximately $2.2 million in costs related to the acquisition of Equinox and
initial start-up costs for the La Choya mine totaling $1.7 million.

EQUINOX ACQUISITION

On March 11, 1994, Hecla completed its acquisition of Equinox, an
exploration, development and mining company headquartered in Vancouver, British
Columbia, whose principal assets consist primarily of metals properties located
in the United States. See "Prospectus Summary -- The Company." The transaction
was treated as a pooling of interests for financial reporting and accounting
purposes. The Company issued approximately 5.9 million shares of Common Stock
for Equinox's outstanding common shares representing an exchange ratio of 0.3
share of Common Stock for each Equinox common share. In addition, 380,406 shares
of Common Stock are issuable upon exercise of outstanding Equinox Warrants (as
hereinafter defined) and Equinox options. Following the acquisition, Equinox was
liquidated so that all of its direct subsidiaries became direct subsidiaries of
the Company. In connection with the acquisition, the Company also issued
production notes related to production at the American Girl mine and Oro Cruz
project, with an aggregate redemption price of Canadian $2,075,655 ("Hecla
Production Notes"). The value of the transaction was approximately $76.3 million
based upon the market value of the securities exchanged on March 11, 1994. In
lieu of evaluating the Equinox acquisition on a discounted cash flow or return
on investment basis, which the Company does not believe is appropriate for a
precious metals acquisition where the consideration is the Company's securities,
the Company analyzed a number of factors in determining to proceed with the
acquisition, including without limitation the reserves acquired and the
underlying cost structure of such reserves, the current and projected production
profile and the impact on the Company's stockholders of the additional reserves
and production. The Company undertook the acquisition of Equinox in furtherance
of its strategy of expanding gold production to 200,000 ounces per year. The
acquisition of Equinox immediately added 30,000 ounces of annual gold production
from its 47% interest in the American Girl mine, as well as adding 512,000
ounces of proven and probable gold reserves at its Rosebud gold project while
having significant exploration and development potential. The Company believes
that the American Girl mine will operate at a break-even level at current metals
prices. In addition, the Company believes that development of the Rosebud
project offers the Company the opportunity to have a profitable operation at
current metals prices. Equinox also held a significant number of properties and
mineral interests at various stages of exploration which fit the Company's
exploration profile. In 1993, Equinox had an operating loss of $6.2 million
(after adjustment for U.S. dollar conversion and presentation in accordance with
U.S. generally accepted accounting principles and the Company's accounting
policies.) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Introduction." Equinox's most significant properties
were its interests in the American Girl gold mine and the Rosebud gold project.

SALE OF GROUSE CREEK JOINT VENTURE INTEREST

On February 8, 1994, the Company sold a 20% undivided interest in the
Company's Grouse Creek gold project to Great Lakes for $13,280,857. Pursuant to
the acquisition and joint venture agreements related to such sale, Great Lakes
is required to fund its 20% pro rata portion of capital expenditures required to
bring the Grouse Creek project to commercial production (including its portion
of capital expenditures incurred to date). In addition, these agreements provide
that Great Lakes has the option at any time prior to 12 months following the
commencement of commercial production at the Grouse Creek project to purchase up
to an additional 10% undivided interest in the project. Under its agreements
with the Company, Great Lakes would pay the Company an amount estimated at
approximately $277,000 for each additional 1% undivided interest in the Grouse
Creek project, and would in addition fund its increased share of all capital
expenditures.

19
<PAGE> 20

Great Lakes funded the purchase of its 20% interest in the Grouse Creek
project from the sale in an underwritten public offering of 17,500,000 Great
Lakes common shares at a price of Canadian $2.00 per common share for gross
proceeds of Canadian $35,000,000. Great Lakes is required to fund its portion of
the capital expenditure requirements for the Grouse Creek project with the net
proceeds of such offering. Pursuant to its agreements with Great Lakes, the
Company purchased 825,000 Great Lakes common shares at the offering price of
Canadian $2.00 per common share, using $1,229,875 of the proceeds received by
the Company for the purchase of Great Lakes' interest in the Grouse Creek
project. In addition, as part of this transaction, Great Lakes issued to the
Company a warrant entitling Hecla to acquire up to 500,000 additional Great
Lakes common shares at Canadian $2.50 per share, subject to certain customary
antidilution adjustments.

The Company sold the interest in the Grouse Creek project to Great Lakes in
order to reduce its capital costs associated with developing and completing the
project while providing the Company with additional capital for other projects.

MOUNTAIN WEST PRODUCTS ACQUISITION

On December 1, 1993, the Company's industrial minerals segment completed
the acquisition of all the outstanding capital stock of Mountain West Products,
a privately held company based in Rexburg, Idaho, which produces decorative
bark, scoria, peat and soil additives sold into the landscape market primarily
in the western United States. Mountain West Products had total assets of
approximately $5 million as of November 30, 1993, just prior to the acquisition
by the Company. Sales totaled approximately $7.6 million for 1992 and $9.3
million for the eleven months ended November 30, 1993. In accordance with the
terms of the acquisition agreement dated October 26, 1993, Hecla issued 655,000
shares of Common Stock to the former shareholders of Mountain West Products in
exchange for their interests. The acquisition was valued at approximately $6.3
million.

GRANDUC MINES

On January 24, 1994, Hecla sold its entire interest in Granduc Mines
Limited, a Vancouver, British Columbia based company, by selling a total of
2,815,300 Granduc Mines Limited shares to two Toronto based companies. As a
result of this transaction, the Company realized net proceeds of approximately
$2.8 million. The Company sold its interest in Granduc Mines Limited because the
transaction provided the Company with additional capital for other projects.

20
<PAGE> 21

USE OF PROCEEDS

The aggregate net proceeds to the Company from the sale of the Shares
offered hereby are estimated to be approximately $55.2 million (or approximately
$63.6 million if the Underwriters' over-allotment option is exercised in full).
The net proceeds from the Offering will be used as follows: (i) approximately
$50,180,000 to redeem on or about June 14, 1994, all $109,950,000 principal
amount of LYONs currently outstanding at a redemption price of $456.39 per
$1,000 principal amount (the LYONs have a yield to maturity of 8% per annum,
based upon their original issue price) and (ii) for other general corporate
purposes, including the additional exploration and development of reserves at
the Rosebud project, Greens Creek mine, and the Gold Hunter property at the
Lucky Friday mine. Pending their use for the purposes set forth above, the
Company will invest the net proceeds or a part thereof in short-term,
interest-bearing instruments or other investment grade securities.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is listed on the New York Stock Exchange and is traded
under the symbol "HL." The following table sets forth for the calendar periods
indicated, the high and low sale prices per share of the Common Stock as
reported on the New York Stock Exchange Composite Tape:

<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW
----------------------------------------------------------------------- ---- ---
<S> <C> <C>
1991
First Quarter........................................................ $ 10 1/4 $ 6 5/8
Second Quarter....................................................... 12 8 5/8
Third Quarter........................................................ 12 5/8 9 1/2
Fourth Quarter....................................................... 12 1/4 9 7/8
1992
First Quarter........................................................ 12 1/4 10
Second Quarter....................................................... 10 7/8 8 7/8
Third Quarter........................................................ 10 5/8 8 3/4
Fourth Quarter....................................................... 9 1/8 7 1/4
1993
First Quarter........................................................ 10 1/2 7 3/8
Second Quarter....................................................... 14 1/2 9 7/8
Third Quarter........................................................ 15 1/4 9 1/8
Fourth Quarter....................................................... 12 1/8 9 5/8
1994
First Quarter........................................................ 15 11 5/8
Second Quarter (through May 4, 1994)................................. 14 3/8 9 3/8
</TABLE>

On May 4, 1994 the last reported sale price of the Common Stock on the New
York Stock Exchange was $10 1/8 per share and the closing price per share of the
Common Stock reported on the New York Stock Exchange Composite Tape was $9 3/8
per share.

The Company last paid cash dividends on its Common Stock of $0.05 per share
in the fourth quarter of 1990. A determination to pay future dividends on the
Common Stock and the amount thereof will be made by the Company's Board of
Directors and will depend on the Company's future earnings, capital
requirements, financial condition and other relevant factors. The Company's
ability to pay dividends is subject to certain restrictions contained in its $30
million long-term revolving credit facility. See "Description of Credit
Facility."

21
<PAGE> 22

CAPITALIZATION

The following table sets forth the actual capitalization of the Company and
its subsidiaries as of December 31, 1993, on a supplemental basis reflecting the
consummation of the Equinox acquisition on December 31, 1993 and as adjusted to
reflect the effect of the sale of the Shares offered hereby (assuming no
exercise of the Underwriters' over-allotment option) and the use of the net
proceeds therefrom (see "Use of Proceeds"). The following information should be
read in conjunction with the Consolidated Financial Statements and Supplemental
Consolidated Financial Statements and related notes contained elsewhere or
incorporated by reference herein. See "Index to Financial Statements."

<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------------------------------
ACTUAL SUPPLEMENTAL(1) AS ADJUSTED(2)
-------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
SHORT-TERM DEBT:.................................... $ -- $ -- $--
-------- --------------- --------------
-------- --------------- --------------
LONG-TERM DEBT:
Liquid Yield Option Notes due 2004(3)............. $ 48,433 $ 48,433 $--
Revolving Credit Facility(4)...................... -- -- --
Other............................................. 1,056(5) 1,576(6) 1,576
-------- --------------- --------------
Total long-term debt...................... 49,489 50,009 1,576
-------- --------------- --------------
SHAREHOLDERS' EQUITY:
Preferred Stock, $0.25 par value, authorized
5,000,000 shares; no shares of Series A
Preferred Shares issued and outstanding, and
2,300,000 shares of Convertible Preferred Stock
($50.00 liquidation preference per share)
issued and outstanding......................... 575 575 575
Common Stock, $0.25 par value, authorized
100,000,000 shares; 34,644,734 shares
outstanding(7)(8).............................. 8,661 10,080 11,705
Capital surplus................................... 238,601 265,687 319,300
Earnings (deficit) retained in the business....... (6,878) (30,774) (30,774)
Net unrealized loss on marketable equity
securities..................................... (8) (8) (8)
Treasury stock reacquired at cost, 62,226
shares......................................... (888) (888) (888)
-------- --------------- --------------
Total shareholders' equity................ 240,063 244,672 299,910
-------- --------------- --------------
Total capitalization...................... $289,552 $ 294,681 $301,486
-------- --------------- --------------
-------- --------------- --------------
</TABLE>

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

(1) Gives effect to the Equinox acquisition on a pooling of interests basis as
of December 31, 1993. See "Condensed Supplemental Consolidated Financial
Information."

(2) Based upon the price to the public of $9 1/8 per Share in the Offering.

(3) Assumes that $48,433,000 of the net proceeds of the Offering is used to
redeem all of the outstanding LYONs, based upon the principal amount
outstanding as of December 31, 1993. At June 14, 1994, $50,180,000 of the
net proceeds will be required to redeem the LYONs at a redemption price of
$456.39 per $1,000 principal amount. See "Description of LYONs."

(4) The Company's revolving credit facility allows the Company to borrow up to
$30,000,000. The Company currently has no amounts outstanding under such
facility. See "Description of Credit Facility."

(5) Other long-term debt includes $962,000 of non-interest bearing notes,
representing the present value of payments owed to certain former
shareholders of CoCa Mines, Inc. in connection with the development of the
Grouse Creek project. The face amount of the obligation is approximately
$1.0 million, which is payable in three equal annual installments beginning
on the date the Grouse Creek project commences commercial production.

(6) Includes present value of Hecla Production Notes in the amount of $520,000;
the Hecla Production Notes have an aggregate redemption price of Canadian
$2,075,655. The Hecla Production Notes are payable from the net cash flows
of the American Girl gold mine/Oro Cruz gold project.

(7) For purposes of the Supplemental calculations, 40,320,761 shares of Common
Stock are considered outstanding and, for purposes of the "As Adjusted"
calculations, 46,820,761 shares of Common Stock are considered outstanding,
excluding in each case the issuance of 251,400 shares issued pursuant to the
exercise of Equinox options subsequent to December 31, 1993.

(8) Excludes as of December 31, 1993 (i) 553,960 shares of Common Stock issuable
upon exercise of outstanding Hecla and Equinox stock options (at an average
exercise price of $7.51 per share); (ii) 887,423 shares of Common Stock
issuable upon exercise of outstanding Hecla and Equinox warrants (at an
average exercise price of $13.40 per share), including 427,990 shares of
Common Stock issuable upon exercise of outstanding warrants with exercise
prices less than the current market price (see "Description of Capital
Stock -- Warrants to Purchase Common Stock"); and (iii) 7,395,498 shares of
Common Stock issuable upon conversion of the Company's Series B Cumulative
Convertible Preferred Stock (at a conversion price of $15.55 per share).

22
<PAGE> 23

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data shown below as of and for the end
of each of the years in the five-year period ended December 31, 1993 have been
derived from, and should be read in conjunction with, the Company's consolidated
financial statements which have been audited by Coopers & Lybrand. See "Index to
Financial Statements." This data does not reflect the acquisition and
consolidation of Equinox, which was completed on March 11, 1994, and will be
accounted for as a pooling of interests. See "Recent Developments -- Equinox
Acquisition" and "Supplemental Consolidated Financial Statements." For
historical financial information with respect to Equinox, reference is made to
Equinox's historical financial statements incorporated herein by reference. See
"Information Incorporated by Reference."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of products........................... $118,931 $152,106 $117,568 $100,651 $ 81,847
Cost of sales and other direct production
costs..................................... 85,780 106,349 84,853 83,288 71,109
Depreciation, depletion and amortization.... 22,046 24,900 21,161 13,493 10,292
-------- -------- -------- -------- --------
Gross profit................................ 11,105 20,857 11,554 3,870 446
-------- -------- -------- -------- --------
Other operating expenses:
General and administrative................ 9,252 10,113 14,054 8,520 6,961
Exploration............................... 10,297 8,430 5,693 7,659 4,353
Research.................................. 444 -- 1,538 1,317 --
Depreciation and amortization............. 536 602 692 819 669
Provision for closed operations and
environmental matters(1)............... 706 2,970 3,638 12,670 2,307
Reduction in carrying value of mining
properties(2).......................... 3,308 -- -- 27,928 200
-------- -------- -------- -------- --------
Total other operating expenses.............. 24,543 22,115 25,615 58,913 14,490
-------- -------- -------- -------- --------
Loss from operations........................ (13,438) (1,258) (14,061) (55,043) (14,044)
-------- -------- -------- -------- --------
Other income (expense):
Interest and other income................. 3,285 10,563 2,219 12,428 2,965
Other gain (loss) on investments(3)....... (8,808) 78 212 (2,176) (147)
Minority interest in net loss of
consolidated subsidiary................ -- 70 484 95 43
Interest expense:
Total interest cost.................... (5,637) (6,073) (6,985) (6,905) (5,023)
Less amount capitalized................ 1,040 591 145 2,070 3,533
-------- -------- -------- -------- --------
Total other income (expense)................ (10,120) 5,229 (3,925) 5,512 1,371
-------- -------- -------- -------- --------
Income (loss) before taxes and cumulative
effect of changes in accounting
principles................................ (23,558) 3,971 (17,986) (49,531) (12,673)
Income tax benefit.......................... (3,109) (2,740) (2,556) (345) (938)
Cumulative effect of changes in accounting
principles(4)............................. -- -- -- (103) --
-------- -------- -------- -------- --------
Net income (loss)........................... (20,449) 6,711 (15,430) (49,289) (11,735)
Preferred stock dividends................... -- -- -- -- (4,070)
-------- -------- -------- -------- --------
Net income (loss) applicable to common
shareholders.............................. $(20,449) $ 6,711 $(15,430) $(49,289) $(15,805)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income (loss) per common share.......... $ (0.68) $ 0.22 $ (0.51) $ (1.60) $ (0.48)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average number of common shares
outstanding............................... 30,049 30,053 30,094 30,866 32,915
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

23
<PAGE> 24

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 34,834 $ 37,639 $ 34,317 $ 20,270 $ 77,621
Total assets................................ 261,624 270,085 258,121 222,443 332,878
Long-term debt obligations.................. 67,009 71,062 76,866 70,382 49,489
Shareholders' equity........................ 157,536 163,654 149,717 113,719 240,063
</TABLE>

NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA

(3) During 1989, the Company sold 952,900 shares of Sunshine common stock for
$3.6 million, realizing a loss of $4.8 million. In connection with the
Company's decision to liquidate its holdings in Sunshine common stock, the
Company transferred the remaining investment to a current asset
classification and recognized an additional loss of $4.2 million for the
difference between the market value of the securities and the remaining book
value on the Company's balance sheet. During 1992, the Company wrote down
its common stock investment in Granduc Mines Limited to current estimated
market value. The resulting $2.1 million write-down was recorded to reflect
the decline in market value of the common stock investment due to continued
depressed metals prices. In January 1994, the Company sold its entire
interest in Granduc Mines Limited for net proceeds of approximately $2.8
million. See "Recent Developments -- Granduc Mines."

(4) Effective January 1, 1992, the Company prospectively adopted the provisions
of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("SFAS No. 106")
and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS No. 109"). The cumulative effect of adopting SFAS No.
106 was to increase the 1992 net loss by approximately $1.6 million. The
cumulative effect of adopting SFAS No. 109 was to decrease the 1992 net loss
by approximately $1.5 million.

24
<PAGE> 25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The Company is primarily involved in the exploration, development, mining
and processing of gold, silver, lead, zinc and industrial minerals. As such, the
Company's revenues and profitability are strongly influenced by world prices of
gold, silver, lead and zinc, which fluctuate widely and are affected by numerous
factors beyond the Company's control, including inflation and worldwide forces
of supply and demand. The aggregate effect of these factors is not possible to
accurately predict. In the instances following the Company's description of
changes that are attributable to more than one factor, the Company presents each
attribute describing the change in descending order relative to the attribute's
importance to the overall change.

The Company recorded net losses applicable to common shareholders for each
of the past three years ended December 31, 1993, primarily as a result of: (i) a
reduction in carrying values of certain mining properties, losses on investments
and provisions for closed operations and environmental matters totaling $2.7
million in 1993, $42.7 million in 1992 and $3.6 million in 1991; (ii) decreased
gold production due to the depletion of oxide ore reserves at the Cactus and
Yellow Pine mines and the decline in ore grade at the Republic mine; and (iii)
depressed gold, silver, lead and zinc prices. If the current market prices of
gold, silver and lead do not increase and as a result of the Company's preferred
dividend payment requirements, the Company expects to continue to experience net
losses applicable to common shareholders, even with the planned gold production
from the commencement of commercial production at the Grouse Creek project in
late 1994. However, the Company's operating cash flows are expected to increase
subsequent to the commencement of commercial production at this project even if
metals prices remain at current levels. See "Investment
Considerations -- Project Development." At present metal prices for 1994, the
Company is anticipating a net loss applicable to common shareholders in the
range of $2.9 million to $3.8 million after the expected dividends to preferred
shareholders totaling approximately $8.0 million for the year ending December
31, 1994. Due to the volatility of metals prices and the significant impact
metals price changes have on the Company's operations, there can be no assurance
that the actual results of operations for the year ending December 31, 1994 will
be within the anticipated range of projected net loss.

The volatility of metals prices requires that the Company, in assessing the
impact of prices on recoverability of its assets, exercise judgment as to
whether price changes are temporary or are likely to persist. The Company
performs a comprehensive evaluation of the recoverability of its assets on a
periodic basis. The evaluation includes a review of future cash flows against
the carrying value of the asset. Moreover, a review is made on a quarterly basis
to assess the impact of significant changes in market conditions and other
factors. Asset write downs may occur if the Company determines that the carrying
values attributed to individual assets are not recoverable given reasonable
expectations for future market conditions, although no such writedowns are
currently contemplated except as described below under "-- Financial Condition
and Liquidity."

In 1994, the Company expects to produce approximately 117,000 ounces of
gold, including 50,000 ounces from the La Choya mine, 38,000 ounces of gold from
the Republic mine, 24,000 ounces from the American Girl mine and an additional
5,000 ounces of gold from other sources. Assuming the timely commencement of
production at the Grouse Creek project in the fourth quarter of 1994, the
Company's planned 1994 total gold production could increase by up to 53,000
ounces to 170,000 ounces, based upon its 80% interest in the project. The
Company's expected gold production increase in 1994 assumes a full year of
production at the La Choya project and the start-up of production at the Grouse
Creek project in the fourth quarter of 1994, which offsets the decrease in gold
production at the Republic mine. The Company's actual level of gold production
for 1994 will depend, in significant part, upon the timely commencement of
production at the Grouse Creek property. See "Business -- Development Projects."

The Company's share of silver production for 1994 is expected to be 2.7
million ounces compared to actual 1993 silver production of 3.0 million ounces.
The expected decrease in silver production is primarily due to the suspension of
operations at the Greens Creek mine in April 1993.

25
<PAGE> 26

In 1993, the Company shipped 888,000 tons of industrial minerals, including
ball clay, kaolin, feldspar and specialty aggregates. The Company's production
of industrial minerals is expected to increase in 1994 to 945,000 tons,
principally due to increased shipments of ball clay and kaolin. Additionally,
the Company expects to ship 591,000 cubic yards of landscape material from its
newly acquired subsidiary, Mountain West Products.

In March 1994, the Company completed its acquisition of Equinox, which was
treated as a pooling of interests for financial reporting and accounting
purposes. See "Recent Developments -- Equinox Acquisition." In 1993, Equinox's
operating loss was $6.2 million, compared to an operating loss of $5.9 million
in 1992 (in each case after adjustment for U.S. dollar conversion and
presentation in accordance with U.S. generally accepted accounting principles
and the Company's accounting policies). The increase in Equinox's operating loss
in 1993 was due to several factors, primarily an increase in the gross loss as a
result of a full year of operations at the American Girl mine, the interest in
which was acquired by Equinox in December 1992. The Company believes that, as a
result of the approximately $2.4 million write-down recognized as of December
31, 1993, the American Girl mine will operate at a break-even level at current
metals prices. In addition, the Company believes that development of the Rosebud
project offers the Company the opportunity to have a profitable operation at
current metals prices.

This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the historical
Consolidated Financial Statements of the Company appearing elsewhere herein and
the historical Consolidated Financial Statements of Equinox incorporated by
reference herein. See "Index to Financial Statements," "Available Information"
and "Information Incorporated by Reference."

RESULTS OF OPERATIONS

1993 VS. 1992

A net loss of approximately $11.7 million, or $0.36 per common share, was
incurred in 1993 compared to a net loss of $49.3 million, or $1.60 per common
share, in 1992. After $4.1 million in dividends to preferred shareholders of the
Company's Series B Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock"), the Company's net loss applicable to common shareholders for
1993 was $15.8 million, or $0.48 per common share. The 1993 loss was due to a
variety of factors, the most significant of which are discussed below.

Sales of products decreased by $18.8 million, or 19%, in 1993 as compared
to 1992, principally the result of (i) decreased gold production, the impact of
which totals approximately $10.9 million, due to the winding down of operations
at the Cactus mine, lower-grade ore being mined and processed at the Republic
mine, and the completion of operations at the Yellow Pine mine during the third
quarter of 1992; (ii) decreased silver, lead, and zinc production, the impact of
which totals approximately $9.4 million, due to suspension of operations at the
Greens Creek mine in April 1993, and the sale of the Company's 25% interest in
the Galena mine in May 1992; (iii) decreases in the average prices of lead and
zinc in 1993 compared to 1992, the impact of which totals approximately $1.7
million; (iv) decreased production of lead at the Lucky Friday mine resulting
from lower lead contained in the ore processed, the impact of which totals
approximately $0.8 million; and (v) decreased sales of ball clay from
Kentucky-Tennessee Clay Company; all of which were partially offset by (a)
increased revenue from the Company's Apex facility totaling $1.8 million; (b)
increased sales of feldspar totaling 1.3 million from K-T Feldspar Corporation,
clay slurry products from the recently completed slurry plant in Monterrey,
Mexico, landscape products from the newly acquired Mountain West Products, and
aggregate products from Colorado Aggregate Company; and (c) increases in the
average prices of gold and silver in 1993 compared to 1992.

Cost of sales and other direct production costs decreased by $12.2 million,
or 15%, in 1993 as compared to 1992, primarily a result of (i) decreased
operating costs totaling approximately $9.0 million at the Greens Creek mine due
to suspension of operations in April 1993; (ii) decreased operating costs
totaling approximately $6.0 million at the Cactus mine due to the completion of
mining operations in February 1992; (iii) decreased operating costs totaling
approximately $1.6 million resulting from the sale of the Company's

26
<PAGE> 27

25% interest in the Galena mine in May 1992; (iv) decreased operating costs
totaling approximately $1.2 million at the Yellow Pine mine resulting from the
completion of operations during the third quarter of 1992; and (v) decreased
production costs totaling approximately $0.4 million at the Republic mine; all
of which were partially offset by (a) increased operating costs during 1993
totaling approximately $0.3 million at the Apex facility, K-T Feldspar
Corporation, Kentucky-Tennessee Clay Company's ball clay division, and Colorado
Aggregate Company; and (b) operating costs in 1993 totaling approximately $4.5
million associated with the newly acquired Mountain West Products.

Cost of sales and other direct production costs as a percentage of sales
from products increased from 83% in 1992 to 87% in 1993, primarily due to (i)
decreases in the gold grade at the Republic mine which decreased to .48 ounces
per ton of ore mined in 1993 from .60 ounces per ton of ore mined in 1992; (ii)
declining lead and zinc prices which averaged $0.18 and $0.44 in 1993 compared
to $0.25 and $.56 in 1992, respectively; and (iii) the care and maintenance
costs associated with the Greens Creek mine which were recognized in 1993 due to
the suspension of operations in April 1993. Management does not believe that the
Company's cost of sales and other direct production costs are materially
different from industry norms.

Cash and full production cost per gold ounce increased from $188 and $258
in 1992 to $212 and $268 in 1993, respectively. The increases are due
principally to lower grade ore being processed at the Republic mine resulting in
fewer gold ounces produced. The increase in full cost per gold ounce was
partially offset by decreasing depreciation charges due to the completion of
mining operations at the Cactus mine where depreciable assets were being
depreciated primarily on a unit-of-production basis.

Cash and full production cost per silver ounce increased from $4.51 and
$5.89 in 1992 to $5.45 and $6.85 in 1993, respectively, due primarily to lower
average prices in 1993 for lead and zinc. Lead and zinc are by-products, the
revenues from which are netted against production costs in the calculation of
production cost per ounce. Management does not believe that the Company's cost
of sales and other direct production costs are materially different from
industry norms.

Depreciation, depletion and amortization expense decreased by approximately
$3.2 million, or 24%, in 1993 as compared to 1992, primarily as a result of (i)
the suspension of operations at the Greens Creek mine in April 1993, as well as
the completion of mining operations at the Cactus mine in February 1992 and the
Yellow Pine mine during the third quarter of 1992, where depreciable assets were
depreciated primarily on a unit-of-production basis; and (ii) significant assets
at Kentucky-Tennessee Clay Company's ball clay division reaching the end of
their depreciable lives. Both were partially offset by increased depreciation
expense due to increased ore tons mined during 1993 at the Lucky Friday and
Republic mines where significant depreciable assets are depreciated on a
unit-of-production basis.

Other operating expenses decreased by $44.4 million, or 75%, in 1993 as
compared to 1992, primarily the result of (i) the 1992 reduction in carrying
value of mining properties totaling $27.9 million, nonrecurring in 1993,
including (a) a $13.5 million write-down to reflect the estimated net realizable
value of the Company's interest in the Apex facility; (b) a $9.0 million
write-down of the Consolidated Silver property in northern Idaho and the Hog
Heaven property in northwest Montana due to depressed silver prices; (c) a $3.5
million write-down to reflect the estimated net realizable value in the
Company's interest in the Lisbon Valley project in Utah; and (d) a $1.9 million
write-down of the Creede and Hardscrabble gold and silver properties located in
Colorado due to depressed previous metals prices; (ii) the 1992 provision for
closed operations and environmental matters totaling $12.7 million, nonrecurring
in 1993, which consisted principally of an $8.5 million increase in the
allowance for the Bunker Hill Superfund Site remediation costs and additional
idle property reclamation and closure costs accruals of $3.3 million as further
described in Note 8 of Notes to Consolidated Financial Statements; (iii)
decreased domestic exploration expenditures mainly at the Republic mine in 1993;
(iv) foreign exploration expenditures in Chile during 1992, nonrecurring in
1993; (v) reduced general and administrative costs in 1993 principally due to
staff reductions and other cost-cutting measures at corporate headquarters; and
(vi) research expenditures incurred at the Apex facility during 1992,
nonrecurring in 1993.

Other income (expense) netted to income of approximately $1.4 million in
1993 compared to income of $5.5 million in 1992. The decrease is primarily due
to (i) the sale of surface and timber rights on various

27
<PAGE> 28

nonoperating Company-owned properties in 1992 resulting in a gain of
approximately $9.0 million, nonrecurring in 1993; and (ii) the sale of the
Company's 25% interest in the Galena mine and adjacent properties in May 1992
resulting in a gain of approximately $1.2 million, nonrecurring in 1993. Both of
these items were partially offset by (a) decreased interest expense in 1993
resulting from (I) the April 29, 1993 issuance of 2.2 million shares of Common
Stock for 60,400 of its outstanding LYONs as described in Note 7 of Notes to
Consolidated Financial Statements, and (II) increased capitalized interest
related to the Grouse Creek and La Choya projects; and (b) the $2.1 million
write-down in 1992 of the Company's common stock investment in Granduc Mines
Limited to reflect the apparent other-than-temporary decline in market value of
the investment, nonrecurring in 1993; and (c) increased interest income earned
in 1993 on the investment of the proceeds from the Company's public offering of
2.3 million shares of Series B Preferred Stock as described in Note 10 of Notes
to Consolidated Financial Statements.

Income taxes reflect a benefit of $0.9 million in 1993 compared to a $0.3
million benefit in 1992. The benefit in both periods reflects the carryback of
1993 and 1992 net operating losses to reduce income taxes previously provided.

1992 VS. 1991

The net loss for 1992 was $49.3 million, or $1.60 per common share,
compared to net loss of $15.4 million, or $0.51 per common share, for 1991.

Sales of products decreased by $16.9 million, or 14%, from 1991 to 1992,
principally as a result of (i) decreased gold production at the Republic and
Cactus mines due to lower-grade ore mined and processed, and the completion of
operations at the Yellow Pine mine in August 1992; (ii) decreases in the average
prices of gold, silver and lead in 1992 compared to 1991; (iii) decreased silver
production resulting from the 1992 sale of the Company's 25% interest in the
Galena mine; and (iv) decreased silver, zinc, lead and gold production at the
Greens Creek mine due to lower-grade ore mined and processed; all of which were
partially offset by (a) increased silver, lead and zinc production at the Lucky
Friday mine; (b) increased sales of specialty aggregates from Colorado Aggregate
Company during 1992; (c) increases in the average price of zinc; (d) increased
sales of feldspar from K-T Feldspar Corporation during 1992; and (e) increased
sales from the kaolin division of the Kentucky-Tennessee Clay Company during
1992.

Cost of sales and other direct production costs decreased $1.6 million, or
2%, from 1991 to 1992 primarily due to (i) decreased operating costs resulting
from the completion of operations at the Yellow Pine mine in August 1992; (ii)
decreased operating costs at the Cactus mine due to the completion of mining
operations in February 1992; (iii) decreased operating costs incurred resulting
from the sale of the Company's 25% interest in the Galena mine; and (iv)
decreased operating costs at the Republic and Lucky Friday mines; all of which
were partially offset by (a) increased operating costs at the Greens Creek mine;
and (b) increased operating costs at Colorado Aggregate Company,
Kentucky-Tennessee Clay Company and K-T Feldspar Corporation.

Costs of sales and other direct production costs as a percentage of sales
from products increased to 83% in 1992 from 72% in 1991, primarily as a result
of declining gold and silver prices which averaged $343.73 and $3.94 in 1992
compared to $362.18 and $4.04 in 1991, respectively.

Cash and full production cost per gold ounce decreased from $191 and $279
in 1991 to $188 and $258 in 1992, respectively. The decrease in the full
production cost per gold ounce is due principally to decreasing depreciation
charges resulting from the completion of mining operations at the Cactus mine
where depreciable assets were being depreciated primarily on a
unit-of-production basis, partially offset by lower grade ore being processed at
the Republic mine resulting in fewer gold ounces produced.

Cash and full production cost per silver ounce increased from $4.50 and
$5.67 in 1991 to $4.51 and $5.89 in 1992, respectively. The full production cost
per silver ounce increase was due primarily to higher production costs and fewer
silver ounces produced at the Greens Creek mine in 1992 as compared to 1991 as
well as a lower average price in 1992 for lead. These were offset somewhat by a
higher average price for zinc. Lead and zinc are by-products, the revenues from
which are netted against production costs in the calculation of production cost
per ounce.

28
<PAGE> 29

Depreciation, depletion and amortization decreased by approximately $7.7
million, or 36%, primarily as a result of the completion of mining operations at
the Cactus mine in February 1992 where depreciation was based on ore tons mined;
and to a lesser extent (i) the completion of operations at the Yellow Pine mine
in August 1992; and (ii) the sale of the Company's 25% interest in the Galena
mine; all of which were partially offset by increased ore tons mined at the
Lucky Friday mine where significant depreciable assets are being depreciated
based on ore tons mined.

Other operating expenses increased by $33.3 million, or 130%, due
principally to (i) the reduction in carrying value of mining properties totaling
$27.9 million including (a) $13.5 million write-down to reflect the estimated
net realizable value of the Company's interest in the Apex facility, a
hydrometallurgical processing plant near St. George, Utah; (b) $9.0 million
write-down of the Consolidated Silver property in northern Idaho and the Hog
Heaven property in northwest Montana due to depressed silver prices; (c) $3.5
million write-down to reflect the estimated net realizable value of the
Company's interest in the Lisbon Valley project in Utah, a joint venture project
fully developed for uranium and vanadium production; and (d) $1.9 million
write-down of the Creede and Hardscrabble gold and silver properties located in
Colorado due to continued depressed precious metals prices; (ii) the provision
for closed operations and environmental matters totaling $12.7 million which
consisted principally of an $8.5 million 1992 increase in the allowance for the
Bunker Hill Superfund Site remediation costs and additional idle property
reclamation and closure costs accrual of $3.3 million as further described in
Note 8 of Notes to Consolidated Financial Statements; and (iii) increased
exploration expenditures at the Republic and Lucky Friday mines during 1992; all
of which were partially offset by decreased general and administrative costs
principally due to (a) 1991 expenses incurred in connection with the June 26,
1991, merger of CoCa Mines, Inc. ("CoCa Mines"), nonrecurring in 1992; (b)
decreased other general and administrative costs resulting from closing the CoCa
Mines office; and (c) other general and administrative cost reduction efforts.

Other income (expense) changed from expense of $3.9 million in 1991 to
income of $5.5 million in 1992, primarily as a result of (i) the sale of surface
and timber rights on various nonoperating Company-owned properties in 1992
resulting in a gain of approximately $9.0 million; (ii) the 1992 sale of the
Company's 25% interest in the Galena mine and adjacent properties located in
northern Idaho, resulting in a gain of approximately $1.2 million; (iii) the
exchange of 1,120,125 shares of the Common Stock for 30,900 of the Company's
outstanding LYONs resulting in a gain of approximately $0.5 million and a
reduction of interest expense in 1992; and (iv) increased capitalized interest
relating to the Grouse Creek and La Choya projects in 1992; all of which were
partially offset by the $2.1 million write-down of the Company's common stock
investment in Granduc Mines Limited to reflect the apparent other-than-temporary
decline in the market value of the investment.

Income taxes reflect a benefit of $0.3 million in 1992 compared to a $2.6
million benefit in 1991. The benefit in both periods reflects the carryback of
1992 and 1991 net operating losses to reduce income taxes previously provided.

In 1992, the Company changed its method of accounting for income taxes and
postretirement benefits other than pensions. The adoption of SFAS No. 109,
"Accounting for Income Taxes", resulted in a $1.5 million benefit as of January
1, 1992. The effect of adopting SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," resulted in an additional expense
of $1.6 million as of January 1, 1992. The net cumulative effect of both of
these accounting changes was to increase the 1992 loss by $0.1 million.

FINANCIAL CONDITION AND LIQUIDITY

A substantial portion of the Company's revenue is derived from the sale of
products, the prices of which are affected by numerous factors beyond the
Company's control. Prices may change dramatically in short periods of time and
such prices have a significant effect on revenues, profits and liquidity of the
Company. The Company is subject to many of the same inflationary pressures as
the U.S. economy in general. To date, the Company has been successful in
implementing cost-cutting measures which have reduced per unit production costs.
Management believes, however, that the Company may not be able to continue to
offset the impact of

29
<PAGE> 30

inflation over the long-term through cost reductions alone. However, the market
prices for products produced by the Company have a much greater impact than
inflation on the Company's revenues and profitability. Moreover, the discovery,
development and acquisition of mineral properties are in many instances
unpredictable events. Future metals prices, the success of exploration programs,
changes in legal and regulatory requirements and other property transactions can
have a significant impact on the need for capital. See "Investment
Considerations."

At December 31, 1993, assets totaled approximately $332.9 million and
shareholders' equity totaled approximately $240.1 million. Cash and cash
equivalents and short-term investments increased by $62.1 million to $65.4
million at December 31, 1993 from $3.3 million at the end of 1992. In 1993, the
major sources of cash were the $110.3 million net proceeds received from the
June 29, 1993, issuance of 2.3 million shares of Series B Preferred Stock as
described further in Note 10 of Notes to Consolidated Financial Statements and
approximately $8.6 million net cash from operating activities. The major uses of
cash were for (i) the development costs incurred in connection with the Grouse
Creek and La Choya projects (approximately $27.9 million and $12.2 million,
respectively); (ii) expenditures at the clay slurry facility in Mexico
(approximately $4.4 million); and (iii) preferred dividend payments ($4.1
million).

The Company estimates that capital expenditures to be incurred in 1994 will
be approximately $62.2 million, after giving effect to the sale of 20% of the
Company's interest in the Grouse Creek project, which was completed in February
1994. These expenditures are expected to consist primarily of (i) the Company's
share of further development expenditures at the Grouse Creek project totaling
approximately $50.0 million; (ii) the Company's share of further development
expenditures at the Greens Creek mine totaling approximately $3.4 million; and
(iii) development expenditures at the Rosebud and Oro Cruz projects totaling
approximately $3.7 million and $1.3 million, respectively. The Company intends
to finance these capital expenditures through a combination of: (i) existing
cash, cash equivalents and short-term investments; (ii) the proceeds from the
sale of a minority joint venture interest in the Grouse Creek project (see
"Recent Developments -- Sale of Grouse Creek Joint Venture Interest"); (iii)
cash flow from operating activities; and (iv) the net proceeds of the Offering
following redemption of the LYONs (see "Use of Proceeds"). In addition, the
Company may borrow additional funds under its revolving credit facility which,
subject to certain conditions, provides for borrowings up to a maximum of $30.0
million. See "Description of Credit Facility." The Company's estimates of its
capital expenditures assume with respect to the Grouse Creek, Greens Creek and
Oro Cruz properties, that the Company's joint venture partners do not default
with respect to their obligations to contribute their respective portions of
development costs and capital expenditures. See "Investment
Considerations -- Joint Venture Arrangements."

The Company's planned environmental and reclamation expenditures for 1994
are expected to be approximately $7.4 million, principally for environmental and
reclamation activities at the Bunker Hill and California Gulch Superfund Sites,
at the Yellow Pine, Escalante and Durita properties and at certain sites
acquired in the Equinox acquisition.

Exploration expenditures for 1994 are estimated to be approximately $6.2
million. The Company's exploration strategy is to focus further exploration at
or in the vicinity of its currently owned properties. Accordingly, 1994
exploration expenditures will be incurred principally at the Republic, Grouse
Creek and La Choya properties. As described under "Business -- Metals
Segment -- Producing Properties -- Republic," if no additional gold reserves are
developed at the Republic mine, certain write-downs may be required.

The Company has a secured reducing credit facility that provides for credit
advances of up to $30.0 million. The availability of advances under this
facility reduce beginning December 31, 1995 and is subject to certain other
limitations, with the balance due at maturity on December 31, 1996. Borrowings
under the facility are secured by the Company's accounts receivable,
inventories, specified marketable securities and certain cash equivalents. See
"Description of Credit Facility" for a description of the revolving credit
facility, including the covenants therein and limitations on the payments of
dividends. As of December 31, 1993, the Company had no outstanding borrowings
under the revolving credit facility.

The Company currently has outstanding $109,950,000 aggregate principal
amount of LYONs which are currently convertible into 20.824 shares of the Common
Stock per $1,000 principal amount of LYONs. See

30
<PAGE> 31

"Description of LYONs." Pursuant to the terms of the indenture governing the
LYONs, on June 14, 1994, holders of LYONs may, pursuant to the Put Feature,
require the Company to purchase LYONs held by them at a purchase price of
$456.39 per $1,000 principal amount of LYONs. The purchase price may be paid, at
the option of the Company, in cash, in shares of Common Stock (valued at the
market price of the Common Stock) or in the Company's Subordinated Extension
Notes due 2004; but because of the Company's need to utilize cash for planned
capital expenditures, it is probable that, absent consummation of the Offering,
it will pay for any LYONs delivered to it pursuant to the Put Feature by issuing
common stock. The Company is unable to predict how many LYONs it may be required
to purchase pursuant to the Put Feature, and the Company cannot predict what
effect the Put Feature will have on the market price of the Common Stock.

The Company is currently considering several alternatives with respect to
the Put Feature. Among the alternatives being examined by the Company is the
Offering with a portion of the proceeds being used to pay cash to redeem the
LYONs (and any remaining proceeds would be used for Company capital
expenditures). Alternatively, the Company is also considering amending certain
terms of the LYONs in order to make it less likely that the Put Feature will be
exercised on June 14, 1994, including changing the conversion ratio to increase
the number of shares of Common Stock that would be issuable for each LYON. If
either of these alternatives is pursued, then additional shares of Common Stock
could be issued, although the Company's intent with respect to these
alternatives is to issue less shares of Common Stock (other than any securities
sold to raise additional funds for capital expenditures) than would be the case
if the Company was required to repurchase all of the outstanding LYONs pursuant
to the Put Feature on June 14, 1994. If the Company takes no action with respect
to the Put Feature and is required to purchase all of the outstanding LYONs on
June 14, 1994, based upon the price to the public of the Shares in the Offering
($9 1/8 per share), the Company would have to issue approximately 5.5 million
shares of Common Stock. There can be no assurance that the Company will
determine to pursue, or be successful in pursuing, any alternative (including
and in addition to the alternatives discussed above) to reduce the likelihood
that the Put Feature will result in the issuance of a significant amount of
Common Stock.

In December 1993, the Company acquired all of the issued and outstanding
common stock of Mountain West Products through the issuance of 655,000 shares of
Common Stock. Mountain West Products is engaged primarily in the acquisition,
mining and processing of decorative bark, scoria and specialty aggregates. The
transaction has been accounted for as a purchase. See "Recent
Developments -- Mountain West Products Acquisition" and Note 2 of Notes to
Consolidated Financial Statements for additional information.

In March 1994, the Company completed its acquisition of Equinox by issuing
approximately 5.9 million shares of Common Stock, in addition to 380,406 shares
currently issuable upon the exercise of Equinox Warrants and Equinox options.
The Company also issued 1,383,770 Hecla Production Notes with a maximum
redemption price of Canadian $1.50 per note. The transaction was treated as a
pooling of interests for financial reporting and accounting purposes.

As further described in Note 8 of Notes to Consolidated Financial
Statements, the Company has been notified by the EPA that it has been designated
by the EPA as a potentially responsible party with respect to several Superfund
sites. At December 31, 1993, the Company's allowance for Superfund site remedial
action costs was approximately $10.7 million, which the Company believes is
adequate based on current estimates of aggregate costs.

In addition, as described in Note 8 of Notes to Consolidated Financial
Statements, the Company is a defendant in two other significant actions. The
first action was filed on November 1990 by Star Phoenix Mining Company ("Star
Phoenix") and certain principals of Star Phoenix asserting that the Company
breached the terms of Star Phoenix's lease agreement for the Company's
Star-Morning mine and that the Company interfered with certain contractual
relationships of Star Phoenix relating to the Company's 1990 termination of such
lease agreement. The plaintiffs in the Star Phoenix litigation have asserted
that they have incurred damages amounting to approximately $20 million as a
result of the Company's actions. The jury trial in the litigation commenced in
May 1994. Although the verdict in the litigation is subject to the inherent
uncertainties of a jury decision, it is the Company's belief that it has
sufficient defenses to the plaintiffs' claims and that the Company will
ultimately prevail in the litigation. The second action was filed by Industrial

31
<PAGE> 32

Constructors Corp. ("ICC") in December 1993 alleging that the Company failed to
comply with the terms of a contract between the Company and ICC related to the
Company's Grouse Creek gold project. ICC is claiming damages in excess of $5
million including a $1 million retention held by the Company under the contract.
The Company has answered the complaint denying ICC's allegations and has filed a
counterclaim against ICC asserting damages in excess of $2 million.

Although the ultimate disposition of these matters and various other
pending legal actions and claims is not presently determinable, it is the
opinion of the Company's management, based upon the information available at
this time, that the outcome of these suits and proceedings will not have a
material adverse effect on the results of operations and financial condition of
the Company and its subsidiaries.

OTHER

In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS No. 112"). This statement requires companies to
recognize the obligation to provide postemployment benefits if the obligation is
attributable to employees' services already rendered, employees' rights to those
benefits have accumulated or vested, payment of the benefits is probable and the
amount of the benefits can be reasonably estimated. The statement requires the
Company to make the necessary changes in accounting for these postemployment
benefits effective January 1, 1994. It is the opinion of the Company's
management that the adoption of SFAS No. 112 will not have a material effect on
the results of operations or financial condition of the Company and its
subsidiaries.

32
<PAGE> 33

BUSINESS

The Company, originally incorporated in 1891, is principally engaged in the
exploration, development and mining of precious and non-ferrous metals,
including gold, silver, lead and zinc, and certain industrial minerals. The
Company owns or has interests in a number of precious and non-ferrous metal
properties and five industrial minerals businesses. In 1993, the Company's
attributable gold and silver production was approximately 61,000 ounces and 3.0
million ounces, respectively. The Company also shipped approximately 888,000
tons of industrial minerals products in 1993, including ball clay, kaolin,
feldspar and specialty aggregates. At December 31, 1993, the Company had
approximately 1.9 million and 53.4 million ounces of proven and probable gold
and silver reserves, respectively (including approximately 654,000 and 3.6
million ounces, respectively, as a result of the Company's acquisition of
Equinox).

As part of the Company's strategy to acquire and develop precious metals
properties, primarily in North America, the Company acquired on March 11, 1994,
Equinox, a gold exploration and development company headquartered in Vancouver,
British Columbia. The Company's principal reason for the acquisition of Equinox
was the opportunity to acquire the Rosebud gold project, located in Pershing
County, Nevada, in which Equinox had a 100% interest, and the American Girl gold
mine, in which Equinox had a 47% interest and which is operated by a joint
venture partner. The Company believes that the Rosebud gold project, which had
proven and probable gold reserves of 512,000 contained ounces as of December 31,
1993, has significant exploration and development potential. Equinox's share of
gold production at the American Girl mine in 1993 was approximately 35,000
ounces.

The Company expects its gold production to increase from approximately
61,000 ounces in 1993 to approximately 117,000 ounces in 1994, with
approximately 43% of the 1994 gold production to come from the La Choya gold
mine. Assuming the timely commencement of production at the Grouse Creek gold
project in the fourth quarter of 1994, the Company's total 1994 gold production
could increase by up to 53,000 ounces (representing its 80% share of the
project) to a total of approximately 170,000 ounces. In addition, the Company
intends to develop the Rosebud gold project upon satisfactory completion of a
feasibility study which is currently expected to be finalized by late 1995.
Development of Rosebud could begin shortly thereafter with production commencing
in late 1996 at the earliest. The feasibility study will assess the potential to
produce approximately 70,000 to 80,000 ounces of gold annually. See
"Business -- Development Projects." As a result of the development of the Grouse
Creek project and the Equinox acquisition, the Company believes that its 1995
attributable gold production will exceed 200,000 ounces.

Although depressed silver prices have impacted the Company's silver
production in recent years, the Company believes that it is well positioned to
respond to an increase in silver prices, by expanding production at its Lucky
Friday mine by developing the Gold Hunter project and through the recommencement
of operations at the Greens Creek mine. In 1993, drilling in the southwest area
of the Greens Creek property encountered a significant additional mineralized
zone containing higher than mine average gold and silver content. Although there
can be no assurance that this additional material can be economically mined,
drilling is continuing to define the nature and extent of the resource. A
feasibility study currently is being undertaken in order to determine the
advisability of placing the mine back into operation. If the decision is made to
reopen the Greens Creek mine, production is expected to commence by 1997, and
when combined with the potential for estimated increased silver production at
the Lucky Friday mine, the Grouse Creek project and the Rosebud project, the
Company's attributable share of annual silver production could exceed 8.0
million ounces in 1997, compared to approximately 3.0 million ounces in 1993.

33
<PAGE> 34

The Company's industrial minerals businesses consist of Kentucky-Tennessee
Clay Company (ball clay and kaolin divisions), K-T Feldspar Corporation,
Mountain West Products (bark and scoria) and Colorado Aggregate Company of New
Mexico. Hecla's industrial minerals segment is a leading producer of three of
the four basic ingredients required to manufacture ceramic and porcelain
products, including sanitaryware, pottery, dinnerware, electric insulators and
ceramic tile. At current production rates, the Company has over 20 years of
proven and probable reserves of ball clay, kaolin and feldspar.

In 1993, the Company's industrial minerals operations provided
approximately $6.6 million of cash from operations which served to partially
offset the impact of decreasing cash flow from the metals segment. Since 1988,
the Company has significantly increased its shipments of industrial minerals,
principally as a result of the acquisition of the kaolin operations of Cyprus
Minerals Corporation in 1989 and of the feldspar assets now held by K-T Feldspar
in 1990. In December 1993, the Company completed its acquisition of Mountain
West Products, which produces timber bark, scoria, peat and soil additives sold
in the landscape market. In 1994, the Company expects to ship approximately
945,000 tons of industrial minerals in addition to approximately 591,000 cubic
yards of landscape material from Mountain West Products.

Sales of the Company's metals products are made principally to domestic and
foreign custom smelters and metal traders. The Company's industrial minerals are
sold principally to domestic manufacturers and wholesalers. Sales to significant
metals customers, as a percentage of total sales of metals products, were as
follows:

<TABLE>
<CAPTION>
1993
----
<S> <C>
Custom Smelters
Various Foreign Smelters.................................................... 11.0%
Asarco Incorporated, East Helena Smelter.................................... 10.3%
Cominco Metals Limited, Trail, British Columbia Smelter..................... 6.0%
----
27.3%
----
----
Custom Metal Traders
The Mocatta Group........................................................... 17.1%
Republic Mase............................................................... 16.8%
Lehman Brothers, Inc........................................................ 15.5%
Merrill Lynch............................................................... 13.3%
</TABLE>

<TABLE>
<CAPTION>
1992
----
<S> <C>
Custom Smelters
Various Foreign Smelters.................................................... 21.6%
Asarco Incorporated, East Helena Smelter.................................... 14.5%
Cominco Metals Limited, Trail, British Columbia Smelter..................... 1.4%
----
37.5%
----
----
Custom Metal Traders
Lehman Brothers, Inc........................................................ 21.3%
Merrill Lynch............................................................... 16.5%
Canadian Imperial Bank of Commerce (CIBC)................................... 14.0%
The Mocatta Group........................................................... 7.7%
</TABLE>

34
<PAGE> 35

<TABLE>
<CAPTION>
1991
----
<S> <C>
Custom Smelters
Various Foreign Smelters.................................................... 14.3%
Asarco Incorporated, East Helena Smelter.................................... 11.8%
Cominco Metals Limited, Trail, British Columbia Smelter..................... 0.8%
----
26.9%
----
----
Custom Metal Traders
Lehman Brothers, Inc........................................................ 21.8%
Prudential-Bache Metal Company Inc.......................................... 15.2%
Republic Mase............................................................... 11.8%
Canadian Imperial Bank of Commerce (CIBC)................................... 13.7%
</TABLE>

STRATEGY

During much of its 103-year history, Hecla has been a leading U.S. primary
producer of silver and lead and, more recently, a significant supplier of gold
and industrial minerals. As part of the Company's strategy to expand its
minerals resource base, Hecla has implemented acquisition, development and
exploration programs designed to increase its production and reserves of
precious metals, principally gold and silver, as well as to expand the Company's
industrial minerals business. This strategy has resulted in several significant
acquisitions, including the acquisition of the Grouse Creek gold property in
connection with the 1991 acquisition of CoCa Mines, the 1992 acquisition of the
La Choya gold project in Mexico and the 1994 acquisition of Equinox, including
the American Girl gold mine and Rosebud gold project.

The Company's strategy for the next year is to focus its resources and
efforts on the continued development and construction of the Grouse Creek gold
project and over the next two years to undertake feasibility studies on the
Rosebud gold project. The Company is also evaluating the feasibility of
expanding its annual silver production, primarily through its share of
production at the Greens Creek mine, assuming that the decision is made to
resume operations, and through successful development efforts at the Gold Hunter
property which is adjacent to the Lucky Friday silver and lead mine, if such
development decision is made. If the decision is made to reopen the Greens Creek
mine by 1997, when combined with estimated silver production at the Grouse
Creek, Lucky Friday and Rosebud properties, the Company's share of annual silver
production could exceed 8.0 million ounces in 1997.

During the next several years, the Company intends to concentrate its
exploration efforts at or in the vicinity of its existing and proposed mining
properties, including Grouse Creek, La Choya, Republic, Greens Creek, Rosebud,
American Girl and Lucky Friday. The Company owns or controls significant land
positions surrounding these existing and proposed mining operations. In
addition, the Company will continue to evaluate acquisition and exploration
opportunities, primarily in North America, which will complement its existing
operations. To a lesser extent, the Company will also continue to search for
opportunities to develop and produce precious metals at several exploration
projects in the United States, Canada, Mexico and Bolivia.

The references above and elsewhere in this Prospectus to the ranking of the
Company's mines and business segments in their respective markets are based on
publicly available information derived from annual reports, trade publications
and other public sources that the Company believes are accurate.

METALS SEGMENT

The Company's principal precious metals properties consist of six
properties in the United States, one operation in Mexico and a number of other
exploration properties in the United States. These properties include the La
Choya, Republic and American Girl gold mines, the Greens Creek and Lucky Friday
silver mines and the Grouse Creek and Rosebud gold projects.

Gold is the Company's largest single source of sales and gross profit
within the metals segment. The Company expects to produce approximately 117,000
ounces of gold in 1994, including 50,000 ounces from the La Choya gold mine,
38,000 ounces of gold from the Republic mine, 24,000 ounces from its share of
the American Girl mine and an additional 5,000 ounces of gold from other
sources. Assuming the timely

35
<PAGE> 36

commencement of construction at the Grouse Creek project in the fourth quarter
of 1994, the Company's planned 1994 gold production could increase by up to
53,000 ounces (representing its 80% share of the project) to a total of 170,000
ounces.

PRODUCING PROPERTIES

La Choya Gold Mine. The La Choya gold mine, located 30 miles south of the
U.S. border in the State of Sonora, Mexico and 100% owned by Hecla, is Hecla's
first operation outside the U.S. and Canada. In May 1992, Hecla exercised its
option to purchase the Mexican mineral concessions related to this property,
which includes a land position of over 36,000 acres.

The La Choya gold mine commenced operations in January 1994. The Company
expects to produce approximately 50,000 ounces of gold in 1994 and approximately
63,000 ounces in each of 1995 and 1996 from the mine. Current proven and
probable gold reserves at the La Choya gold mine are expected to be
substantially depleted in 1996 or early 1997. The ore is mined at a stripping
ratio of 2.48:1 utilizing a cut-off grade of 0.012 ounces of gold per ton,
crushed to one inch in size, and then cyanide leached on a leach pad. The gold
in the leach solution is processed in a carbon recovery plant to produce a gold
and silver dore, which is transported to the U.S. for further refining to pure
metals.

The following table presents the proven and probable ore reserves for the
years ended December 31, 1992 and 1993, respectively, at the La Choya gold mine.

<TABLE>
<CAPTION>
GOLD
---------------------------
TOTAL RESERVES AVERAGE GRADE CONTAINED
YEAR ENDED DECEMBER 31, (TONS) (OZ./TON) OUNCES
------------------------------------------- -------------- ------------- ---------
<S> <C> <C> <C>
1992....................................... 4,283,277 0.039 167,000
1993....................................... 6,138,000 0.037 225,500
</TABLE>

Reserves represent diluted in place grades and do not reflect losses in the
recovery process. The estimates of reserves at December 31, 1993 and 1992 are
based on gold prices of $375 per ounce and $350 per ounce, respectively. The
present cut-off grade for reserve calculations at the mine is 0.012 ounces of
gold per ton.

For the La Choya mine, the average life-of-mine cash cost per ounce of gold
is estimated at approximately $210 to $220 per ounce, with an estimated average
full cost of $310 to $320 per ounce of gold, although there can be no assurance
that these costs will be achieved. Such projections do not give effect to any
additional reserves which may be proven as a result of the Company's continuing
exploration efforts at the La Choya mine. As of December 31, 1993, the Company
has spent approximately $18.8 million (excluding capitalized interest) on the
purchase and development of the La Choya gold mine. The Company uses a near-term
estimate of metal prices for purposes of estimating ore reserves at each of the
Company's properties. Near-term prices are used as they more closely reflect the
current economic conditions at the measurement date. In contrast to near-term
prices used for estimating ore reserves, the Company uses longer-term estimated
metal prices to assess the future recoverability of mining assets because the
Company believes that they better measure the estimated revenues and resultant
cash flows over the estimated remaining life of the mine.

An exploration drilling program is planned for 1994 to expand the gold
reserves at the La Choya gold mine. The Company believes there is the potential
to discover additional gold reserves within the mining concessions currently
controlled by Hecla. The drilling program will continue with the objective of
expanding the current project and extending the life of the mine.

The carrying value of the La Choya mine was $19.8 million at December 31,
1993.

At December 31, 1993, there were 87 employees at the La Choya gold mine.
The National Union of Mine, Metallurgical and Related Workers of the Mexican
Republic is the bargaining agent for the La Choya gold mine employees. The
current labor agreement expires on September 7, 1994.

American Girl Gold Mine/Oro Cruz Gold Project. The American Girl gold mine
and the Oro Cruz gold project are located in Imperial County, California.
Geology of the area is not complex and has been well

36
<PAGE> 37

studied. Mineralization is hosted along low angle brittle faults (detachment
faults) with average dips of 15 to 20 degrees. Gold occurs in the native form,
most often along fracture boundaries. The American Girl mine and the Oro Cruz
project are located in an area that has experienced high levels of seismic
activity.

The Company acquired the American Girl mine and Oro Cruz project in March
1994 as part of the Equinox acquisition. The American Girl mine and the Oro Cruz
project are each managed by MK Gold, the Company's joint venture partner. The
Company has a 47% interest in the American Girl mine and the Oro Cruz project
with MK Gold having the remaining 53% interest. MK Gold receives a monthly
management fee of 2% of certain specified costs of the joint ventures. Certain
matters regarding the joint ventures require the approval of management
committees and each of the Company and MK Gold have two members on the
committees. The carrying value of the American Girl mine and Oro Cruz project
was $2.4 million at December 31, 1993.

The property is held through a combination of patented and unpatented
claims either owned outright or through leases. The American Girl mine contains
several ore bodies from which ore has been and is currently being extracted.
Mined ore is processed through heap leach and conventional mill facilities owned
by the joint venture. The American Girl consists of two open pit heap leach
operations, and an underground operation.

The Company anticipates that sufficient ore reserves at the American Girl
mine exist to enable surface mining to continue until late 1994 and underground
mining to continue until mid-1995, following which mining is anticipated to
start at the Oro Cruz project.

The crushing plant is currently crushing approximately 70,000 tons per
month of materials from open pit operations and 20,000 tons per month of
materials from underground operations. The carbon absorption plant has been
modified to increase plant capacity to budgeted production levels. The heap
leach facilities are currently operating at a recovery rate of approximately
60%. The conventional leach plant (mill) designed with a 500 tons per day
capacity is currently operating at a recovery rate of approximately 90% and an
average throughput of 648 tons of ore per day.

The following table presents selected operating data for Equinox's share of
the American Girl mine for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1992(1) 1993
-------- --------
<S> <C> <C>
Total tons processed................................................ 47,685 433,504
Average recovered grade:
(oz. of gold per ton)............................................. 0.045 0.082
Ounces of gold produced............................................. 1,922 35,324
Average cost per ounce of gold produced:
Cash production cost.............................................. $348 $279
Full production cost.............................................. 406 380
</TABLE>

- ---------------
(1) Equinox acquired the property in December 1992; represents production for
the month ended December 31, 1992.

The following table presents the Company's share of the proven and probable
gold reserves for the years ended December 31, 1992 and 1993, respectively, at
the American Girl gold mine/Oro Cruz gold project. (1992 is presented on a 50%
basis for the American Girl Mine and a 44% basis for the Oro Cruz project; 1993
is presented on a 47% basis, reflecting the renegotiated joint venture
arrangement effective as of January 1, 1994.)

<TABLE>
<CAPTION>
GOLD
---------------------------
TOTAL RESERVES AVERAGE GRADE CONTAINED
YEAR ENDED DECEMBER 31, (TONS) (OZ./TON) OUNCES
------------------------------------------- -------------- ------------- ---------
<S> <C> <C> <C>
1992....................................... 1,151,640 0.103 119,892
1993....................................... 1,814,200 0.078 141,837
</TABLE>

Reserves were estimated by the mine manager using a gold price of $380 per
ounce for both 1992 and 1993. The cut off grade for open pit reserves varies
from 0.015 to 0.020 ounces of gold per ton depending upon

37
<PAGE> 38

the distance to the processing facility, among other factors. The cut off grade
for the underground reserves is 0.125 ounces of gold per ton.

For the American Girl mine/Oro Cruz gold project, the average life-of-mine
cash cost per ounce of gold is estimated at approximately $292 per ounce with an
estimated full cost of $365 per ounce of gold, although there can be no
assurance that these costs can be achieved. The Company estimates life-of-mine
cash and full production costs per ounce of gold estimated to be recovered and
considers the estimated salvage value of surface plant, equipment and the value
associated with property rights to assess the net realizeable value of the
property and to assist in financial planning. Current projections do not give
effect for any additional reserves which may be proven as a result of continuing
exploration efforts at the American Girl/Oro Cruz project. The Company uses a
near-term estimate of metal prices for purposes of estimating ore reserves at
each of the Company's properties. Near-term prices are used as they more closely
reflect the current economic conditions at the measurement date. In contrast to
near-term prices used for estimating ore reserves, the Company uses longer-term
estimated metal prices to assess the future recoverability of mining assets
because the Company believes that they better measure the estimated revenues and
resultant cash flows over the estimated remaining life of the mine.

The Oro Cruz project covers approximately 3,500 acres and adjoins the
existing American Girl mine operations. Reserves at the Oro Cruz project are
estimated at 2,073,000 tons at 0.057 ounces per ton minable by open pit methods.
Underground estimated reserves are 335,000 tons at a grade of 0.245 ounces per
ton. The total indicated gold content is approximately 200,000 ounces, of which
88,000 ounces would be the Company's share.

The properties are subject to an underlying net smelter return royalty
ranging from 3.5% to 12.5%, depending upon gold price and the recovery of
capital costs.

In December 1991, the Oro Cruz joint venture was notified by permitting and
regulatory agencies that an Environmental Impact Statement would be required
before mining could take place on the Oro Cruz property. Environmental
permitting began in January 1992. Operating permits are anticipated to be
received in mid-1994. The Company intends to pay $1.3 million as its share of
capital expenditures at the Oro Cruz property in 1994.

Republic Gold Mine. The Republic gold mine, located in northeast
Washington State and 100% owned by the Company, was the Company's principal
gold-producing property in 1993. The grade of ore recovered during 1993 declined
to an average of 0.48 ounces per ton as the higher grade portions of the Golden
Promise area have been mined out. Consequently, Republic's gold production in
1993 declined to 49,600 ounces, compared with 58,300 ounces produced in 1992. At
the same time, due to an ongoing emphasis on increasing operating efficiencies
and lowering costs, the Republic mine lowered its average cash production cost
per ton of ore mined during 1993 to approximately $98 per ton, compared to
approximately $108 in 1992 and $123 per ton in 1991. The operating efficiencies
were derived from increased mechanization of mining operations resulting in
increased tons mined and processed. However, due to declining gold ore grade and
decreasing by-product prices, average cash production costs per ounce of gold at
the Republic mine increased to $207 in 1993 from $176 in 1992 and $143 in 1991,
respectively.

The Republic gold mine is an underground operation using both conventional
and smaller-scaled mechanized underground mining methods. It produces
gold-silver ore which is processed in a 325-ton-per-day flotation and
cyanidation mill located on the property. Products from the mill include a
gold-silver flotation concentrate and a gold-silver dore. Combined average
recovery in 1993 of the two mill products was 91% for the gold and 80% for the
silver contained in the ore. The Company's land position in the Republic area
consists of approximately five square miles, where the Company is currently
focusing significant exploration and development efforts in search of additional
gold mineralization (see "-- Exploration Activities").

38
<PAGE> 39

The following table presents selected operating data for the Republic gold
mine for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1989 1990 1991 1992 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total tons mined................................. 82,961 92,843 96,562 102,631 110,846
Average recovered grade:
(oz. of gold per ton).......................... 0.90 0.88 0.81 0.60 0.48
(oz. of silver per ton)........................ 3.60 3.50 3.20 3.60 3.10
Ounces of gold produced.......................... 74,335 81,397 77,736 58,343 49,601
Ounces of silver produced........................ 301,432 326,346 311,445 299,957 276,688
Average cost per ounce of gold produced:
Cash production cost........................... $121 $128 $143 $176 $207
Full production cost........................... 130 143 176 220 262
</TABLE>

During 1990, Hecla drove an underground decline into the mine, which
provides secondary access to the Golden Promise area and a base for further
exploration. Exploration at Republic has been emphasized over the past three
years in an effort to replenish the mine's gold reserves. No new proven or
probable gold reserves were discovered in 1993, causing a decrease in known ore
reserves from 140,263 contained ounces of gold at the beginning of 1993 to
44,373 contained ounces of gold at the beginning of 1994. The Company estimates
that if additional gold reserves are not discovered at the Republic mine through
Hecla's ongoing exploration program, gold reserves at the Republic mine will be
substantially depleted in early 1995 and mining will cease. Should it be
determined that no additional gold reserves can be economically developed at the
Republic mine, the Company may be required to write down all or a part of its
investment in the Republic mine, which at December 31, 1993 amounted to
approximately $11.4 million.

The following table presents the proven and probable ore reserves for the
years ended December 31, 1990, 1991, 1992, and 1993, respectively, at the
Republic gold mine.

<TABLE>
<CAPTION>
GOLD SILVER
--------------------- ---------------------
TOTAL AVERAGE AVERAGE
RESERVES GRADE CONTAINED GRADE CONTAINED
YEAR ENDED DECEMBER 31, (TONS) (OZ./TON) OUNCES (OZ./TON) OUNCES
------------------------------------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1990................................. 437,580 0.65 284,427 3.5 1,531,530
1991................................. 401,318 0.53 212,699 3.2 1,276,191
1992................................. 269,736 0.52 140,263 3.2 865,853
1993................................. 103,533 0.43 44,373 2.7 278,183
</TABLE>

Reserves represent diluted in place grades and do not reflect losses in the
recovery process. The estimates of reserves at December 31, 1993, 1992, 1991 and
1990 are based on gold prices per ounce of $375, $350, $375 and $400,
respectively, and silver prices per ounce of $4.50, $4.00, $4.50 and $5.00,
respectively. The present cut-off grade for reserve calculations at the mine is
0.24 ounces of gold per ton.

For the Republic mine, the average life-of-mine cash cost per ounce of gold
is estimated at approximately $289 per ounce with an estimated full cost of $358
per ounce of gold, although there can be no assurance that these costs can be
achieved. The Company estimates life-of-mine cash and full production costs per
ounce of gold estimated to be recovered and considers the estimated salvage
value of surface plant, equipment and the value associated with property rights
to assess the net realizeable value of the property and to assist in financial
planning. Current projections do not give effect to any additional reserves
which may be proven as a result of continuing exploration efforts by the Company
at the Republic mine or any write-offs that may be necessary to the Company's
remaining investment in the Republic mine if the Company cannot economically
recover additional gold or silver from the existing ore body and the Company
discontinues operations at the mine. The Company uses a near-term estimate of
metal prices for purposes of estimating ore reserves at each of the Company's
properties. Near-term prices are used as they more closely reflect the current
economic conditions at the measurement date. In contrast to near-term prices
used for estimating ore reserves, the Company uses longer-term estimated metal
prices to assess the future recoverability of mining assets because the Company

39
<PAGE> 40

believes that they better measure the estimated revenues and resultant cash
flows over the estimated remaining life of the mine.

In 1993, the Company adjusted ore reserves downward at the Republic mine by
approximately 39,000 ounces of gold and 235,000 ounces of silver. Most of the
adjustment became necessary when development encountered erratic mineralization
in an upper level ore zone which was previously estimated to be continuous
reducing the tonnage available for mining by 33,765 tons. Other various
adjustments attributable to the reduction totaled 867 tons.

There were 116 people employed at the Republic mine at December 31, 1993.
Employees at the Republic mine are not represented by a bargaining agent.

Lucky Friday Mine. The Lucky Friday, a deep underground silver and lead
mine, located in northern Idaho and 100% owned by Hecla, has been a producing
mine for the Company since 1958. Moreover, in 1983 and 1985, the Lucky Friday
mine was the nation's top silver producer, producing approximately 5.0 million
ounces of silver annually. The mine operated continuously until low metals
prices and rockburst activity forced the suspension of operations in April 1986.
During the shutdown, Hecla's engineers began converting portions of the mine to
the Lucky Friday Underhand Longwall mechanized mining method designed to
increase productivity and reduce rockburst activity. Production was resumed at
the Lucky Friday mine in June 1987, and has continued uninterrupted since that
time.

During 1993, through the implementation of cost-saving measures including
improvements to the Lucky Friday Underhand Longwall mechanized mining method,
further mechanization of the mining process and additional reductions of the
Lucky Friday hourly work force, the Company was able to decrease its cash
operating costs per ton mined at the mine to $68 per ton, compared to $74 in
1992. However, the cash cost per ounce of silver produced at Lucky Friday
increased from $4.12 per ounce in 1992 to $5.54 per ounce in 1993, due to the
decline in prices of by-product metals, primarily lead. See "Metals Prices."

The full implementation of the mechanized underhand mining method has been
primarily responsible for the successful reduction in operating costs at the
mine. This method utilizes diesel-fueled, rubber-tired equipment underground, a
ramp system and cemented sand fill and has not only been effective in reducing
operating costs, but also in limiting rockburst activity and improving safety.
Without this mining method, the mine would likely be unworkable in certain
working areas because of the unstable nature of the rock in those areas. The
Company continues to implement cost reduction measures at the mine.

Ore extracted from the mine is processed in a 1,000-ton-per-day
conventional flotation mill at a current rate of 700 tons per day at the mine
site. The flotation process produces both a silver-lead concentrate and a zinc
concentrate. During 1993, approximately 98% of the silver, 97% of the lead and
86% of the zinc was recovered.

The following table presents operating data for the Lucky Friday mine for
the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1989 1990 1991 1992 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total tons mined.......................... 138,720 147,671 152,150 175,170 179,579
Average recovered grade:
(oz. of silver per ton)................. 13.70 12.80 12.20 11.50 12.03
(percent lead).......................... 11.60 11.70 12.40 12.30 11.27
(percent zinc).......................... 2.30 2.20 2.10 2.70 2.88
Ounces of silver produced................. 1,904,038 1,894,944 1,850,531 2,031,779 2,122,738
Tons of lead produced..................... 16,094 17,333 18,857 21,336 19,795
Tons of zinc produced..................... 3,253 3,306 3,164 4,213 4,385
Average cost per ounce of silver produced:
Cash production cost.................... $4.57 $4.54 $5.01 $4.12 $5.54
Full production cost.................... 6.35 6.25 6.20 5.35 6.77
</TABLE>

40
<PAGE> 41

The length and grade of the ore body have not materially diminished on the
lowest level of the mine. Based upon this factor, drilling data, extensive
knowledge of the geologic character of the deposit and many years of experience
in the Lucky Friday mine and the Coeur d'Alene Mining District, the Company
believes that there are no geologic factors known at present which appear to
prevent the continuation of the Lucky Friday ore body for a considerable
distance beneath the 6,200 foot working level which is the existing bottom of
the mine's silver shaft.

The following table presents the proven and probable ore reserves for the
years ended December 31, 1990, 1991, 1992 and 1993, respectively, at the Lucky
Friday silver and lead mine.

<TABLE>
<CAPTION>
SILVER
---------------------
TOTAL AVERAGE
RESERVES GRADE CONTAINED LEAD ZINC
YEAR ENDED DECEMBER 31, (TONS) (OZ./TON) OUNCES (PERCENT) (PERCENT)
-------------------------------------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1990.................................. 527,830 14.5 7,653,535 13.4 2.7
1991.................................. 440,060 13.6 5,984,816 12.8 2.8
1992.................................. 446,105 14.3 6,398,265 13.4 2.3
1993.................................. 414,315 14.4 5,976,380 14.3 3.0
</TABLE>

Reserves represent diluted in place grades and do not reflect losses in the
recovery process. The estimates of reserves at December 31, 1993, 1992, 1991 and
1990 are based on silver prices of $4.50, $4.00, $4.50 and $5.00 per ounce,
respectively, zinc prices of $0.44, $0.55, $0.50 and $0.65 per pound,
respectively, and a lead price of $0.23, $0.30, $0.30 and $0.35 per pound,
respectively. The present cut-off value for reserve calculations at the mine is
$54.00 per ton of ore.

During 1991, Hecla discovered several mineralized structures containing
some high-grade silver ores in an area known as the Gold Hunter property, about
5,000 feet northwest of the existing Lucky Friday workings. In an extensive
exploration program in 1992 and early 1993, the Company undertook an underground
evaluation of the Gold Hunter property mineralization. The program discovered
mineralization containing significant amounts of silver and lead in an area
accessible from the 4,050-foot level of the Lucky Friday mine. The exploration
program was completed during 1993. The Company's decision regarding development
of the Gold Hunter property is pending. The Gold Hunter deposit is controlled by
Hecla under a long-term operating agreement, which entitles Hecla, as operator,
to a 79.08% interest in the net profits from operations from the Gold Hunter
properties. The Company will be obligated to pay a royalty after it has recouped
its costs to explore and develop the properties, which as of December 31, 1993,
totaled approximately $7.9 million. If the Gold Hunter property is further
developed, the Company estimates that approximately $10 to $15 million of
capital expenditures would be required.

At December 31, 1993, there were 139 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 was renewed in 1993 and expires on
June 12, 1996 and will be continued for an additional three years if the Company
develops the Gold Hunter property.

The carrying value of the Lucky Friday mine was $28.1 million at December
31, 1993. Even though recent historical production costs have exceeded revenues
realized from the sale of recovered metals, based upon management's estimates of
metal to be recovered, and considering estimated future production costs and
metal prices, the Company's management believes that the carrying value of the
Lucky Friday mine is recoverable from future undiscounted cash flows generated
from operations and considering the estimated salvage value of surface plant,
equipment and the value associated with property rights. In evaluating the
carrying value of the Lucky Friday mine, the Company used fixed metal prices of
$5.00 per ounce of silver, $0.30 per pound of lead and $0.57 per pound of zinc
through 2003, the estimated end of commercial production. These prices were
utilized as the Company's management believes that they are reasonable estimates
of average prices over the remaining life of the mine. In contrast to
longer-term prices used for estimating life-of-mine revenues and resultant cash
flows, the Company uses near-term estimates of metal prices to estimate ore
reserves as they more closely reflect the current economic conditions at the
measurement date. Estimated future production costs were derived from actual
production costs currently

41
<PAGE> 42

being experienced at the Lucky Friday mine, adjusted for anticipated changes
resulting from the execution of the Company's mine production plan. Based upon
these projected factors, the Company estimates that future cash and full
production costs per ounce of silver produced over the remaining life of the
mine would be approximately $3.73 and $5.13, respectively. As these amounts are
derived from numerous estimates, the most volatile of which are metal prices,
there can be no assurance that actual results will correspond to these
estimates. With respect to the Lucky Friday mine, the principal reasons that
cash costs per ounce are assumed to be lower than recent historical amounts are:
(i) slightly higher silver grades, somewhat offset by lower lead grades; (ii)
the effect of lead by-product revenues (which are credited against the
production costs of silver produced) at $0.30 per pound which is higher than
recent actual prices; and (iii) economic gains (i.e., lower cost per ton of ore
milled) by operating the existing mill at higher capacity than the current
levels. If the mineral resource associated with the Gold Hunter property
described previously is not fully developed by the Company, management of the
Company believes that a material write-down in the carrying value of the Lucky
Friday mine is unlikely based upon present economic conditions.

Cactus Gold Mine. As a result of its acquisition of CoCa Mines in 1991,
the Company currently holds a 63.75% interest in Cactus Gold Mines Company and
manages Cactus' producing open pit heap leach mine, located approximately 85
miles northeast of Los Angeles, California, in the Mojave Mining District. The
Company's share of gold production at the mine totaled 27,212 ounces for 1992
and 7,316 ounces for 1993. The deposit at the Cactus mine was mined out in
February 1992, but the Company's share of gold recovery from the heap, which is
estimated to total an additional 3,200 ounces, will continue through mid-1994,
with gradually decreasing production as cyanide neutralization processes in the
heap are completed. The Company had no carrying value at the Cactus mine at
December 31, 1993. For the Cactus mine, the remaining average life-of-mine cash
and full cost per ounce of gold is estimated at approximately $407 per ounce,
although there can be no assurance that this cost can be achieved.

DEVELOPMENT PROJECTS

The Company currently has two gold development projects: the Grouse Creek
project in Idaho and the Rosebud project in Nevada. The information below with
respect to such projects should be read together with "Investment
Considerations -- Project Development"; "-- Reserves"; "-- Government Regulation
and Legal Proceedings"; and "-- Pending Legislation."

Grouse Creek Gold Project. The Company acquired a large block of patented
and unpatented mining claims, known as the Grouse Creek project, as a result of
its acquisition of CoCa Mines in 1991. The Grouse Creek project will be a gold
and silver producing property. The Company's current mineral rights cover 21.4
square miles in central Idaho, 27 miles southwest of the town of Challis in the
historical Yankee Fork Mining District. Currently 43% of the proven and probable
gold reserves and 20% of the proven and probable silver reserves are located on
fully patented mining claims. The Grouse Creek project consists of 18 patented
lode mining claims, 2 patented placer claims, 43 millsite claims (pending start
of construction), and 17 unpatented lode claims for which patent applications
are pending and the Company has received the first half of a Mineral Entry Final
Certificate. Upon certification by a Federal Mineral Examiner and issuance of
patents for the latter 17 lode claims, all of the current proven and probable
ore reserves at the Grouse Creek project will be located within patented mining
claims. The remainder of the mineral rights included in the Company's Yankee
Fork claim block consists of 846 unpatented claims. See "Investment
Considerations -- Pending Legislation." All major environmental and construction
permits have been approved for the current project.

In February 1994, the Company completed the sale of a 20% undivided
interest in the Grouse Creek project to Great Lakes. Great Lakes has paid its
20% share of capital expenditures made to date and is responsible for 20% of all
remaining capital expenditures. Until 12 months after the commencement of
commercial production at Grouse Creek, Great Lakes has the right to purchase up
to an additional 10% undivided interest in the project and, in addition, fund
its increased share of capital expenditures incurred. See "Recent
Developments -- Sale of Grouse Creek Joint Venture Interest."

For purposes of this Prospectus, unless otherwise indicated, the
discussions regarding Grouse Creek assume that Hecla has an 80% undivided
interest in the project and is required to fund 80% of the capital

42
<PAGE> 43

expenditure requirements for the project. To the extent Great Lakes is unable or
unwilling to fund its share of expenses, the Company may be required to make up
any shortfall, although pursuant to the Company's joint venture agreement with
Great Lakes this would increase the Company's ownership interest in the project.
See "Investment Considerations -- Joint Venture Arrangements."

As of December 31, 1993, the Company and its predecessors had expended
approximately $54.0 million (excluding capitalized interest) on its share of the
acquisition, exploration and development of the Grouse Creek project. The
carrying value of the Grouse Creek project was $58.8 million at December 31,
1993. Based on the current mine plan, the Company's share of capital costs for
the project over the next two years are expected to total approximately $53.0
million, with approximately $50.0 million spent in 1994 and approximately $3.0
million (primarily for equipment) during 1995. The Company expects production
startup to occur in the fourth quarter 1994, with full production achieved in
1995.

The Company and its predecessors identified two distinct mineral deposits
at the Grouse Creek project: the Sunbeam deposit; and the Grouse deposit, which
includes the Grouse pit (the "Upper Grouse Pit") and the Grouse underground
high-grade ore zone (the "Underground Deposit"). The Sunbeam deposit, containing
both gold and silver, is a volcanic-hosted epithermal precious metal system
contained within a rhyolitic flow-dome and underlying pyroclastic rocks. Ore is
structurally controlled and occurs in silicified and argillized shear and
fracture zones that strike northeast. Gold and silver occur primarily as native
gold and electrum, with minor amounts of silver sulfides and sulfosalts. Ore
zones in the Sunbeam deposit have good continuity vertically and along strike.

The Grouse deposit, which also contains both gold and silver, is a volcanic
and lacustrine sedimentary-hosted epithermal precious metal system contained
within lacustrine sediments and underlying pyroclastic rocks. Ore is
stratigraphically and structurally controlled and occurs as roughly stratabound
and silicified ore zones. Gold and silver occur as electrum, native silver and
silver sulfides and sulfosalts in the Upper Grouse Pit ore zones and as native
gold, electrum, and possibly auriferous pyrite in the Underground Deposit. Ore
zones in the Grouse deposit have good continuity.

As a result of the drilling program conducted in 1991 and 1992, the Company
discovered the Underground Deposit, a high-grade gold ore zone beneath the
proposed Upper Grouse Pit, approximately 500 feet below the existing surface.
The Company has modified its current mine plan to include a drift to gain access
to, and mine, the Underground Deposit. The Underground Deposit is open at depth
and has good potential to contain additional high grade ore.

The Sunbeam deposit was defined by 721 reverse circulation test holes
totalling 198,097 feet and 22 diamond drill core holes totalling 7,152 feet.
Test hole drilling has been completed on an approximate 75 foot grid over the
Sunbeam deposit. The deposit is above the water table. The Upper Grouse Pit has
been defined by 416 reverse circulation test holes totalling 175,508 feet and 22
diamond core drill holes totalling 8,488 feet. The higher sections of the
deposit are drilled on an approximate 75 to 100 feet grid. Portions of the Upper
Grouse Pit ore body are below the water table. The deeper high-grade gold ore
zone in the Underground Deposit ore body has been defined by a reverse
circulation test hole grid pattern on approximately 50 foot centers.

Proven and probable ore reserves have increased significantly at Grouse
Creek since Hecla acquired the property. Drilling programs conducted each year
since 1991 increased the contained ounces of gold in the deposit by
approximately 50%, from 551,800 ounces in 1990 to 831,000 ounces in 1992 (of
which the Company has an 80% share). This increase in the proven and probable
reserves includes approximately 96,000 ounces of probable reserves attributable
to the Underground Deposit.

The following table presents the Company's share of the proven and probable
ore reserves for the Grouse Creek project for the years ended December 31, 1990,
1991, 1992 and 1993, respectively. (All periods prior to

43
<PAGE> 44

1993 are presented on a 100% Hecla basis; 1993 is presented on an 80% basis to
reflect the sale of the 20% joint venture interest to Great Lakes.)

<TABLE>
<CAPTION>
GOLD SILVER
----------------------- --------------------------
TOTAL AVERAGE AVERAGE
RESERVES GRADE CONTAINED GRADE CONTAINED
YEAR ENDED DECEMBER 31, (TONS) (OZ./TON) OUNCES (OZ./TON) OUNCES
------------------------ ----------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1990.................... 9,513,000 0.058 551,800 1.5 14,270,000
1991.................... 15,018,600 0.048 719,150 1.2 17,276,810
1992.................... 14,467,000 0.057 831,000 1.2 17,474,000
1993.................... 12,104,000 0.055 671,200 1.1 12,972,800
</TABLE>

Reserves represent diluted in place grades and do not reflect losses in the
recovery process. The estimates of reserves at December 31, 1993, 1992, 1991 and
1990 are based on gold prices of $375, $350, $375 and $400 per ounce,
respectively, and silver prices of $4.50, $4.00, $6.00 and $5.00 per ounce,
respectively.

Pursuant to the current mine plan, the Sunbeam deposit and the Underground
Deposit will be mined simultaneously beginning in the fourth quarter of 1994,
followed by the Upper Grouse Pit. The current mine plan for the Underground
Deposit proposes a panel cut and fill method. The ore zone is approximately 30
feet thick and will be mined in panels 10 feet high and 20 feet wide. Cemented
backfill will be used to obtain nearly 100% extraction of the underground
reserve. Conventional underground mining equipment will be used for drilling,
blasting, loading and hauling. Both the Sunbeam pit and the Upper Grouse Pit
will use conventional surface mining methods. Blasthole assays will be used to
determine ore grade material. This material will be segregated and hauled by
off-highway trucks to the processing plant. Waste material will be hauled to a
waste storage area or will be used as construction material in the tailings dam.
Both pits will mine ore on 20 foot benches.

The milling process involves a 6,000 ton per day gold recovery facility.
This process involves crushing and grinding of the ore and recovering
approximately 50% of the gold in a gravity circuit. The remaining gold and
silver is dissolved in a weak sodium cyanide solution and recovered with carbon
adsorption and Merrill Crowe precipitation. Overall recoveries are currently
estimated at 94% gold and 41% silver for ore from the Sunbeam deposit, and 74%
gold and 64% silver for ore from the Upper Grouse Deposit and 95% gold and 85%
silver from the Underground Deposit. A refinery on the property will produce
dore that will be sold to commercial refiners. The tailings from the cyanide
process will be impounded in a 15.5 million ton capacity double-lined tailings
pond. The permit for this facility has been approved.

The Sunbeam pit will be mined at a rate of 7,700 tons per day at a cut-off
grade of 0.020 ounces per ton of gold equivalent (a combination of the value of
the contained gold and silver based upon a ratio of 180 ounces of silver per
ounce of gold) and a stripping ratio of 3.2:1. The Upper Grouse Pit will be
mined at approximately the same rate and will have a cut-off grade of 0.031
ounces per ton of gold equivalent (a combination of the value of the contained
gold and silver based upon a ratio of 100 ounces of silver per ounce of gold)
and a stripping ratio of 5.1:1. Based upon the information developed to date,
the Underground Deposit is expected to be in production in 1994 and 1995
producing a total of approximately 96,000 ounces of gold and 400,000 ounces of
silver.

The Company estimates that its share of total production at the Grouse
Creek project will be 53,000, 102,000 and 88,000 ounces of gold in 1994, 1995
and 1996, respectively, including the gold production attributable to the
Underground Deposit. After 1996, based upon existing reserves, the Company's
share of annual production will decline from approximately 78,000 ounces of gold
in 1997 to approximately 66,000 ounces of gold in the year 2001, when current
proven and probable reserves are expected to be substantially depleted. Based
upon proven and probable reserves at December 31, 1993, the Company's share of
total gold production is expected to be 563,000 ounces during the life of the
project. Based upon proven and probable reserves at December 31, 1993, the
Company's share of total silver production is expected to be approximately 7.9
million ounces during the life of the project, including 6.8 million ounces for
the years 1998-2001. The average life-of-mine cash cost per ounce of gold is
estimated at approximately $185 to $190 per ounce, with an estimated average
full cost of $355 to $360 per ounce of gold, although there can be no assurance
that these

44
<PAGE> 45

costs will be achieved. Such projections do not give effect to any additional
reserves which may be proven as a result of continuing exploration activities at
the Grouse Creek project.

Reclamation activities include the partial backfill and revegetation of the
Sunbeam Deposit and Upper Grouse Pit; covering, recontouring and revegetating of
the tailing surface; and construction of a permanent spillway. The waste dump
and haul roads will be recontoured and revegetated. Process facilities will be
removed and foundations will be buried. Concurrent reclamation practices will be
employed whenever possible. These reclamation plans have been approved by the
appropriate state and federal agencies.

The Company believes that there is excellent potential for extending and
discovering additional gold reserves at the project including high grade
mineralization along the lower contact between the ash flow tuffs. To date, the
Company has identified 15 exploration targets. Within the immediate area of the
Upper Grouse Pit, Hecla also believes that there could be additional high grade
zones accessible through the underground operation. An exploration program will
be undertaken during 1994 to evaluate the economic potential of areas below and
adjacent to the Upper Grouse Pit.

Rosebud Gold Project. The Rosebud gold project is located in the Rosebud
Mining District, in Pershing County, Nevada, and consists of 46 unpatented lode
mining claims (the "Hecla Claims"), a 52% interest in 49 lode mining claims held
under a joint venture with N.A. Degerstrom Inc. (the "Degerstrom Claims") and a
100% interest in 411 lode mining claims (the "Lac Claims") totalling 10,120
acres (the Hecla Claims, the Degerstrom Claims and the Lac Claims collectively
comprise the "Rosebud Project"). The Rosebud Project may be reached from
Lovelock, Nevada by travelling a distance of approximately 50 miles on an all
weather gravel road. The carrying value of the Rosebud Project was $2.5 million
at December 31, 1993.

In 1993, Equinox sold a 2.5% net smelter return royalty and an option to
purchase for $2.5 million an additional 1.5% net smelter return royalty on the
property to Euro-Nevada Mining Corporation Inc. ("Euro-Nevada"). The option must
be exercised within 30 days after delivery by the Company to Euro-Nevada of a
feasibility study and production decision on the Rosebud Project.

Until 1991, all significant gold mineralization and most of the 115,000
feet of drilling in 167 holes had been completed on what is known as the Dozer
Hill Zone, a northeast trending zone extending a distance of about 1,500 feet
within portions of 10 claims within the Hecla Claims and the Lac Claims.

In 1991, 58,691 feet of drilling was carried out to test exploration
targets east of the Dozer Hill Zone and to further evaluate the property. This
exploration drilling encountered a new zone of high grade gold mineralization
(the "East Zone") about 1,000 feet east of the Dozer Hill Zone within portions
of three claims within the Hecla Claims and Lac Claims, although numerous low
grade drill intersections in between suggest the two zones may be connected.
Mineralization appears related to the low angle South Ridge fault which
underlies most of the area of interest. Mineralization in the Dozer Hill Zone
occurs above this fault while mineralization in the East Zone occurs within and
below this fault.

Results to date indicate that gold mineralization in the East Zone, as in
the Dozer Hill Zone and many other volcanic-hosted gold deposits, is erratically
distributed with numerous low grade holes interspersed with higher grade holes
over an area of approximately 1,000 feet east-west and 500 feet north-south.
Drilling has also intersected further mineralization approximately 700 feet east
of the East Zone. Hydrological studies have also been carried out.

In 1992, an additional 35,000 feet of drilling in 56 holes was completed on
the Rosebud Project. This was followed by metallurgical studies and permit
preparation for an advanced underground exploration program. In 1993, the
underground exploration program was started. To date, exploration efforts have
established proven and probable ore reserves totaling 1,984,000 tons containing
approximately 512,000 ounces of gold and 3.6 million ounces of silver.

The Company's and its predecessors' expenditures on the Rosebud Project to
December 31, 1993 were approximately $4.2 million which consist of acquisition
and drilling program expenditures.

During 1994 the Company intends to spend approximately $3.7 million at the
Rosebud property. Underground work will include 3,600 feet of drifting and
25,000 feet of underground diamond drilling.

45
<PAGE> 46

Permitting related work will include the preparation and submission of the plan
of operations for the property followed by the preparation of the Draft
Environmental Impact Statement. Engineering activities will be related to the
preparation of permitting documents, detailed mine design upon completion of the
drifting and drilling programs and metallurgical testing which will support
detailed mill design.

Activities in 1995 are expected to include detailed design and a final
feasibility study in the second quarter. The permitting effort is expected to
continue through the majority of 1995. The Company is subject to, among other
items, obtaining the appropriate regulatory approvals and satisfactory
completion of a feasibility study and intends to begin construction of the mine
and related facilities in early 1996. Production could follow as early as late
1996. The feasibility study will assess the potential to produce approximately
70,000 to 80,000 ounces of gold annually. Although the project is in preliminary
stages, if a determination is made to develop the project, capital costs are
expected to be, at a minimum, approximately $38 million.

Patents have been applied for on 13 claims at the Rosebud property. These
claims contain all of the proven and probable reserves.

SUSPENDED OPERATIONS

Greens Creek Mine. The Company currently holds a 29.7% interest in the
Greens Creek mine, located on Admiralty Island, near Juneau, Alaska, through a
joint venture arrangement with Kennecott, the manager of the mine, a wholly
owned subsidiary of Kennecott Corporation, and CSX Alaska Mining Inc. Greens
Creek is primarily a silver mine although it also produces zinc, gold and lead.

In February 1993, as a result of continued depressed metal prices, the
decision was made by the mine manager to suspend operations at the Greens Creek
mine. Commercial production ceased in April 1993 and the mine and mill were
placed on a standby basis. However, limited mine development activities have
continued at the mine. The Company has been informed by the mine manager that
all operating and environmental permits will be maintained in anticipation of a
resumption of operations once economic conditions improve.

At the Greens Creek mine, ore is milled at a 1,225-ton-per-day mill which
produces three concentrates including lead, zinc and bulk lead/zinc. During 1992
the cash costs per ton milled increased 4.9% from $103 per ton in 1991 to $108
per ton in 1992, primarily due to increased milling and mining costs. The cash
costs per ounce of silver increased from $3.94 per ounce in 1991 to $4.82 per
ounce in 1992 because of the significant decline in the prices of by-product
metals, principally zinc and lead. See "Metals Prices."

The following table presents operating data for the Greens Creek mine for
the periods indicated based upon Hecla's then-current interest in the mine,
which was 29.7% as of December 31, 1993.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1990 1991 1992 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Hecla's share of total tons mined................. 107,445 120,187 123,526 33,638
Average recovered grade:
(oz. of silver per ton)......................... 20.00 18.10 20.80 20.70
(oz. of gold per ton)........................... 0.10 0.09 0.11 0.13
(percent lead).................................. 4.40 4.00 4.70 4.60
(percent zinc).................................. 9.70 9.90 10.80 11.30
Hecla's share of ounces of silver produced........ 2,144,389 2,178,141 1,959,368 551,107
Hecla's share of ounces of gold produced.......... 10,705 10,505 9,094 2,826
Hecla's share of tons of lead produced............ 4,698 4,863 4,650 1,298
Hecla's share of tons of zinc produced............ 10,391 11,906 11,385 3,453
Average cost per ounce silver produced:
Cash production costs........................... $2.52 $3.94 $4.82 $5.11
Full production costs........................... 4.69 5.43 6.54 7.16
</TABLE>

46
<PAGE> 47

The following table presents Hecla's share of the proven and probable ore
reserves for the Greens Creek silver mine for the following periods.

<TABLE>
<CAPTION>
SILVER GOLD
HECLA'S ---------------------- ---------------------
SHARE OF AVERAGE AVERAGE
RESERVES GRADE CONTAINED GRADE CONTAINED LEAD ZINC
YEAR ENDED DECEMBER 31, (TONS) (OZ./TON) OUNCES (OZ./TON) OUNCES (PERCENT) (PERCENT)
- -------------------------------- --------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1990............................ 1,776,400 15.1 26,823,640 0.13 231,000 4.2 12.4
1991............................ 3,876,000 13.3 51,524,678 0.12 473,267 4.0 12.8
1992............................ 3,422,000 12.7 43,322,519 0.13 452,171 4.1 13.3
1993............................ 1,911,000 16.0 30,576,000 0.14 267,540 4.7 14.4
</TABLE>

Reserves represent diluted in place grades and do not reflect losses in the
recovery process. Reserve estimates at December 31, 1993, 1992, 1991 and 1990
were calculated by the manager of the mine using prices of $4.75, $4.50, $4.00
and $5.74 per ounce for silver, respectively, $350, $340, $365 and $402 per
ounce for gold, respectively, $0.57, $0.60, $0.46 and $0.51 per pound for zinc,
respectively, and $0.28, $0.33, $0.25 and $0.30 per pound for lead,
respectively.

Ore reserve criteria and estimation techniques used for year-end 1993
reserves at the Greens Creek mine differed substantially from those used in
prior years. Among these changes were the adoption of block modeling techniques
in place of the sectional methods for a major section of the mine, a
reevaluation of cut-off criteria, and the development of refinements to in-site
net smelter return estimates involving projected smelting terms and distribution
or recovery of metals in the three concentrate products and metal price changes.
In addition, more rigorous criteria for reserve classification were applied to
the probable reserves category. These changes and the deduction for production
in 1993 resulted in a reduction in proven and probable mineral reserves from 3.4
million tons as of December 31, 1992, to 1.9 million tons as of December 31,
1993.

In 1993, drilling in the southwest area of the Greens Creek mine
encountered an additional mineralized zone containing higher than mine average
gold and silver content. The Company's interest in this mineral-bearing material
would amount to approximately 840,000 tons at 33.71 ounces of silver per ton,
0.27 ounce of gold per ton, 13.36% zinc, and 5.84% lead. Sufficient drilling in
the southwest area has not yet been completed to classify the mineralized zone
as proven and probable mineral reserves. Drilling is expected to continue in
1994 to define the nature and extent of this resource.

In January 1994, the manager of the Greens Creek mine initiated a
feasibility study to determine the economic viability of placing the mine,
including the mineral-bearing material of the southwest area, back into
production. The feasibility study is expected to be completed during the fourth
quarter of 1994 or the first quarter of 1995.

The carrying value of the Company's interest in the Greens Creek mine is
$49.2 million at December 31, 1993. Even though recent historical production
costs have exceeded revenues realized from the sale of recovered metals and
mining operations at the Greens Creek mine are currently suspended, based upon
management's estimates of metal to be recovered and considering estimated future
production costs and metal prices, the Company's management believes that the
carrying value of the Greens Creek mine is recoverable from future undiscounted
cash flows generated from operations. In evaluating the carrying value of the
Greens Creek mine, the Company used fixed metal prices of $375.00 per ounce of
gold, $4.50 per ounce of silver, $0.25 per pound of lead and $0.50 per pound of
zinc through 2008, the estimated end of commercial production. These prices were
utilized as the Company's management believes that they are reasonable estimates
of average prices over the remaining life of the mine. In contrast to
longer-term prices used for estimating life-of-mine revenues and resultant cash
flows, the Company uses near-term estimates of metal prices to estimate ore
reserves as they more closely reflect the current economic conditions at the
measurement date. Estimated future production costs were derived from production
costs experienced at the mine, adjusted, as necessary, for anticipated changes
from the execution of the mine manager's mine production plan. Based upon these
projected factors, the Company estimates that future cash and full production
costs per ounce of silver produced over the remaining life of the mine would be
$0.44 and $2.43,

47
<PAGE> 48

respectively. As these amounts are derived from numerous estimates, the most
volatile of which are metal prices, there can be no assurance that actual
results will correspond to these estimates. With respect to the Greens Creek
mine, the principal reasons that cash costs per ounce are assumed to be less
than historical amounts are: (i) an increase in the grade of ore processed; and
(ii) the effect of lead and zinc by-product revenues (which are credited against
the production costs of silver produced) at $0.25 per pound and $0.50 per pound,
respectively, which are higher than recent actual prices.

At December 31, 1993 there were 26 employees at the Greens Creek mine. The
employees at the Greens Creek mine are not represented by a bargaining agent.

EXPLORATION ACTIVITIES

The Company conducts exploration activities from its headquarters in Coeur
d'Alene, Idaho. The Company owns or controls patented and unpatented mining
claims, fee land, state and private leases in ten states, Canada and Bolivia. In
addition, the Company has a number of interests in exploration concessions in
Sonora, Mexico. The Company is currently concentrating its exploration
activities at or near the vicinity of the Republic gold mine (see "-- Producing
Properties -- Republic Gold Mine"), the Rosebud project (see "-- Development
Projects -- Rosebud Gold Project"), the Grouse Creek project (see
"-- Development Projects -- Grouse Creek Gold Project"), the La Choya project
(see "-- Producing Properties -- La Choya Gold Project"), the American Girl mine
and Oro Cruz project (see "-- Producing Properties -- American Girl Gold
Mine/Oro Cruz Gold Project"), and the Lucky Friday mine (see "-- Producing
Properties -- Lucky Friday Mine").

OTHER GOLD MINERALIZATION

Golden Eagle/Yellow Pine. In 1988, Hecla's geologists discovered the
Golden Eagle deposit, near the Republic gold mine which is a lower grade sulfide
deposit of refractory gold. The deposit contains approximately 10 million tons
of material at an average grade of 0.10 ounces of gold per ton. The Company
believes that any development of this deposit would require a major joint
venture partner. At the Yellow Pine gold mine, 15 to 20 million tons of
mineralized sulfide material containing approximately 0.10 ounces of gold per
ton have been discovered. As with the Republic sulfide deposit, gold is more
difficult to economically recover from these materials. On a combined basis, the
two sulfide deposits at Republic and Yellow Pine contain approximately 3 million
ounces of gold.

J & L Property. The J & L property contains a massive sulfide deposit
consisting of gold, silver, lead and zinc mineralization. The J & L property is
located near Revelstoke, British Columbia. The Company is renegotiating a lease
whereby the Company will have a 100% effective interest in the J & L property.

INDUSTRIAL MINERALS SEGMENT

The Company's principal industrial minerals assets are its ball clay
operations in Kentucky, Tennessee and Mississippi; its kaolin operations in
South Carolina and Georgia; its feldspar operations in North Carolina; and its
specialty aggregate operations (primarily scoria and bark) in southern Colorado,
northern New Mexico and Idaho. The Company conducts these operations through
four wholly owned subsidiaries: (i) K-T Clay, which operates its ball clay and
kaolin divisions; (ii) K-T Feldspar, which operates the feldspar business; and
(iii) CAC and Mountain West Products, which operate the Company's specialty
aggregate and landscape bark business.

The Company's strategy is to continue to grow the industrial minerals
segment principally through the expansion of existing market shares, new product
development and the acquisition of additional minerals businesses that
complement existing operations. Hecla's industrial mineral revenues and reserves
increased significantly in recent years principally due to the acquisitions of
the kaolin operations of Cyprus Minerals Company in 1989 and the feldspar
operations of Indusmin Incorporated in 1990. As a result of these acquisitions,
in combination with the Company's preexisting industrial minerals operations,
Hecla has positioned itself as a leading producer of three of the four basic
ingredients required to produce ceramic products.

48
<PAGE> 49

During 1993, K-T Clay focused attention on expanding its presence in
Mexico. A clay slurry plant, constructed in Monterrey, Mexico, supplies raw
materials to the Mexican ceramics industry. In addition, two U.S. processing
plants were expanded to improve packaging automation, which increased plant
capacity. More efficient clay production systems were also implemented, further
improving the quality of K-T Clay's products. K-T Clay's ball clay and kaolin
divisions, and K-T Feldspar each hold in excess of 20 years of reserves based on
current sales and product mix.

The following table sets forth information with respect to total industrial
minerals revenue and production for the past five years.

<TABLE>
<CAPTION>
YEAR REVENUE (000'S) TONS SHIPPED
------------------------ --------------- -------------
<S> <C> <C>
1993.................... $44,953 887,676
1992.................... 43,231 879,034
1991.................... 40,524 823,214
1990.................... 34,971 711,295
1989.................... 33,356 709,895
</TABLE>

Following the acquisition of Mountain West Products in December 1993,
14,422 cubic yards of product were produced for the month of December.

K-T CLAY BALL CLAY DIVISION

K-T Clay is one of the nation's major suppliers of premium ball clay. Ball
clay is of sedimentary origin and consists of several basic clay minerals along
with a slight amount of organic content; a combination of materials that gives
ball clay its unique character. The principal use of ball clay is in the ceramic
and porcelain fields, which includes use for such items as pottery, dinnerware,
wall tile, electrical insulators and sanitaryware. Ball clay is also used in
refractories and abrasives and also has applications in other specialty
industries. K-T Clay mines many grades of ball clay, then processes and blends
the clays to meet the specifications and requirements of various customers.
Different uses may require mixtures of ball clay having substantially different
physical properties. K-T Clay, through many years of experience and ongoing work
in its laboratories, possesses a degree of expertise that enables it to meet
customer requirements with minimal advance notice.

K-T CLAY KAOLIN DIVISION

K-T Clay acquired the kaolin operations and assets of Cyprus Minerals
Company's clay division on February 17, 1989, including kaolin mines and plants
at Deepstep and Sandersville, Georgia, and Aiken, South Carolina. Kaolin, or
china clay, is a relatively pure white clay of sedimentary origin, and is
consumed in a variety of end uses including ceramic whiteware, textile grade
fiberglass, as rubber and paper filler, and in miscellaneous plastics, adhesives
and pigment applications. Kaolin is a unique industrial mineral because of its
wide range of chemical and physical properties. The kaolin division of K-T Clay
mines, processes, and blends numerous grades of clay to meet the specifications
and requirements of its customers.

K-T FELDSPAR CORPORATION

The Company acquired the feldspar operations and assets of Indusmin
Incorporated on December 13, 1990, including sodium feldspar mines and a
processing plant located near Spruce Pine, North Carolina. Feldspars are the
major constituents in igneous rocks and important constituents of other major
rock types. K-T Feldspar mines, processes, and blends sodium feldspar and
feldsparsilica products. It also produces by-product mica concentrate and
construction sand. K-T Feldspar products are primarily used in the ceramic
whiteware, glass, and paint industries.

MOUNTAIN WEST PRODUCTS

The Company acquired Mountain West Products in December 1993. Mountain West
Products, a wholly owned subsidiary located in southern Idaho, purchases,
processes and markets timber bark, scoria, peat and

49
<PAGE> 50

soil additives. These products are sold as organic soil amendments, organic
landscape mulches and organic decorative ground cover for landscape purposes.
Mountain West Products shipped a total of 14,422 cubic yards of landscape
material for the month of December 1993, and is expected to increase its total
shipments to 591,000 cubic yards for all of 1994.

COLORADO AGGREGATE COMPANY OF NEW MEXICO

CAC, a wholly owned subsidiary located in southern Colorado and in northern
New Mexico, mines and sells scoria, primarily for landscaping and for use as
briquettes in gas barbecue grills. CAC also produces brightly painted aquarium
gravel, as well as other specialty aggregate products.

MARKETING

K-T Clay and K-T Feldspar products are marketed to the ceramics industry by
K-T Clay employees trained in ceramic engineering or related technical fields.
The experienced sales force allows K-T Clay to rapidly adjust to and meet new
requirements of its customers. K-T Clay enjoys the marketing advantage of having
one sales force offering three of the four products needed by ceramics
manufacturers: ball clay, kaolin and feldspar. The majority of K-T Clay's
products are used in the ceramics and porcelain industry. Marketing of kaolin
and feldspar to industries other than the ceramics and porcelain industry is
carried out through sales and distribution agents. Mountain West Products' and
CAC's products are marketed by their employees and sales and distribution
agents.

COMPETITION

The Company's principal competitors in ball clay mining operations are
generally either family-owned or divisions of larger, diversified companies.
Based upon available information, the Company believes that K-T Clay is the
largest producer of ball clay in the U.S. The principal competitors of the
Company in the ball clay industry are H. C. Spinks Clay Company, Watts Blake
Bearne & Company, and Old Hickory Clay Company. The Company has also become a
significant U.S. producer of ceramic-grade kaolin. The principal competitors of
the Company in the kaolin industry are Albion Kaolin Company, Evans Clay
Company, JM Huber Corporation and Dry Branch Kaolin Company. The Company, with
the acquisition of Indusmin Incorporated's feldspar assets, is also a major
producer and supplier of sodium feldspar products. The principal competitors of
the Company in the feldspar industry are Feldspar Corporation and Unimin
Corporation.

Mountain West Products competes with other producers of lawn and garden and
soil products, decorative bark products and landscape mulches. The principal
competitors are either privately owned companies or divisions of larger
diversified companies that operate in numerous regional markets. The Company has
limited information about the sales of competing products in its overall markets
but believes it supplies a significant portion of the market for its product in
the United States intermountain region.

CAC competes with other producers of scoria and with manufacturers of
ceramic briquettes in the production and sale of briquettes. The Company
believes that CAC supplies a major portion of the scoria briquettes used in gas
barbecue grills. Price and natural product characteristics, such as color,
uniformity of size, lack of contained moisture and density, are important
competitive considerations to CAC's customers. The Company also believes that it
is competitive in the landscape scoria market east of the Continental Divide.

SPECIALTY METALS SEGMENT

Although the Company's strategy has primarily focused on expanding its
precious metal and industrial mineral operations, the Company continues to
investigate specialty mineral opportunities for its Apex processing facility
located in southern Utah. During 1993, the Apex facility continued production of
cobalt chemicals and process trials of metallurgical residues. The Company plans
to continue to develop the Apex facility to produce cobalt chemicals and
specialty metals, assuming satisfactory economics can be achieved.

50
<PAGE> 51

DESCRIPTION OF LYONS

The LYONs were issued under an indenture dated as of June 1, 1989 (the
"Indenture"), between the Company and Manufacturers Hanover Trust Company, a New
York corporation, as trustee (the "Trustee"). The following summaries of certain
provisions of the LYONs and the Indenture describe the material terms but do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the LYONs and the Indenture, including
the definitions therein of certain terms which are not otherwise defined in this
Prospectus. The Indenture is filed as an exhibit to this Registration Statement
and is incorporated by reference herein. See "Available Information."

The LYONs are unsecured obligations of the Company limited to $201,250,000
aggregate principal amount at maturity and mature on June 14, 2004. Currently,
the Company has outstanding LYONs with an aggregate principal amount at maturity
of $109,950,000. The LYONs were issued at an issue price of $308.32 per LYON,
which represents a yield to maturity of 8.00% per annum computed on a semiannual
bond equivalent basis from June 14, 1989.

A holder of a LYON may convert it into Common Stock of the Company at any
time before the close of business on June 14, 2004; provided, however, that if a
LYON is called for redemption, the holder may convert it only until the close of
business on the Redemption Date.

The initial Conversion Rate is 20.824 shares of Common Stock per LYON,
subject to adjustment upon the occurrence of certain events. The Indenture
permits the Company to increase the Conversion Rate from time to time.

If the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, the right to
convert a LYON into Common Stock may be changed into a right to convert it into
securities, cash or other assets of the Company or another person.

No sinking fund is provided for the LYONs. The Company may redeem the LYONs
as a whole at any time, or from time to time in part. The table below shows the
Redemption Prices of a LYON per $1,000 principal amount, at June 14, 1994, at
each June 14 thereafter prior to maturity and at maturity on June 14, 2004,
which prices reflect the accrued Original Issue Discount calculated to each such
date. The Redemption Price of a LYON redeemed between such dates would include
an additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table.

<TABLE>
<CAPTION>
ACCRUED
ORIGINAL
ISSUE
DISCOUNT REDEMPTION
LYON AT PRICE
REDEMPTION DATE ISSUE PRICE(1) 8.00%(2) (1) + (2)
----------------------------------------------------- -------------- -------- ----------
<S> <C> <C> <C>
June 14, 1994........................................ $ 308.32 $ 148.07 $ 456.39
June 14, 1995........................................ 308.32 185.31 493.63
June 14, 1996........................................ 308.32 225.59 533.91
June 14, 1997........................................ 308.32 269.16 577.48
June 14, 1998........................................ 308.32 316.28 624.60
June 14, 1999........................................ 308.32 367.25 675.57
June 14, 2000........................................ 308.32 422.37 730.69
June 14, 2001........................................ 308.32 482.00 790.32
June 14, 2002........................................ 308.32 546.48 854.80
June 14, 2003........................................ 308.32 616.24 924.56
At maturity.......................................... 308.32 691.68 1,000.00
</TABLE>

On June 14, 1994 (the "Purchase Date"), the Company will purchase, at the
option of the Holder, any outstanding LYON for which a written purchase notice
(the "Purchase Notice") has been delivered by the Holder to the office of the
Paying Agent at any time on or prior to the Purchase Date and not withdrawn,
subject to certain additional conditions. The Purchase Price payable to the
Holder of a LYON delivering a

51
<PAGE> 52

Purchase Notice is $456.39 (Issue Price plus accrued Original Issue Discount to
the Purchase Date) payable by the Company (the "Purchase Price"), at its option,
entirely either in cash, shares of Common Stock or Extension Notes, but not in
any combination thereof (except for the payment of cash for fractional shares of
Common Stock or fractional Extension Notes).

If the Company elects to pay the Purchase Price in shares of Common Stock,
the number of shares to be delivered in respect of the Purchase Price shall be
equal to the Purchase Price divided by the Market Price of the Common Stock.
Shares of Common Stock issued upon purchase of the LYONs in accordance with the
provisions of the Indenture and prior to the Distribution Date (as defined
below), shall also be entitled to receive Rights (as defined below), under the
terms and subject to the conditions of the Rights Plan (as defined below). If
the Company elects to pay the Purchase Price in Extension Notes, the aggregate
principal amount of Extension Notes to be issued in respect of the Purchase
Price shall be equal to the Purchase Price. However, no fractional shares of
Common Stock and no Extension Notes in denominations of other than $1,000
principal amount or an integral multiple thereof (valued at par) will be
delivered upon any purchase by the Company of LYONs through the delivery of any
such security in payment of the Purchase Price. Instead, the Company will pay
cash based on the Market Price for all fractional shares of Common Stock or cash
based on the principal amount (valued at par) for all fractional Extension
Notes. The "Market Price" means the average of the Sale Price (as defined below)
of the Common Stock for the five Business Day period ending three Business Days
prior to the Purchase Date, appropriately adjusted to take into account the
occurrence during the eight Business Days preceding such Purchase Date of
certain events that would result in an adjustment of the Conversion Rate with
respect to the Common Stock. The "Sale Price" of the Common Stock on any date
means the closing sale price (or if no closing sale price is reported, the
average of the high and low bid prices) on such date as reported in the
composite transactions for the principal United States securities exchange on
which the Common Stock is traded or, if the Common Stock is not listed on a
United States national or regional stock exchange, as reported by the National
Association of Securities Dealers Automated Quotation System. Because the Market
Price of the Common Stock is determined prior to the Purchase Date, Holders of
LYONs bear the market risk with respect to the value of the Common Stock to be
received from the date such Market Price is determined to the Purchase Date.

The Company's right to purchase LYONs with Extension Notes or shares of
Common Stock is subject to the Company satisfying various conditions, including:
(i) the registration of the Extension Notes or the Common Stock, as the case may
be, under the Securities Act and the Exchange Act, if applicable; (ii) the
qualification of an Extension Indenture covering the Extension Notes under the
Trust Indenture Act of 1939, as amended, if applicable; and (iii) any necessary
qualification or registration under applicable state law or the availability of
an exemption from such qualification or registration. If such conditions are not
satisfied by June 14, 1994, the Company will pay the Purchase Price of the LYONs
in cash. No LYONs may be purchased if there has occurred and is continuing an
Event of Default.

Because of the Company's need to utilize cash for planned capital
expenditures, unless the Offering is completed successfully, the Company expects
to pay for any LYONs delivered to it pursuant to the Put Feature by issuing
Common Stock. See "Use of Proceeds." The Company is unable to predict how many
LYONs it may be required to purchase pursuant to the Put Feature. If the Company
were required to purchase all of the LYONs on June 14, 1994 pursuant to the Put
Feature, assuming a market price of the Common Stock of $9 1/8 per share (the
price to the public of the Shares in the Offering), the Company would issue
approximately 5.5 million shares of Common Stock, representing approximately
11.9% of the Company's Common Stock outstanding after such issuance. The Company
cannot predict what effect the Put Feature will have on the market price of the
Common Stock. For a discussion of other alternatives being considered with
respect to the LYONs, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition and Liquidity."

In the event of any Change in Control (as defined in the Indenture) of the
Company occurring on or prior to June 14, 1994, each Holder of LYONs will have
the right, at the Holder's option, subject to the terms and conditions of the
Indenture, to require the Company to purchase all or any part (provided that the
principal amount at maturity must be $1,000 or an integral multiple thereof) of
the Holder's LYONs on the date that is 35 business days after the occurrence of
such Change in Control (the "Change in Control Purchase Date") at

52
<PAGE> 53

a cash price equal to the Issue Price plus accrued Original Issue Discount to
the Change in Control Purchase Date.

The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at maturity of the LYONs then outstanding
may declare the Issue Price of the LYONs plus the Original Issue Discount on the
LYONs accrued to the date of such declaration to be immediately due and payable.
In the case of certain events of bankruptcy or insolvency, the Issue Price of
the LYONs plus the Original Issue Discount accrued thereon to the occurrence of
such event shall automatically become and be immediately due and payable.

DESCRIPTION OF CAPITAL STOCK

The following statements with respect to the Company's capital stock
describe the material terms but are subject to the detailed provisions of the
Company's Certificate of Incorporation, and by-laws, as amended (the "By-Laws"),
and to the Rights Agreement (as defined below). These statements do not purport
to be complete and are qualified in their entirety by reference to the terms of
the Certificate of Incorporation, the By-Laws and the Rights Agreement, which
are incorporated by reference in this Prospectus.

COMMON STOCK AND PREFERRED STOCK

The Company is authorized to issue 100 million shares of Common Stock,
$0.25 par value per share, of which 40,642,493 shares of Common Stock were
issued as of May 2, 1994, including 62,245 treasury shares. The Company is
authorized to issue five million shares of Preferred Stock, of which 2.3 million
shares of the Company's Series B Preferred Stock are currently outstanding.

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 the Board of Directors of
the Company. The Board may fix the number of shares constituting each series and
increase or decrease the number of shares of any series.

Subject to the rights of the holders of any outstanding shares of Preferred
Stock, each share of Common Stock is entitled to one vote on all matters
presented to the shareholders, with no cumulative voting rights; to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefor; and in the event of liquidation or dissolution of the
Company, to share ratably in any distribution of the Company's assets. Holders
of shares of Common Stock do not have preemptive rights or other rights to
subscribe for unissued or treasury shares or securities convertible into such
shares, and no redemption or sinking fund provisions are applicable. All
outstanding shares of Common Stock are fully paid and nonassessable.

SERIES B PREFERRED STOCK

The Series B Preferred Stock ranks senior to the Common Stock and any
shares of Series A Junior Participating Preferred Shares issued pursuant to the
Rights with respect to payment of dividends and amounts upon liquidation,
dissolution or winding up. While any shares of Series B Preferred Stock are
outstanding, Hecla may not authorize the creation or issue of any class or
series of stock that ranks senior to the Series B Preferred Stock as to
dividends or upon liquidation, dissolution or winding up without the consent of
the holders of at least 66 2/3% of the outstanding shares of Series B Preferred
Stock and any other series of Preferred Stock ranking on a parity with the
Series B Preferred Stock as to dividends and upon liquidation, dissolution or
winding up (a "Parity Stock"), voting as a single class without regard to
series.

Holders of shares of Series B Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of Hecla out of assets of
Hecla legally available therefor, cumulative cash dividends at the rate per
annum of $3.50 per share of Series B Preferred Stock.

Hecla will not (i) declare, pay or set apart funds for the payment of any
dividend or other distribution with respect to any Junior Stock (as defined
below) or (ii) redeem, purchase or otherwise acquire for consideration any
Junior Stock or Parity Stock through a sinking fund or otherwise (except by
conversion into

53
<PAGE> 54

or exchange for shares of Junior Stock and other than a redemption or purchase
or other acquisition of shares of Common Stock of Hecla made for purposes of an
employee incentive or benefit plan of Hecla or any subsidiary), unless all
accrued and unpaid dividends with respect to the Series B Preferred Stock and
any Parity Stock at the time such dividends are payable have been paid or funds
have been set apart for payment of such dividends. As used herein, (i) the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock, or in options, warrants or rights to holders of Junior Stock to
subscribe for or purchase any Junior Stock, and (ii) the term "Junior Stock"
means the Common Stock, any Series A Junior Participating Preferred Shares
issued pursuant to the Rights, and any other class of capital stock of Hecla now
or hereafter issued and outstanding that ranks junior as to the payment of
dividends or amounts payable upon liquidation, dissolution and winding up to the
Series B Preferred Stock.

The Series B Preferred Stock is not redeemable prior to July 1, 1996. On
and after such date, the Series B Preferred Stock is redeemable at the option of
Hecla, in whole or in part, at $52.45 per share if redeemed during the
twelve-month period beginning July 1, 1996 declining to $50.00 per share July 1,
2003 and thereafter, plus, in each case, all dividends accrued and unpaid on the
Convertible Preferred Stock up to the date fixed for redemption.

The holders of shares of Series B Preferred Stock will be entitled to
receive, in the event of any liquidation, dissolution or winding up of Hecla,
whether voluntary or involuntary, $50.00 per share of Series B Preferred Stock
plus an amount per share of Series B Preferred Stock equal to all dividends
(whether or not earned or declared) accrued and unpaid thereon to the date of
final distribution to such holders (the "Liquidation Preference"), and no more.
Until the holders of the Series B Preferred Stock have been paid the Liquidation
Preference in full, no payment will be made to any holder of Junior Stock upon
the liquidation, dissolution or winding up of Hecla.

Except as indicated below or in the Series B Preferred Certificate of
Designations, or except as otherwise from time to time required by applicable
law, the holders of Series B Preferred Stock will have no voting rights and
their consent shall not be required for taking any corporate action. When and if
the holders of Series B Preferred Stock are entitled to vote, each holder will
be entitled to one vote per share. If the equivalent of six quarterly dividends
payable on the Series B Preferred Stock have not been declared and paid or set
apart for payment, whether or not consecutive, the number of directors then
constituting the Board of Directors of Hecla shall be increased by two and the
holders of the Series B Preferred Stock and any other series of Parity Stock
similarly affected, voting as a single class without regard to series, will be
entitled to elect such two additional directors at the next annual meeting and
each subsequent meeting, until such time as all cumulative dividends have been
paid in full.

Each share of Series B Preferred Stock will be convertible, in whole or in
part at the option of the holders thereof, into shares of Common Stock at a
conversion price of $15.55 per share of Common Stock (equivalent to a conversion
rate of approximately 3.2154 shares of Common Stock for each share of Series B
Preferred Stock), subject to adjustment as described below (the "Conversion
Price").

The Conversion Price is subject to adjustment upon certain events,
including (i) dividends (and other distributions) payable in Common Stock on any
class of capital stock of Hecla, (ii) the issuance to all holders of Common
Stock of certain rights or warrants (other than the Rights or any similar rights
issued under any successor shareholders rights plan) entitling them to subscribe
for or purchase Common Stock or securities which are convertible into Common
Stock, (iii) subdivisions, combinations and reclassifications of Common Stock,
and (iv) distributions to all holders of Common Stock of evidences of
indebtedness of Hecla or assets (including securities, but excluding those
dividends, rights, warrants and distributions referred to above and dividends
and distributions paid in cash out of the profits or surplus of Hecla).

WARRANTS TO PURCHASE COMMON STOCK

CoCa Warrants. As a result of the acquisition of Geodome Resources Limited
by CoCa Mines in 1989, and the acquisition of CoCa Mines by the Company in 1991,
as of March 1, 1994, the Company has outstanding 459,232 warrants to acquire
Common Stock at an exercise price of $17.81 and 12,859 warrants to acquire
Common Stock at an exercise price of $12.42 (collectively, the "CoCa Warrants").
The CoCa

54
<PAGE> 55

Warrants are exercisable until May 5, 1994. However, the CoCa Warrants will
expire if, at any time after May 15, 1990, upon 60 calendar days' prior notice,
the Common Stock has had an average per share closing public market price of not
less than $22.24 for at least 60 consecutive trading days prior to such
expiration notice.

Equinox Warrants. As a result of the Company's acquisition of Equinox in
March 1994, warrants issued by Equinox on December 8, 1992 in connection with
Equinox's acquisition of another company ("Equinox Warrants") were assumed by
Hecla. The Equinox Warrants are exercisable for a total of 379,506 shares of
Common Stock at an exercise price of Canadian $11.33 per share (equivalent to
U.S.$8.17 using the exchange rate on May 4, 1994). The Equinox Warrants expire
on August 31, 1996. If the Common Stock trades higher than Canadian $16.67 for
20 consecutive trading days, upon Hecla's election and notice to warrantholders,
the holders of Equinox Warrants must exercise their warrants or lose the right
to exercise. The terms of the Equinox Warrants are set forth in the warrant
transfer agency agreement made as of December 8, 1992 between Equinox and
Montreal Trust Company of Canada, which agreement has been assumed by the
Company.

RIGHTS

Upon the terms and subject to the conditions of the Rights Agreement, a
holder of a Right is entitled to purchase one one-hundredth of a Series A
Preferred Share at an exercise price of $47.50. The Rights are currently
represented by the certificates for the Common Stock and are not transferable
apart therefrom. Transferable Rights certificates will be issued at the earlier
of (i) the tenth day after the public announcement that any person or group has
acquired beneficial ownership of 15% or more of the Common Stock (an "Acquiring
Person") or (ii) the tenth 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 of Hecla to not less than 10% prior to any such acquisition.

The Rights are subject to adjustment in several circumstances. In
particular, (i) in the event Hecla is acquired in a merger or other business
combination transaction, each Right will entitle its holder to purchase, at the
exercise price of the Right, that number of shares of common stock of the
acquiror which at the time of such transaction would have a market value of two
times the exercise price of the Rights and (ii) in the event any person or group
becomes an Acquiring Person, each holder of a Right (other than Rights
beneficially owned by the Acquiring Person, which will become void) will
thereafter have the right to receive upon exercise that number of shares of
Common Stock having a market value of two times the exercise price of the Right.

All the outstanding Rights may be redeemed by Hecla for $0.05 per Right
prior to the tenth day following the date on which it was announced that a
person or group became an Acquiring Person. Under certain circumstances, the
Board of Directors of the Company 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, 1996 unless earlier redeemed.

As long as the Rights are attached to and evidenced by the certificates
representing the Common Stock, Hecla will continue to issue one Right with each
share of Common Stock that shall become outstanding. A Right is presently
attached to each issued and outstanding share of Common Stock. So long as the
Rights are outstanding, the Company will issue one Right with each new share of
Common Stock issued.

The Rights have certain antitakeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors of the Company. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors of the Company since the Rights may be redeemed by the
Company prior to the consummation of such transactions.

55
<PAGE> 56

The Rights Agreement is attached as an exhibit to the Company's
Registration Statement on Form 8-A dated May 19, 1986. The Rights Agreement was
amended effective November 29, 1990 and such amendment is attached as an exhibit
to the Company's Current Report on Form 8-K dated November 9, 1990 (as amended,
the "Rights Agreement"). The description of the Rights found in each of the
foregoing Form 8-A and Form 8-K has been incorporated by reference herein and
copies of such Forms can be obtained in the manner set forth under "Information
Incorporated By Reference."

CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS

Certain provisions in the Company's Certificate of Incorporation and
By-Laws may in certain circumstances have an antitakeover effect. These
provisions (1) classify the Board of Directors into three classes, as nearly
equal in number as possible, each of which serve for three years, with one class
being elected each year; (2) provide that directors may be removed only for
cause and only with the approval of the holders of at least 80% of the voting
power of the capital stock of the Company entitled to vote generally in the
election of directors (the "Voting Stock"); (3) provide that any vacancy on the
Board of Directors shall be filled only by the remaining directors then in
office, though less than a quorum; (4) require that shareholder action be taken
at an annual or special meeting of shareholders and prohibit shareholder action
by consent; (5) provide that special meetings of shareholders of the Company may
be called only by the Board of Directors pursuant to a resolution adopted by a
majority of the entire Board of Directors; and (6) provide that the shareholder
vote required to alter, amend or repeal the foregoing provisions is 80% of the
then-outstanding Voting Stock.

The Certificate of Incorporation authorizes the issuance of five million
shares of Preferred Stock of which 2.3 million shares have been issued as Series
B Preferred Stock. In addition, sufficient shares of Preferred Stock have been
reserved for issuance upon exercise of the Rights. It would be possible, within
the limitations imposed by applicable law and the applicable rules of the New
York Stock Exchange upon which the Common Stock is listed, for the Board of
Directors to authorize the issuance of one or more series of Preferred Stock
with voting rights (including class voting rights) or other rights, powers and
preferences which could impede the success of a proposed merger, tender offer,
proxy contest or other attempt to gain control of the Company. In a takeover or
similar situation, the issuance by the Board of Directors of Preferred Stock
having voting rights could dilute the voting power of the shares of Common Stock
held by a potential acquiror. Moreover, if the Preferred Stock were to be issued
with class voting rights such an issuance could potentially confer veto power
over the proposed transaction on a party friendly to the Company's management.

The Certificate of Incorporation also requires the approval by the holders
of 80% of the then-outstanding Voting Stock as a condition for mergers and
certain other business combinations of the Company ("Business Combinations")
with any holder of more than 12 1/2% of such Voting Stock (an "Interested
Shareholder") unless the transaction is either approved by at least a majority
of the members of the Board of Directors who are unaffiliated with the
Interested Shareholder and were directors before the Interested Shareholder
became an Interested Shareholder (the "Continuing Directors") or certain minimum
price and procedural requirements are met.

While the foregoing provisions contained in the Certificate of
Incorporation and By-Laws as well as those in the Rights Plan are intended to
encourage persons seeking to acquire control of the Company to initiate such an
acquisition through arm's-length negotiations with the Board of Directors, they
could also have the effect of discouraging a third party from making a tender
offer (including an offer at a substantial premium over the then-current market
value of the Common Stock) or otherwise attempting to obtain control of the
Company even though such an attempt might be beneficial to the Company and its
shareholders. Since such provisions may have the effect of giving the Board of
Directors more bargaining powers in negotiations with potential acquirors, they
could also result in the Board of Directors using such bargaining power not only
to try to negotiate a favorable price for an acquisition but also to negotiate
more favorable terms for the management or the Board of Directors.

56
<PAGE> 57

DESCRIPTION OF CREDIT FACILITY

The following summary of the Company's revolving credit facility, which
describes the material terms of such facility, does not purport to be complete
and is qualified in its entirety by reference to the agreement (including the
amendments thereto) for such facility, a copy of which has been filed as an
exhibit to this Registration Statement. See "Available Information."

The Company is a party to a secured reducing revolving credit agreement
dated January 25, 1993 (as amended on April 12, 1993, August 11, 1993 and
November 9, 1993) with a group of banks including Mase Westpac Limited, New York
Branch, as agent, which currently provides for reducing revolving credit
advances of up to $30.0 million. The facility must be repaid in its entirety no
later than December 31, 1996.

Pursuant to the terms of the credit facility, as amended, the availability
under the revolving credit facility reduces as follows:

<TABLE>
<CAPTION>
BASE MAXIMUM
SCHEDULED COMMITMENT AMOUNT
REDUCTION DATE REDUCTION AVAILABLE
---------------------------------------------- ----------- -----------
<S> <C> <C>
December 31, 1995............................. $ 3,750,000 $26,250,000
March 31, 1996................................ 3,750,000 22,500,000
June 30, 1996................................. 3,750,000 18,750,000
September 30, 1996............................ 3,750,000 15,000,000
December 31, 1996............................. 15,000,000 --
</TABLE>

Commitment fees are 1/2 of 1 percent on the average daily unused portion of
the maximum available amount of the base commitment. The interest rate options
are a specified bank's reference rate plus 1/2 percent, a CD Rate plus 1 5/8
percent or the Offshore Rate plus 1 1/2 percent, each as defined in the
agreement for the facility. No compensating balances are required. Borrowings
under the agreement are collateralized by the Company's accounts receivable,
inventories and specified marketable securities and cash equivalents. The
agreement contains restrictive covenants concerning the maintenance of a minimum
net worth, current ratio, leverage ratio and fixed charge coverage ratio. The
agreement for the revolving credit facility restricts the Company from paying
any dividends while there is an Event of Default (as defined in such agreement).
Among other things, there will be an Event of Default if the Company violates
the restrictive covenants described above.

As of May 4, 1994, there were no amounts outstanding under the revolving
credit facility. The Company does not currently anticipate borrowing material
amounts under such facility in the foreseeable future.

CERTAIN UNITED STATES TAX CONSEQUENCES
FOR NON-U.S. SHAREHOLDERS

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of shares of
Common Stock by a person that is a "Non-U.S. Shareholder." For purposes of this
discussion, a "Non-U.S. Shareholder" means any person other than (i) an
individual who is a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, or (iii) an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.

This discussion is for general information only and does not consider all
aspects of United States federal tax consequences that may be relevant to a
particular Non-U.S. Shareholder in light of such shareholder's particular tax
position, and does not deal with state, local or foreign tax consequences. This
discussion is based on the Internal Revenue Code, existing and proposed Treasury
regulations, and judicial and administrative interpretations as of the date
hereof, all of which are subject to change. Prospective investors are urged to
consult their own tax advisors with respect to the United States federal, state
and local tax consequences of owning and disposing of the Common Stock, as well
as any tax consequences arising under the laws of any other taxing jurisdiction.

57
<PAGE> 58

DIVIDENDS

In the event that dividends are paid on the Common Stock, any such
dividends paid to a Non-U.S. Shareholder will be subject to withholding of
United States federal income tax at a rate of 30% of the amount of the dividend
(or a lower rate prescribed by an applicable income tax treaty). However, if the
dividend is effectively connected with the conduct of a United States trade or
business by the Non-U.S. Shareholder and the Non-U.S. Shareholder properly files
Internal Revenue Service Form 4224 (or such other applicable form required by
the Internal Revenue Service) with the Company or its dividend-paying agent,
then the dividend (i) will not be subject to income tax withholding, and (ii)
except to the extent that an applicable income tax treaty provides otherwise,
will be subject to United States federal income tax at progressive rates of tax.
In the case of a Non-U.S. Shareholder that is a corporation, such effectively
connected dividend income may also be subject to the branch profits tax (which
is generally imposed on a foreign corporation on the repatriation from the
United States of effectively connected earnings and profits) at a 30% rate (or a
lower rate prescribed by an applicable income tax treaty).

A Non-U.S. Shareholder that is eligible for a reduced rate of United States
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund with
the Internal Revenue Service.

The Company is required to report annually to the Internal Revenue Service
and each Non-U.S. Shareholder the amount of dividends paid to, and the income
tax withheld with respect to, such shareholder. Such information may also be
made available by the Internal Revenue Service to the tax authorities of the
country in which the Non-U.S. Shareholder resides.

DISPOSITION OF COMMON STOCK

Because the Company is a "U.S. real property holding corporation", a
Non-U.S. Shareholder who held, directly or indirectly, at any time during the
five-year period ending on the date of disposition of shares of Common Stock,
more than 5% of any class of stock of the Company that is regularly traded on an
established securities market within the meaning of the applicable Treasury
regulations will be subject to United States federal income tax on the gain
realized upon such disposition. Non-U.S. Shareholders will also be subject to
U.S. federal income tax on the gain realized upon a disposition of shares of
Common Stock of (i) the gain is effectively connected with a United States trade
or business carried on by the Non-U.S. Shareholder and, if an income tax treaty
applies, attributable to a United States permanent establishment maintained by
the Non-U.S. Shareholder, (ii) the Non-U.S. Shareholder is an individual who
holds the Common Stock as a capital asset, such shareholder is present in the
United States for 183 days or more in the taxable year of the disposition and
either the Non-U.S. Shareholder has a "tax home" in the United States for United
States federal income tax purposes or the sale is attributable to an office or
other fixed place of business maintained by the Non-U.S. Shareholder in the
United States or (iii) the Non-U.S. Shareholder is subject to a tax pursuant to
the provisions of United States tax law applicable to certain United States
expatriates.

ESTATE TAX

Shares of Common Stock owned or treated as owned by an individual who is
not a citizen or resident (as specifically defined for U.S. federal estate tax
purposes) of the United States at the time, of his or her death will be
includable in the individual's gross estate for United States federal estate tax
purposes and thus subject to United States federal estate tax, unless an
applicable estate tax treaty provides otherwise.

UNITED STATES INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

United States information reporting requirements (other than the reporting
of dividend payments for purposes of the 30% income tax withholding discussed
under "Dividends" above) and backup withholding tax generally will not apply to
a dividend payment made outside the United States to a Non-U.S. Shareholder, if
the dividend is either subject to the 30% withholding tax discussed above or is
subject to a reduced rate of such withholding tax under an applicable income tax
treaty. Otherwise, information reporting and backup withholding tax at a 31%
rate may apply to dividends paid on the Common Stock to a Non-U.S. Shareholder

58
<PAGE> 59

who fails to certify its non-U.S. status under penalties of perjury in the
manner required by United States law or otherwise fails to establish an
exemption.

In addition, the payment of the proceeds of the sale of shares of Common
Stock to or through the United States office of a broker will be subject to
information reporting and possible 31% backup withholding unless the owner
certifies its non-U.S. status under penalties of perjury or otherwise
establishes an exemption. The payment of the proceeds of the sale of shares of
Common Stock to or through the foreign office of a broker generally will not be
subject to this backup withholding tax. In the case of the payment of proceeds
from the disposition of shares of Common Stock through a foreign office of a
broker that is a United States person or a "U.S. related person," existing
regulations require information reporting but not backup withholding on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Shareholder and the broker has no actual knowledge to the
contrary. For this purpose, a "U.S. related person" is (i) a "controlled foreign
corporation" for United States federal income tax purposes, or (ii) a foreign
person, 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment (or for
such part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a United States
trade or business. Proposed Treasury regulations which have not been finally
adopted contain a similar rule with respect to information reporting by a broker
that is a United States person or a "U.S. related person." However, under the
proposed regulations, such a person may only rely on documentary evidence to
avoid information reporting if the foreign office "effects" the sale at such
foreign office. Any amounts withheld under the backup withholding rules from a
payment to a Non-U.S. Shareholder will be allowed as a refund or a credit
against such Non-U.S. Shareholder's United States federal income tax, provided
that the required information is furnished to the Internal Revenue Service.

These information reporting and backup withholding rules are under review
by the Internal Revenue Service, and their application to the Common Stock could
be changed by future regulations.

59
<PAGE> 60

UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") between the Company and each of the underwriters named
below (the "Underwriters"), the Company has agreed to sell to the Underwriters,
and each of the Underwriters for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company, the
respective number of Shares set forth opposite each such Underwriter's name. The
Underwriters will be committed to purchase all of the Shares if any are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased as set forth in the Purchase Agreement.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------------ ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................... 1,500,000
Salomon Brothers Inc.................................................... 1,500,000
Dean Witter Reynolds Inc. .............................................. 200,000
Donaldson, Lufkin & Jenrette Securities Corporation..................... 200,000
Goldman, Sachs & Co. ................................................... 200,000
Kidder, Peabody & Co. Incorporated...................................... 200,000
Lehman Brothers Inc. ................................................... 200,000
Oppenheimer & Co., Inc. ................................................ 200,000
PaineWebber Incorporated................................................ 200,000
Prudential Securities Incorporated...................................... 200,000
Robertson, Stephens & Company, L.P. .................................... 200,000
S.G. Warburg & Co. Inc. ................................................ 200,000
J.C. Bradford & Co. .................................................... 100,000
The Buckingham Research Group Incorporated.............................. 100,000
Cowen & Company......................................................... 100,000
Dain Bosworth Incorporated.............................................. 100,000
Fahnestock & Co. Inc. .................................................. 100,000
Huntleigh Securities Corporation........................................ 100,000
Interstate/Johnson Lane Corporation..................................... 100,000
Janney Montgomery Scott Inc. ........................................... 100,000
Jensen Securities Co. .................................................. 100,000
Piper Jaffray Inc. ..................................................... 100,000
Ragen MacKenzie Incorporated............................................ 100,000
RBC Dominion Securities Corporation..................................... 100,000
The Robinson-Humphrey Company, Inc. .................................... 100,000
Stifel, Nicolaus & Company, Incorporated................................ 100,000
Wheat, First Securities, Inc. .......................................... 100,000
----------
Total...................................................... 6,500,000
----------
----------
</TABLE>

The Representatives have advised the Company that the Underwriters propose
initially to offer the Shares to the public at the public offering price set
forth on the cover page of the Prospectus and to certain dealers at such price
less a concession not in excess of $.33 per Share. The Underwriters may allow,
and such dealers may reallow, a discount not to exceed $.10 per Share to certain
other dealers. After the Offering, the public offering price, concession and
discount may be changed.

The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to 975,000 additional
Shares at the initial public offering price less the underwriting discount. The
Representatives may exercise this option only to cover over-allotments, if any,
made on the sale of Shares offered hereby. To the extent that the
Representatives exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase the same percentage of
such shares as the number of Shares to be purchased by each such Underwriter
shown in the foregoing table bears to the total number of Shares initially
offered hereby.

60
<PAGE> 61

The Company has agreed, for a period of 180 days after the date of this
Prospectus, not to, without the prior written consent of the Representatives,
offer, sell or offer to sell, grant any option for the sale of, or otherwise
dispose of directly or indirectly, any shares of Common Stock or securities
convertible into Common Stock, other than the sale of the Shares to the
Underwriters and other than conversions of existing convertible securities,
exercises of any outstanding options or warrants, grants of Common Stock or
options pursuant to the Company's employee plans, and pursuant to the Rights.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

Each of the Representatives, from time to time, performs investment banking
and other financial services for the Company.

LEGAL MATTERS

The validity of the Shares and certain other legal matters relating to the
Offering will be passed upon for the Company by Wachtell, Lipton, Rosen & Katz,
New York, New York. The validity of the Shares offered hereby will be passed
upon for the Underwriters by Shearman & Sterling, Los Angeles, California.

EXPERTS

The consolidated financial statements and financial statement schedules of
the Company and the supplemental consolidated financial statements reflecting
the acquisition of Equinox accounted for as a pooling of interests included or
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement have been included or incorporated herein in reliance on the report of
Coopers & Lybrand, independent accountants, given on the authority of that firm
as experts in accounting and auditing. The consolidated financial statements of
Equinox incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been incorporated herein in reliance on the report
of Deloitte & Touche, chartered accountants, given on the authority of that firm
as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Documents filed by the Company can
also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005, on which exchange certain of the Company's
securities are listed.

This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments thereto, the "Registration Statement") filed by
the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement and to the exhibits thereto for further information with
respect to the Company and the shares of Common Stock offered hereby. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and in each instance reference is made to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is qualified in its entirety by such
reference.

61
<PAGE> 62

INFORMATION INCORPORATED BY REFERENCE

The following documents filed by the Company with the Commission (File No.
1-8491) are incorporated in this Prospectus by reference and hereby made a part
hereof: (i) the Company's Annual Report on Form 10-K for the year ended December
31, 1993; (ii) the Company's Proxy Statement, dated March 28, 1994, for the
Annual Meeting of Stockholders to be held on May 6, 1994 (except for pages 8
through 12 thereof); (iii) the description of Common Stock contained in the
Registration Statement on Form 8-B, dated May 6, 1983, filed under Section 12 of
the Exchange Act, including any amendment or report filed for the purpose of
updating such description; (iv) the description of the Company's Preferred Share
Purchase Rights contained in the Registration Statement on Form 8-A, dated May
19, 1986, filed under Section 12 of the Exchange Act, as amended by the
description contained in the Current Report on Form 8-K, dated November 9, 1990,
including any other amendment or report filed for the purpose of updating such
description; (v) the description of the CoCa Warrants (as hereinafter defined)
contained in the Registration Statement on Form 8-A, dated May 17, 1989, of CoCa
Mines, Inc., as amended by CoCa Mines, Inc.'s Form 8 (Amendment No. 1), dated
July 2, 1991, as amended by the Company's Form 8 (Amendment No. 2), dated May 8,
1992; (vi) the description of the Company's Series B Cumulative Convertible
Preferred Stock contained in the Registration Statement on Form 8-A, dated June
18, 1993, filed under Section 12 of the Exchange Act; (vii) the description of
the Company's Liquid Yield Option Notes due 2004 contained in the Registration
Statement on Form 8-A, dated June 5, 1989, filed under Section 12 of the
Exchange Act; (viii) the Company's Current Report on Form 8-K dated March 11,
1994, as amended by the Form 8-K/A-1 filed May 2, 1994; and (ix) the Company's
Current Report on Form 8-K dated April 29, 1994.

All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the
termination of the offering of the shares of Common Stock, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, other
than exhibits to such documents (except for exhibits that are specifically
incorporated by reference herein). Requests for such copies should be directed
to the Company's principal executive offices located at 6500 Mineral Drive,
Coeur d'Alene, Idaho 83814-8788, to the attention of Mr. Michael B. White,
Secretary (telephone no. (208) 769-4100).

62
<PAGE> 63

GLOSSARY OF CERTAIN MINING TERMS

BALL CLAY -- A fine-grained, plastic, white firing clay used principally
for bonding in ceramic ware.

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

CASH PRODUCTION COSTS PER OUNCE -- Calculated based upon total cash
production costs, as defined herein, 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.

DECLINE -- An underground passageway connecting one or more levels in a
mine, providing adequate traction for heavy, self-propelled equipment. Such
underground openings are often driven in an upward or downward spiral, much the
same as a spiral staircase.

DEVELOPMENT -- Work carried out for the purpose of opening up a mineral
deposit and making the actual ore extraction possible.

DORE -- Unparted gold and silver poured into molds when molten to form
buttons or bars. Further refining is necessary to separate the gold and silver.

DRIFT -- A horizontal passage underground.

EXPLORATION -- Work involved in searching for ore, usually by drilling or
driving a drift.

FELDSPARS -- Aluminosilicates that contain potassium, sodium and calcium.
Feldspar products are primarily used in the ceramic whiteware, glass and paint
industries.

FULL PRODUCTION COSTS -- Includes all cash production costs, as defined,
plus depreciation, depletion and amortization relating to each operating mine.

FULL PRODUCTION COSTS PER OUNCE -- Calculated based upon total full
production costs, as defined, divided by the total ounces of the primary metal
produced.

GRADE -- The average assay of a ton of ore, reflecting metal content.

HEAP LEACHING -- A process involving the percolation of a cyanide solution
through crushed ore heaped on an impervious pad or base to dissolve minerals or
metals out of the ore.

KAOLIN -- A fine, white clay used as a filler or extender in ceramics and
refractories.

MILL -- A processing plant that produces a concentrate of the valuable
minerals or metals contained in an ore. The concentrate must then be treated in
some other type of plant, such as a smelter, to effect recovery of the pure
metal.

ORE -- Material that can be mined and processed at a positive cash flow.

PATENTED MINING CLAIM -- A parcel of land originally located on federal
lands as an unpatented mining claim under the General Mining Law, the title of
which has been conveyed from the federal government to a private party pursuant
to the patenting requirements of the General Mining Law.

PROBABLE RESERVES -- Resources for which tonnage and grade are computed
primarily from specific measurements, samples or production data, and partly
from projection for a reasonable distance on geologic evidence. The sites
available for inspection, measurement and sampling are too widely or otherwise
inappropriately spaced to permit the mineral bodies to be outlined completely,
or the grade established throughout.

PROVEN RESERVES -- Resources for which tonnage is computed from dimensions
revealed in workings and drill holes and for which the grade is computed from
the results of detailed sampling. The sites for inspection, sampling and
measurement are spaced so closely and the geologic character is so well defined
that size, shape and mineral content are all established. The computed tonnage
and grade are judged to be accurate, within

63
<PAGE> 64

limits which are stated, and no such limit is judged to be different from the
computed tonnage or grade by more than 20%.

RESERVES -- That part of a mineral deposit that can be economically and
legally extracted or produced at the time of the reserve determination. Reserves
are customarily stated in terms of "ore" when dealing with metals.

ROCKBURST -- Explosive rock failures caused by the pressure exerted by rock
adjacent to mine openings far below the surface.

SAND FILL -- The coarser fraction of concentrator tailings, which is
conveyed underground in pipes as a slurry to support cavities left by extraction
of ore.

SHAFT -- A vertical or steeply inclined excavation for the purpose of
opening and servicing a mine. It is usually equipped with a hoist at the top
which lowers and raises a conveyance for handling personnel and materials.

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

TROY OUNCE -- Unit of weight measurement used for all precious metals. The
familiar 16-ounce avoirdupois pound equals 14.583 troy ounces.

UNDERHAND MINING -- The primary mining method employed in the Lucky Friday
mine utilizing mechanized equipment, a ramp system and cemented sandfill. The
method has proven effective in reducing mining cost and rockburst activity.

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 load mining claim is
granted certain rights including the right to explore and mine such claim under
the General Mining Law.

VEIN -- A mineralized zone having a more or less regular development in
length, width and depth which clearly separates it from neighboring rock.

WASTE -- Barren rock in a mine, or mineralized material that is too low in
grade to be mined and milled at a profit.

64
<PAGE> 65

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Hecla Mining Company Audited Year-End
Financial Statements:
Report of Independent Accountants................................................... F-2
Consolidated Balance Sheets at December 31, 1993 and 1992........................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1993,
1992 and 1991.................................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
1992 and 1991.................................................................... F-5
Consolidated Statement of Changes in Shareholders' Equity for the Years Ended
December 31, 1993, 1992 and 1991................................................. F-6
Notes to Consolidated Financial Statements.......................................... F-7
Supplemental (Hecla Mining Company and Equinox Resources Ltd.)
Financial Statements:
Report of Independent Accountants................................................... F-26
Supplemental Consolidated Balance Sheets at December 31, 1993 and 1992.............. F-27
Supplemental Consolidated Statements of Operations for the Years Ended December 31,
1993, 1992 and 1991.............................................................. F-28
Supplemental Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1992 and 1991.............................................................. F-29
Supplemental Consolidated Statement of Changes in Shareholders' Equity for the Years
Ended December 31, 1993, 1992 and 1991........................................... F-30
Notes to Supplemental Consolidated Financial Statements............................. F-31
</TABLE>

F-1
<PAGE> 66

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Shareholders
Hecla Mining Company

We have audited the accompanying consolidated balance sheets of Hecla
Mining Company and Subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1993. 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 conducted our audits in accordance with generally accepted auditing
standards. 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 provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hecla Mining
Company and subsidiaries as of December 31, 1993 and 1992, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.

As discussed in Notes 6 and 9 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and postretirement
benefits other than pensions in 1992.

COOPERS & LYBRAND

Spokane, Washington
February 3, 1994, except for Note 5,
as to which the date is February 8, 1994

F-2
<PAGE> 67

HECLA MINING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1993
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 3,287 $ 37,891
Short-term investments............................................... -- 27,540
Accounts and notes receivable........................................ 15,290 16,859
Income tax refund receivable......................................... 390 --
Inventories.......................................................... 12,652 13,022
Other current assets................................................. 1,349 1,915
-------- --------
Total current assets......................................... 32,968 97,227
Investments............................................................ 4,822 6,211
Properties, plants and equipment, net.................................. 179,827 222,870
Other noncurrent assets................................................ 4,826 6,570
-------- --------
Total assets................................................. $222,443 $332,878
-------- --------
-------- --------
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses................................ $ 9,003 $ 14,610
Accrued payroll and related benefits................................. 2,139 2,056
Preferred stock dividends payable.................................... -- 2,012
Accrued taxes........................................................ 1,271 928
Current portion of deferred income taxes............................. 285 --
-------- --------
Total current liabilities.................................... 12,698 19,606
Deferred income taxes.................................................. 1,038 359
Long-term debt......................................................... 70,382 49,489
Accrued reclamation costs.............................................. 20,108 19,503
Other noncurrent liabilities........................................... 3,723 3,858
-------- --------
Total liabilities............................................ 107,949 92,815
-------- --------
Minority interest in consolidated subsidiary........................... 775 --
-------- --------
Commitments and contingencies (Notes 2, 3 and 8)
SHAREHOLDERS' EQUITY
Preferred stock, 25c par value, authorized 5,000,000 shares, issued and
outstanding 1993 -- 2,300,000, liquidation preference $117,012....... -- 575
Common stock, 25c par value, authorized 100,000,000 shares; issued
1993 -- 34,644,734, issued 1992 -- 31,651,192........................ 7,912 8,661
Capital surplus........................................................ 97,806 238,601
Retained earnings (deficit)............................................ 8,927 (6,878)
Net unrealized loss on marketable equity securities.................... (16) (8)
Less common stock reacquired, at cost; 1993 -- 62,226 shares,
1992 -- 63,753 shares................................................ (910) (888)
-------- --------
Total shareholders' equity................................... 113,719 240,063
-------- --------
Total liabilities and shareholders' equity................... $222,443 $332,878
-------- --------
-------- --------
</TABLE>

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

F-3
<PAGE> 68

HECLA MINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Sales of products.......................................... $117,568 $100,651 $ 81,847
-------- -------- --------
Cost of sales and other direct production costs............ 84,853 83,288 71,109
Depreciation, depletion and amortization................... 21,161 13,493 10,292
-------- -------- --------
106,014 96,781 81,401
-------- -------- --------
Gross profit.......................................... 11,554 3,870 446
-------- -------- --------
Other operating expenses:
General and administrative............................... 14,054 8,520 6,961
Exploration.............................................. 5,693 7,659 4,353
Research................................................. 1,538 1,317 --
Depreciation and amortization............................ 692 819 669
Provision for closed operations and environmental
matters............................................... 3,638 12,670 2,307
Reduction in carrying value of mining properties......... -- 27,928 200
-------- -------- --------
25,615 58,913 14,490
-------- -------- --------
Loss from operations.................................. (14,061) (55,043) (14,044)
-------- -------- --------
Other income (expense):
Interest and other income................................ 2,219 12,428 2,965
Other expense............................................ (17) (61) (3)
Gain (loss) on investments............................... 229 (2,115) (144)
Minority interest in net loss of consolidated
subsidiary............................................ 484 95 43
Interest expense:
Total interest cost................................... (6,985) (6,905) (5,023)
Less amount capitalized............................... 145 2,070 3,533
-------- -------- --------
(3,925) 5,512 1,371
-------- -------- --------
Loss before income taxes and cumulative effect of changes
in accounting principles................................. (17,986) (49,531) (12,673)
Income tax benefit......................................... 2,556 345 938
-------- -------- --------
Loss before cumulative effect of changes in accounting
principles............................................... (15,430) (49,186) (11,735)
Cumulative effect of changes in accounting principles...... -- (103) --
-------- -------- --------
Net loss................................................... (15,430) (49,289) (11,735)
Preferred stock dividends.................................. -- -- (4,070)
-------- -------- --------
Net loss applicable to common shareholders................. $(15,430) $(49,289) $(15,805)
-------- -------- --------
-------- -------- --------
Net loss per common share:
Loss before cumulative effect of changes in accounting
principles and after preferred stock dividends........ $ (0.51) $ (1.59) $ (0.48)
Cumulative effect of changes in accounting principles.... -- (0.01) --
-------- -------- --------
$ (0.51) $ (1.60) $ (0.48)
-------- -------- --------
-------- -------- --------
Cash dividends per common share............................ $ -- $ -- $ --
-------- -------- --------
-------- -------- --------
Weighted average number of common shares outstanding....... 30,094 30,866 32,915
-------- -------- --------
-------- -------- --------
</TABLE>

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

F-4
<PAGE> 69

HECLA MINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net loss..................................................... $(15,430) $(49,289) $(11,735)
Noncash elements included in net loss:
Depreciation, depletion and amortization.................. 21,853 14,312 10,961
Deferred income tax benefit............................... (1,429) (120) (964)
Loss (gain) on disposition of properties, plants and
equipment............................................... (1,865) (9,628) 1,300
(Gain) loss on investments................................ (229) 2,115 144
Accretion of interest on long-term debt................... 5,891 5,602 4,349
Provision for reclamation and closure costs............... 2,898 12,305 1,635
Reduction in carrying value of mining properties.......... -- 27,928 200
Gain on retirement of long-term debt...................... -- (510) (323)
Minority interest in net loss of consolidated
subsidiary.............................................. 484 95 43
Change in:
Accounts and notes receivable............................. (844) 5,869 (1,569)
Income tax refund receivable.............................. -- -- 390
Inventories............................................... (3,047) 4,162 (370)
Other current assets...................................... (920) 849 (566)
Accounts payable and accrued expenses..................... (2,808) 188 5,607
Accrued payroll and related benefits...................... -- (443) (83)
Preferred stock dividends payable......................... -- -- 2,012
Accrued taxes............................................. 359 (1,770) (343)
Noncurrent liabilities.................................... (160) (2,184) (2,105)
-------- -------- --------
Net cash provided by operating activities.................... 4,753 9,481 8,583
-------- -------- --------
Investing activities:
Purchase of investments and increase in cash surrender value
of life insurance......................................... (219) (117) (554)
Purchase of short-term investments, net...................... -- -- (27,540)
Proceeds from sale of investments and subsidiary............. 738 -- 273
Additions to properties, plants and equipment................ (18,885) (23,176) (52,671)
Proceeds from disposition of properties, plants and
equipment................................................. 1,036 11,493 1,282
Other, net................................................... 1,012 (272) (2,105)
-------- -------- --------
Net cash applied to investing activities..................... (16,318) (12,072) (81,315)
-------- -------- --------
Financing activities:
Repayment on gold loan....................................... (1,387) -- --
Common stock issued under stock option plans................. 1,500 296 1,060
Preferred stock issuance, net of issuance costs.............. -- -- 110,346
Acquisition of treasury stock................................ (4) -- --
Preferred stock dividends.................................... -- -- (4,070)
-------- -------- --------
Net cash provided by financing activities.................... 109 296 107,336
-------- -------- --------
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents......... (11,456) (2,295) 34,604
Cash and cash equivalents at beginning of year............... 17,038 5,582 3,287
-------- -------- --------
Cash and cash equivalents at end of year..................... $ 5,582 $ 3,287 $ 37,891
-------- -------- --------
-------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during year for:
Interest (net of amount capitalized)...................... $ 182 $ 159 $ 318
-------- -------- --------
-------- -------- --------
Income tax payments, net.................................. $ 171 $ 222 $ 49
-------- -------- --------
See Notes 2, 5, and 7 for noncash investing and financing activities.
</TABLE>

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

F-5
<PAGE> 70

HECLA MINING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS AND SHARES IN THOUSANDS)

<TABLE>
<CAPTION>
NET UNREALIZED
PREFERRED STOCK COMMON STOCK RETAINED LOSS ON
--------------- --------------- CAPITAL EARNINGS TREASURY MARKETABLE EQUITY
SHARES AMOUNT SHARES AMOUNT SURPLUS (DEFICIT) STOCK SECURITIES
------ ------ ------ ------ -------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1990....... $ 30,119 $7,530 $ 83,397 $ 73,646 $ (906) $ (13)
Net loss........................ (15,430)
Net change in unrealized loss on
marketable equity
securities.................... (3)
Stock issued under stock option
plans
Hecla......................... 26 6 141
CoCa.......................... 130 32 1,147
Stock issued under CoCa employee
stock ownership plan.......... 34 9 165
Acquisition of treasury stock..... (4)
------ ------ ------ ------ -------- --------- -------- -----
Balances, December 31, 1991....... 30,309 7,577 84,850 58,216 (910) (16)
Net loss........................ (49,289)
Stock issued under stock option
plans
Hecla......................... 17 4 117
CoCa.......................... 20 5 170
Stock issued for Mexican mineral
concessions................... 185 46 1,748
Stock issued
to retire long-term debt...... 1,120 280 10,921
------ ------ ------ ------ -------- --------- -------- -----
Balances, December 31, 1992....... 31,651 7,912 97,806 8,927 (910) (16)
Net loss........................ (11,735)
Preferred stock dividends ($1.77
per share).................... (4,070)
Stock issued under stock option
plans
Hecla......................... 87 22 590
CoCa.......................... 52 13 435
Net change in unrealized loss on
marketable equity
securities.................... 8
Treasury stock issued net
of purchase................... (12) 22
Stock issued for Mountain West
Products...................... 655 164 6,141
Preferred stock issuance, net of
issuance costs................ 2,300 575 109,771
Stock issued to retire
long-term debt................ 2,200 550 23,870
------ ------ ------ ------ -------- --------- -------- -----
Balances, December 31, 1993....... 2,300 $575 34,645 $8,661 $238,601 $ (6,878) $ (888) $ (8)
------ ------ ------ ------ -------- --------- -------- -----
------ ------ ------ ------ -------- --------- -------- -----
</TABLE>

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

F-6
<PAGE> 71

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. COMPANY'S BUSINESS AND CONCENTRATIONS OF CREDIT RISK -- Hecla Mining
Company and its subsidiaries (the Company) are engaged in mining and mineral
processing. Sales of metals products are made principally to domestic and
foreign custom smelters and metal traders. Industrial minerals are sold
principally to domestic manufacturers and wholesalers. Sales to significant
metals customers, as a percentage of total sales of metals products, were as
follows:

<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Custom smelters........................................ 26.9% 37.5% 27.3%
Custom metal traders:
Customer A........................................ 15.2% 21.3% 17.1%
Customer B........................................ 21.8% 16.5% 16.8%
Customer C........................................ 11.8% 14.0% 15.5%
Customer D........................................ 13.7% 7.7% 13.3%
</TABLE>

During 1993, 1992 and 1991, the Company sold 19%, 26%, and 17% of its
products to companies in foreign countries, respectively.

The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company places its cash and temporary cash investments with high
credit worthy institutions. At times such investments may be in excess of the
FDIC insurance limit. The Company routinely assesses the financial strength of
its customers and, as a consequence, believes that its trade accounts receivable
credit risk exposure is limited.

B. BASIS OF CONSOLIDATION -- The consolidated financial statements include
the accounts of the Company, its majority-owned subsidiaries and its
proportionate share of the accounts of the joint ventures in which it
participates. All significant intercompany transactions and accounts are
eliminated.

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

D. INVESTMENTS -- The Company follows the equity method of accounting for
investments in common stock of operating companies 20% to 50% owned. Investments
in non-operating companies that are not intended for resale or are not readily
marketable are valued at the lower of cost or net realizable value. The carrying
value of marketable equity securities is based on the lower of aggregate cost or
quoted market value. The cost of investments sold is determined by specific
identification.

Short-term investments represent investments in certificates of deposits,
commercial paper and U.S. Treasury Notes recorded at amortized cost, plus
accrued interest, which approximates market value.

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 book value or
estimated net realizable value.

F-7
<PAGE> 72

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

affect the decision to reopen or make a disposition of the assets. The Company
estimates 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, 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 and, where appropriate, from the continuity of existing,
developed ore bodies, future production costs and future metal prices over the
estimated remaining mine life.

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

F. MINE EXPLORATION AND DEVELOPMENT -- Exploration costs are charged to
operations as incurred, as are normal development costs at operating mines.
Major mine development expenditures at operating properties and at new mining
properties not yet producing are capitalized.

G. RECLAMATION OF MINING AREAS -- Minimum standards for mine reclamation
have been established by various governmental agencies which affect certain
operations of the Company. A reserve for mine reclamation costs has been
established for restoring certain abandoned and currently disturbed mining areas
based upon estimates of cost to comply with existing reclamation standards. Mine
reclamation costs for operating properties are accrued using the
unit-of-production method.

H. INCOME TAXES -- In the fourth quarter of 1992, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS No. 109"), retroactive to January 1, 1992. SFAS No. 109
requires a company to recognize deferred tax liabilities and assets for the
expected future income tax consequences of events that have been recognized in a
company's financial statements. Under this method, deferred tax liabilities and
assets are determined based on the temporary differences between the financial
statement carrying amounts and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the temporary differences are expected
to reverse. In 1991, the Company utilized the liability method of accounting for
income taxes as required by Statement of Financial Accounting Standards No. 96.

I. NET LOSS PER COMMON SHARE -- Net loss per common share is computed by
adding preferred stock dividends to net loss and dividing the result by the
weighted average number of shares of common stock and common stock equivalents
(stock options) outstanding during each reporting period unless the common stock
equivalents are anti-dilutive. Due to the net losses in 1993, 1992 and 1991,
common stock equivalents are anti-dilutive and therefore have been excluded from
the computation.

J. REVENUE RECOGNITION -- Sales of metal products sold directly to smelters
are recorded when they are received by the smelter, at estimated metal prices.
Recorded values are adjusted periodically and upon final settlement. Metal in
products tolled (rather than sold to smelters) is sold under contracts for
future delivery; such sales are recorded at contractual amounts when products
are available to be processed by the smelter or refinery. Sales of industrial
minerals are recognized as the minerals are delivered.

K. INTEREST EXPENSE -- Interest costs incurred during the construction of
qualifying assets are capitalized as part of the asset cost.

L. CASH EQUIVALENTS -- The Company considers cash equivalents to consist of
highly liquid investments with a remaining maturity of three months or less when
purchased. For investments characterized as cash equivalents, the carrying value
is a reasonable estimate of fair value.

M. FOREIGN CURRENCY TRANSLATION -- All assets and liabilities of the
Company's Canadian and Mexican operations are translated to U.S. dollars using
the exchange rate at the balance sheet date. Income and expense items are
translated using average exchange rates. Gains and losses from foreign currency
transactions are included in operations.

F-8
<PAGE> 73

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2: BUSINESS COMBINATIONS

Equinox Resources Limited

On December 29, 1993, the Company, two wholly owned Canadian subsidiaries
of the Company, and Equinox Resources Ltd. ("Equinox"), a mining, exploration
and development company, incorporated under the laws of the Province of British
Columbia and headquartered in Vancouver, Canada, executed an Acquisition
Agreement providing for the Company's acquisition of Equinox. Pursuant to the
Acquisition Agreement and related Plan of Arrangement, upon consummation of the
transactions contemplated thereby, (i) Equinox common shareholders will receive
0.3 common share of the Company ("Company common shares"), for each outstanding
Equinox common share, (ii) holders of Equinox's Series "A" production
participating preferred shares will receive newly issued production notes of the
Company with the same material terms and conditions, and (iii) outstanding
Equinox options and warrants will become exercisable for Company common shares.
In connection with the acquisition of Equinox, the Company expects to issue
approximately 6.3 million Company common shares, including shares issuable upon
exercise of outstanding Equinox options and warrants.

The Board of Directors of the Company and Equinox have each approved the
Acquisition Agreement. However, the transactions contemplated by the Acquisition
Agreement are subject to a number of conditions including, without limitation,
approval by Equinox shareholders, and approval by a Canadian court of the Plan
of Arrangement.

Assuming the transaction is consummated as planned, the acquisition will be
treated as a pooling-of-interests, and accordingly, the consolidated financial
statements will be restated to reflect the accounts of Equinox.

Pro forma unaudited results of operations assuming the merger had occurred
on January 1, 1991, are as follows (in thousands except per-share data):

<TABLE>
<CAPTION>
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales.......................................... $117,568 $101,621 $ 92,888
Net loss applicable to common shareholders......... (15,521) (55,276) (21,852)
Net loss per common share.......................... (0.46) (1.59) (0.57)
</TABLE>

The pro forma information above includes adjustments related to conforming
Equinox's accounting policies for income taxes, reclamation, asset
recoverability, and exploration costs to those of the Company.

Mountain West Bark Products, Inc.

In December 1993, the Company acquired all of the issued and outstanding
common stock of Mountain West Bark Products, Inc. ("Mountain West") through the
issuance of 655,000 shares of the Company's common stock. Mountain West is
engaged primarily in the purchasing, processing and marketing of certain waste
products from lumber milling operations in the western intermountain region.
These products are sold as soil amendments, landscape mulches and decorative
ground cover for landscape purposes. The transaction has been accounted for as a
purchase and, accordingly, the acquired assets and liabilities have been
recorded at their estimated fair value at December 1, 1993, the date of the
acquisition. Mountain West's operating results have been included in the
consolidated financial statements since that date and were immaterial to the
Company. Results of operations of Mountain West prior to December 1, 1993, were
not material and, therefore, are not presented. The value of the Company's
common shares issued in this transaction was approximately $6,305,000. Goodwill
of $1,733,000 was recorded in the transaction and is being amortized
straight-line over 15 years.

F-9
<PAGE> 74

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3: INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1992 1993
------- -------
<S> <C> <C>
Concentrates and metals in transit and other products............ $ 1,779 $ 1,189
Industrial minerals products..................................... 4,192 5,260
Materials and supplies........................................... 6,681 6,573
------- -------
$12,652 $13,022
------- -------
------- -------
</TABLE>

At December 31, 1993, the Company had forward sales commitments for 4,500
ounces of gold at an average price of $363 per ounce. The commitments are for
delivery in February 1994. There is no silver committed to forward sales at
December 31, 1993. The Company purchased options to put 41,880 ounces of gold to
the counterparties at an average price of $385 per ounce. Concurrently, the
Company sold options to allow the counterparties to call 41,880 ounces of gold
from the Company at an average price of $453 per ounce. There was no net cost
associated with the purchase and sale of these options.

NOTE 4: INVESTMENTS

Investments consist of the following components (in thousands):

<TABLE>
<CAPTION>
CARRYING MARKET
VALUE COST VALUE
------- ------ ------
<S> <C> <C> <C>
December 31, 1993:
Marketable equity securities.................................... $ 23 $ 31 $ 23
Other investments............................................... 6,188 6,188
------- ------
$ 6,211 $6,219
------- ------
------- ------
December 31, 1992:
Marketable equity securities.................................... $ 16 $ 32 $ 16
Other investments............................................... 4,806 4,806
------- ------
$ 4,822 $4,838
------- ------
------- ------
</TABLE>

At December 31, 1993, the portfolio of noncurrent marketable equity
securities includes gross unrealized gains of approximately $9,000 and gross
unrealized losses of approximately $17,000. The other investments are
principally large blocks of common and preferred stock in several mining
companies, investments in various ventures, and cash surrender value of life
insurance policies. The securities are generally restricted as to trading or
marketability, although some are traded on various exchanges.

At December 31, 1993, other investments with a carrying value of $5,430,632
had an estimated fair value of $7,689,811 based on the quoted market price for
such securities and cash values of life insurance policies. For the remaining
other investments, for which there are no reliable quoted market prices, a
reasonable estimate of fair value could not be made without incurring excessive
costs.

During the fourth quarter of 1992, the Company wrote down its common stock
investment in Granduc Mines Limited (Granduc) to current estimated market value.
The $2.1 million write-down of this investment was recorded to reflect the
apparent other-than-temporary decline in market value of the common stock
investment due to continued depressed metal prices. At December 31, 1993, the
Company's carrying value of its Granduc common stock investment was
approximately $1,488,000.

F-10
<PAGE> 75

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On January 24, 1994, the Company sold its entire investment in Granduc by
selling 2,000,000 Granduc common shares to Conwest Exploration Company Limited
and 815,330 Granduc common shares to Jascan Resources Inc., both of which are
Toronto, Ontario, Canada-based companies. The Company recognized a gain on the
sale of approximately $1,327,000 in the first quarter of 1994.

On June 30, 1993, the Company sold substantially all of its interest in
Acadia Mineral Ventures Limited, a previously consolidated subsidiary, to
Kingswood Resources, Inc., a Canadian exploration and development company, for
Canadian $350,000 cash, plus 5,000,000 Kingswood Resources, Inc. common shares.
The Company recognized a loss on the sale of approximately $120,000 in the
second quarter of 1993.

NOTE 5: PROPERTIES, PLANTS AND EQUIPMENT

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

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1993
-------- --------
<S> <C> <C>
Mining properties.............................................. $ 39,811 $ 54,984
Deferred development costs..................................... 127,529 154,005
Plants and equipment........................................... 167,873 178,640
Land........................................................... 6,176 6,163
-------- --------
341,389 393,792
Less accumulated depreciation, depletion and amortization...... 161,562 170,922
-------- --------
Net carrying value............................................. $179,827 $222,870
-------- --------
-------- --------
</TABLE>

Based on its periodic reviews of the status of various mining properties
and investments, the Company determined in the fourth quarter of 1992 that
certain adjustments were appropriate to properly reflect estimated net
realizable values. These adjustments consisted primarily of the write-downs of
various properties, plants and equipment totaling approximately $28.0 million.
The major portion of the adjustments related to the $13.5 million write-down of
the Company's interest in the Apex processing facility, a hydrometallurgical
processing plant near St. George, Utah. The Company continues to evaluate the
feasibility of custom recoveries of specialty metals and chemical products. Also
in 1992, due to depressed silver prices, the Company recorded write-downs of
approximately $9.0 million related to the Consolidated Silver and Hog Heaven
silver properties, located in North Idaho and northwest Montana, respectively.
The Lisbon Valley Project in Utah, a joint venture which is fully developed for
uranium and vanadium production, was also written down in 1992 by approximately
$3.5 million to its estimated net realizable value. Included in the 1992
write-downs were approximately $1.5 million and $0.4 million related to the
Company's interests in the Creede and Hardscrabble gold and silver properties,
respectively, both located in Colorado.

On May 19, 1992, the Company acquired interests in a number of Mexican
mineral concessions for approximately $2.9 million. The purchase consideration
included the issuance of 184,862 shares of the Company's common stock valued at
$1.8 million.

The net carrying values of the major mining properties of the Company that
were on a standby or idle basis at December 31, 1993 and 1992 were approximately
$55.3 million and $5.3 million, respectively. Operations at the Greens Creek
mine, with a net carrying value of $49.2 million at December 31, 1993, were
suspended in April 1993 pending improvement in lead, zinc and silver prices.

F-11
<PAGE> 76

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

rata share of the total construction cost for Grouse Creek from July 1, 1993 to
the completion of the project which is currently estimated at $90 million, and
has the option to increase its ownership to a maximum of 30 percent by
contributing additional funds on a proportional basis.

NOTE 6: INCOME TAXES

Major components of the Company's income tax provision (benefit) are as
follows (in thousands):

<TABLE>
<CAPTION>
1991 1992 1993
------- ----- -----
<S> <C> <C> <C>
Current:
Federal................................................ $(1,375) $(390) $(200)
State.................................................. 248 165 226
------- ----- -----
Total current.................................. (1,127) (225) 26
------- ----- -----
Deferred:
Federal................................................ (1,390) (17) (728)
State.................................................. (39) (103) (236)
------- ----- -----
Total deferred................................. (1,429) (120) (964)
------- ----- -----
Income tax benefit....................................... $(2,556) $(345) $(938)
------- ----- -----
------- ----- -----
</TABLE>

Effective January 1, 1992, the Company adopted the provisions of SFAS No.
109. As of January 1, 1992, the Company recorded a tax benefit of approximately
$1.5 million ($0.049 per common share), which represents the net decrease in the
deferred tax liability as of that date. This has been reflected in the
consolidated statement of operations as a component of the cumulative effect of
changes in accounting principles.

In 1992 and 1991, for income tax purposes, the Company carried back current
operating losses to offset income recorded in prior years and recorded income
tax refunds of approximately $390,000 and $2.2 million, respectively.

The sources of significant temporary differences which gave rise to the
deferred tax provision (benefit) and their effects were as follows (in
thousands):

<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Depreciation, depletion, deferred development and exploration
costs....................................................... $ 311 $ 196 $ 5,739
Utilization of capital losses................................. (1,740) 2,428 (941)
Reclamation costs............................................. (87) (3,457) 476
Reduction in carrying values of mining properties, plants
and equipment............................................... -- (8,826) --
Gain on sale of mineral property.............................. (466) -- --
Unrealized losses on marketable equity securities............. 580 (1,491) (84)
Increase of investment tax credits available to reduce
deferred taxes.............................................. (109) -- --
Change in valuation allowance associated with the ability to
use net operating losses.................................... -- 11,168 (6,361)
Postretirement benefits....................................... -- (543) (3)
Alternative minimum tax credit carryforward................... -- 390 156
Other, net.................................................... 82 15 54
------- ------- -------
$(1,429) $ (120) $ (964)
------- ------- -------
------- ------- -------
</TABLE>

F-12
<PAGE> 77

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the net deferred tax liability as of December 31, 1993
and 1992, were as follows (in thousands):

<TABLE>
<CAPTION>
1993
-------------------------------------
DEFERRED TAX
------------------------
ASSETS LIABILITIES TOTAL
-------- ----------- --------
<S> <C> <C> <C>
Accrued reclamation costs.................................. $ 5,739 $ 5,739
Investment valuation differences........................... 1,754 1,754
Miscellaneous.............................................. 2,039 2,039
Postretirement benefits other than pensions................ 742 742
Other liabilities.......................................... 188 188
Deferred compensation...................................... 406 406
Accounts receivable........................................ 456 456
Properties, plants and equipment........................... $ (19,309) (19,309)
Deferred income............................................ (440) (440)
Pension costs.............................................. (477) (477)
Deferred state income taxes, net........................... (2,271) (2,271)
-------- ----------- --------
Total temporary differences........................... 11,324 (22,497) (11,173)
-------- ----------- --------
Mexican net operating losses............................... 1,280 1,280
Federal net operating losses............................... 55,598 55,598
State net operating losses................................. 4,359 4,359
Tax credit carryforwards................................... 1,626 1,626
-------- ----------- --------
Total net operating losses and tax credits................. 62,863 62,863
-------- ----------- --------
Valuation allowance........................................ (52,049) (52,049)
-------- ----------- --------
Net deferred tax assets and liabilities.................... $ 22,138 $ (22,497) $ (359)
-------- ----------- --------
-------- ----------- --------
</TABLE>

F-13
<PAGE> 78

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1992
-------------------------------------
DEFERRED TAX
------------------------
ASSETS LIABILITIES TOTAL
-------- ----------- --------
<S> <C> <C> <C>
Accrued reclamation costs.................................. $ 5,833 $ 5,833
Investment valuation differences........................... 1,670 1,670
Miscellaneous.............................................. 1,236 1,236
Postretirement benefits other than pensions................ 738 738
Other liabilities.......................................... 698 698
Deferred compensation...................................... 532 532
Accounts receivable........................................ 456 456
Properties, plants and equipment........................... $ (13,570) (13,570)
Deferred income............................................ (516) (516)
Pension costs.............................................. (315) (315)
Deferred state income taxes, net........................... (1,153) (1,153)
-------- ----------- --------
Total temporary differences........................... 11,163 (15,554) (4,391)
-------- ----------- --------
Federal net operating losses............................... 46,645 46,645
State net operating losses................................. 3,248 3,248
Tax credit carryforwards................................... 1,630 1,630
Alternative minimum tax credit carryforwards............... 156 156
-------- ----------- --------
Total net operating losses and tax credits................. 51,679 51,679
-------- ----------- --------
Valuation allowance........................................ (48,611) (48,611)
-------- ----------- --------
Net deferred tax assets and liabilities.................... $ 14,231 $ (15,554) $ (1,323)
-------- ----------- --------
-------- ----------- --------
</TABLE>

The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets which may not be realized principally due to
expiration of net operating losses and tax credit carryforwards. The change in
the valuation allowance is as follows (in thousands):

<TABLE>
<CAPTION>
1992 1993
-------- --------
<S> <C> <C>
Balance at beginning of year................................... $(26,148) $(48,611)
Net increase in allowance related to uncertainty of recovery of
net operating loss carryforwards............................. (24,891) (3,438)
Utilization of capital loss carryforwards...................... 2,428 --
-------- --------
Balance at end of year......................................... $(48,611) $(52,049)
-------- --------
-------- --------
</TABLE>

The annual tax benefit is different from the amount which would be provided
by applying the statutory federal income tax rate to the Company's pretax loss.
The reasons for the difference are as follows (in thousands):

<TABLE>
<CAPTION>
1991 % 1992 % 1993 %
------- --- -------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Computed "statutory" benefit...................... $(6,115) (34) $(16,841) (34) $(4,309) (34)
Effect of adjustments associated with the
alternative minimum tax......................... 3,594 20 -- -- -- --
Investment and foreign tax credits................ (202) (1) -- -- -- --
Nonutilization of net operating losses............ -- -- 16,455 33 3,508 28
State income taxes, net of federal tax benefit.... 167 1 41 -- (137) (1)
------- --- -------- --- ------- ---
Income tax benefit................................ $(2,556) (14) $ (345) (1) $ (938) (7)
------- --- -------- --- ------- ---
------- --- -------- --- ------- ---
</TABLE>

F-14
<PAGE> 79

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Certain of the Company's net operating loss carryovers are attributed to
preference related items, and therefore are not available to offset alternative
minimum taxable income. However, they are available to offset future regular
taxable income. At December 31, 1993, the Company had tax basis net operating
loss carryovers available to offset future regular and alternative minimum
taxable income. These carryovers expire as follows (in thousands):

<TABLE>
<CAPTION>
REGULAR TAX NET ALTERNATIVE MINIMUM TAX
OPERATING LOSSES NET OPERATING LOSSES
---------------- -----------------------
<S> <C> <C>
1994.................................... $ 11,009 $
1995.................................... 12,590 5
1996.................................... 268 268
1997.................................... 2,020 695
1998.................................... 11,005 308
1999.................................... 6,235 1,199
2000.................................... 3,089 789
2001.................................... 4,538 1,683
2002.................................... 1,359 346
2003.................................... 1,150 623
2004.................................... 13,131 532
2005.................................... 17,201 878
2006.................................... 25,000 3,105
2007.................................... 27,088 17,414
2008.................................... 27,840 22,731
---------------- ----------
$163,523 $50,576
---------------- ----------
---------------- ----------
</TABLE>

In addition to the above, the Company had Mexican tax net operating loss
carryovers totaling $1,280,000, which expire in 1998.

During 1992, the Company used prior year capital loss carryovers of
approximately $7.4 million to offset 1992 capital gains. At December 31, 1993,
for income tax purposes, the Company had approximately $6.0 million of
alternative minimum tax net operating losses generated by CoCa Mines Inc.
("CoCa") prior to its merger with the Company in 1991. Due to the merger, there
are limitations on the amount of these net operating losses that can be utilized
in any given year to reduce certain future taxable income.

NOTE 7: LONG-TERM DEBT AND CREDIT AGREEMENT

Long-term debt at December 31, 1993 and 1992, consisted of the following
(in thousands):

<TABLE>
<CAPTION>
1992 1993
------- -------
<S> <C> <C>
Zero coupon convertible notes.................................... $69,376 $48,433
Notes payable.................................................... 917 962
Other long-term debt............................................. 89 94
------- -------
$70,382 $49,489
------- -------
------- -------
</TABLE>

Zero Coupon Convertible Notes

F-15
<PAGE> 80

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

life of the issue. The outstanding balances at December 31, 1993 and 1992,
include the accrued original issue discount. The noteholder, at his option, may
convert each note with a face value of $1,000 into 20.824 shares of the
Company's common stock. The notes are redeemable in cash at any time at the
option of the Company, in whole or in part, at redemption prices equal to the
issue price plus original issue discount to the date of redemption. The Company
will purchase any note with a face value of $1,000 at the option of the holder
on June 14, 1994 ("Put Feature"), at a purchase price of $456.39 (issue price
plus original issue discount to such date). The Company, at its option, may pay
such purchase price in cash, shares of common stock or extension notes, but not
in any combination thereof. However, because of the Company's need to utilize
cash for planned capital expenditures, absent any action by the Company, it will
pay for any LYONs delivered to it pursuant to the Put Feature by issuing Company
common stock. The Company is unable to predict how many LYONs it may be required
to purchase pursuant to the Put Feature and cannot predict what effect the Put
Feature will have on the market price of Company common stock.

The Company is currently considering several alternatives with respect to
the Put Feature. Among the alternatives being examined by the Company is the
sale of additional shares of the Company's common stock (or other Company
securities) with the proceeds of such an offering being used either to redeem
all of the outstanding LYONs or to pay cash for LYONs delivered to the Company
pursuant to the Put Feature (and any remaining proceeds would be used for the
Company's capital expenditures). The Company is also considering amending
certain terms of the LYONs in order to make it less likely that the Put Feature
will be exercised on June 14, 1994, including changing the conversion ratio to
increase the number of shares of the Company's common stock that would be
issuable for each LYON. If either of these alternatives is pursued, then
additional shares of Company common stock could be issued, although the
Company's intent with respect to these alternatives is to issue less shares of
Company common stock (other than any securities sold to raise additional funds
for capital expenditures) than would be the case if the Company was required to
repurchase all of the outstanding LYONs pursuant to the Put Feature on June 14,
1994. However, if the Company takes no action with respect to the Put Feature
and is required to purchase all of the outstanding LYONs on June 14, 1994, based
upon current market prices ($11.63 on December 31, 1993), the Company would have
to issue approximately 4,300,000 shares of Company common stock. There can be no
assurance that the Company will determine to pursue, or be successful in
pursuing, any alternative (including and in addition to the alternatives
discussed above) to reduce the likelihood that the Put Feature will result in
the issuance of a significant amount of the Company's common stock.

At December 31, 1993, remaining deferred debt issuance costs of
approximately $1.4 million incurred in connection with the issuance of this debt
is being amortized using the interest method over the life of the issue.

On May 19, 1992, the Company exchanged 1,120,125 shares of its common stock
for 30,900 outstanding LYONs. In the noncash transaction, the Company recorded
the issuance of common stock totaling approximately $11.2 million and the
reduction of long-term debt and deferred issuance costs totaling approximately
$12.0 million and $0.3 million, respectively, recognizing a gain totaling
approximately $0.5 million.

On April 29, 1993, the Company exchanged 2.2 million shares of its common
stock for 60,400 outstanding LYONs. The Company recorded the issuance of common
stock totaling approximately $24.4 million and the reduction of long-term debt
and deferred issuance costs totaling approximately $25.2 million and $0.5
million, respectively, recognizing a gain from this transaction of approximately
$0.3 million. The market value of the outstanding LYONs at December 31, 1993, is
$48.4 million based on quoted market prices for the debt.

F-16
<PAGE> 81

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Notes Payable

The notes are noninterest-bearing, discounted at 15% and payable in three
annual equal amounts from the date of commercial production of the Grouse Creek
property which is currently estimated to be October 1994. The fair value of
these notes payable approximates the carrying value at December 31, 1993.

Revolving Credit Agreement

On January 25, 1993, the Company entered into a secured reducing revolving
credit facility. The agreement provided for reducing revolving credit advances
of up to $24.0 million. On November 11, 1993, the Company amended this agreement
to provide for reducing revolving credit advances of up to $30.0 million. There
were no outstanding borrowings under this agreement at December 31, 1993.
Pursuant to the amended agreement, the availability under the facility reduces
as follows:

<TABLE>
<CAPTION>
SCHEDULED BASE COMMITMENT BASE COMMITMENT
REDUCTION DATE REDUCTION AVAILABLE
----------------------------------------- --------------- ---------------
<S> <C> <C>
December 31, 1995........................ $ 3,750,000 $26,250,000
March 31, 1996........................... 3,750,000 22,500,000
June 30, 1996............................ 3,750,000 18,750,000
September 30, 1996....................... 3,750,000 15,000,000
December 31, 1996........................ 15,000,000 --
</TABLE>

Commitment fees are 1/2 of 1 percent on the average daily unused portion of
the base commitment. The interest rate options are a specified bank's reference
rate plus 1/2 percent, a CD Rate plus 1 5/8 percent or the Offshore Rate plus
1 1/2 percent. No compensating balances are required. Borrowings under the
agreement are collateralized by the Company's accounts receivable, inventories,
and specified marketable securities. The agreement contains restrictive
covenants, among others, concerning the maintenance of a minimum net worth,
current ratio, leverage ratio, and fixed charge coverage ratio.

NOTE 8: CONTINGENCIES

F-17
<PAGE> 82

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Leadville Site. The Company paid the United States $450,000 under the decree.
The other two steps in the settlement process at the site relate to the Company
finalizing a study of any environmental impacts associated with the tailings
impoundments and implementing the appropriate response activity to address these
impacts. In July 1993, the Company completed and delivered to EPA the study
report analyzing the environmental impacts associated with the tailings
impoundments. Based on that study report, EPA has selected a response action for
the tailings impoundments which requires capping and providing of vegetation
cover for the tailings impoundments. The Company has recently finalized the
terms of a consent decree with the federal government providing for the payment
by the Company of $516,000 to cover a portion of EPA's past costs at the site
and a portion of the costs of the selected response action for the tailings
impoundments. The consent decree is in the process of being signed by all
parties and must also be approved by the Colorado Federal District Court. Upon
final approval of the consent decree, the Company will be released from
liability for response costs for the entire Leadville Site. In November 1991,
the Company finalized a settlement with two primary liability insurers
concerning insurance coverage for the Company's environmental liability at the
Leadville Site. The monies received in the insurance settlement in November 1991
are sufficient to cover the Company's CERCLA liability at the site.

In October 1989, and again in February 1990, the Company was notified by
the EPA that the EPA considered the Company a Potentially Responsible Party
("PRP") at the Bunker Hill Superfund Site located at Kellogg, Idaho ("Bunker
Hill Site"). The EPA has also notified a number of other companies involved in
mining or smelting activities in the site area that the EPA has determined they
are also PRPs at the site. The EPA has asserted that all PRPs, including the
Company, are responsible for the EPA's response costs and for remediating the
Bunker Hill Site as a result of the parties' release of hazardous substances at
or into the site. In August 1991, the EPA issued a Record of Decision regarding
the remedial action plan for the populated areas of the site. During the summers
of 1990, 1991, 1992, and 1993, the Company participated, along with a number of
other PRPs at the site, in a number of Orders on Consent pursuant to which the
participating PRPs agreed to undertake certain limited remedial activities
related to the populated areas of the site. The Company has also participated
with Gulf USA Corporation, one of the PRPs at the site, in an Order on Consent
with the EPA pursuant to which the Company and Gulf USA agreed to undertake
certain remedial activity with regard to the hillsides located within the site.
The EPA's Record of Decision covering the nonpopulated areas of the site was
issued on September 22, 1992. On November 4, 1992, the EPA issued special notice
letters under CERCLA to the Company and a number of other PRPs at the site
demanding reimbursement of the federal government's past response costs and
implementation of the remedial activity covered by the two previous Records of
Decision issued for the site. In November 1992, the major PRPs at the site,
including the Company, agreed to an allocation of most of the future remedial
activity at the site under the Records of Decision. The allocation is between
two PRP groups. One PRP group is principally made up of mining companies who
operated upstream from the site, and the second PRP group is made up of Gulf USA
and other companies who had mining, smelting, or related operations within the
site. The allocation for remedial activity among the two PRP groups is based
upon a number of factors, including each PRP's level of activity affecting the
site and an estimate of the costs to implement the various portions of the site
remediation. On January 11, 1993, the Company and certain other PRPs who had
received the special notice letters submitted to the EPA an offer which the PRPs
deemed should satisfy the government's requirements under CERCLA for a
good-faith offer. Under the terms of the offer, the Company and a subset of the
participating PRPs would assume responsibility for most residential and
commercial soils remediation and other incidental and related activities. A
different PRP sub-group, of which the Company is not a member but which includes
Gulf USA, would be responsible for implementing most of the remaining site's
remedial activities. The responsibility of each PRP group would be several from
the responsibilities of the other group, but would be joint and several among
the PRPs within each group. The Company estimates most of the proposed remedial
activity at the site will be undertaken over a period of five to seven years.
The PRPs' goodfaith offer did not include payment of any of the government's
past response costs. In October 1993, Gulf USA filed voluntary bankruptcy under
Chapter 11 of the United States Bankruptcy Code. Notwithstanding Gulf's
bankruptcy filing, the PRP group

F-18
<PAGE> 83

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

including the Company has recently finalized the terms of a consent decree with
the federal government and the State of Idaho generally along the allocation of
liability set forth in the PRPs' goodfaith offer. The Company and the other PRPs
participating in the consent decree have also agreed to an allocation of costs
to implement the work at the Bunker Hill Site under the terms of the consent
decree. The consent decree at the Bunker Hill Site is in the process of being
executed by all parties and will also be subject to Idaho Federal District Court
approval.

In July 1991, the Coeur d'Alene Indian Tribe (the "Tribe") brought a
lawsuit, under CERCLA, in Idaho Federal District Court against the Company and a
number of other mining companies asserting claims for damages to natural
resources located downstream from the Bunker Hill Site over which the Tribe
alleges some ownership or control. The Company has answered the Tribe's
complaint denying liability for natural resource damages and asserted a number
of defenses to the Tribe's claims, including a defense that the Tribe has no
ownership or control over the natural resources they assert have been damaged.
In July 1992, the Idaho Federal District Court, in a separate action, determined
that the Tribe does not own the beds, banks and waters of Lake Coeur d'Alene and
the lower portion of its tributaries, the ownership of which is the primary
basis for the natural resource damage claims asserted by the Tribe against the
Company. Based upon the Tribe's appeal of the July 1992 district court ownership
decision to the 9th Circuit U.S. Court of Appeals, the court in the natural
resource damage litigation issued an order on October 30, 1992, staying the
court proceedings in the natural resource damage litigation until a final
decision is handed down on the question of the Tribe's title.

In 1991, the Company initiated litigation in the Idaho State District Court
in Kootenai County, Idaho, against a number of insurance carriers which provided
comprehensive general liability insurance coverage to the Company and its
predecessors. The Company believes that the insurance companies have a duty to
defend and indemnify the Company under their policies of insurance relating to
claims asserted against the Company by the EPA and by the Tribe. In two separate
decisions issued in August 1992 and in March 1993, the court ruled that the
named primary insurance companies had a duty to defend the Company in the
Tribe's lawsuit, but that no carrier had a duty to defend the Company in the EPA
proceeding. The Company has not reduced its environmental accrual to reflect any
anticipated insurance proceeds.

The Records of Decision with respect to both the populated and nonpopulated
areas for the Bunker Hill Site indicate that future remediation costs total
approximately $93.0 million. Additionally, the federal government has asserted
that they have incurred approximately $17.0 million in past costs at the site.
Because CERCLA assigns joint and several liability among the PRPs, any one of
the PRPs, including the Company, could be assessed the entire cost of
remediation. However, based upon the terms of the consent decrees and related
agreements for the Bunker Hill and Leadville Sites, as described above, the
Company has accrued an amount for the Company's share of such remediation and
other costs that management presently believes is the most likely amount that
the Company will be required to fund. Based upon this analysis, in the fourth
quarter of 1993, the Company increased its allowance for CERCLA Superfund Site
remedial action costs at the Bunker Hill and Leadville Sites by approximately
$0.2 million and $0.3 million, respectively. The total allowance for liability
for remedial activity costs at the Bunker Hill and Leadville Sites is $10.2
million and $0.5 million, respectively, as of December 31, 1993. Other than
consulting work necessary for the implementation of the Company's allocated
portion of the remedial activity at these sites, the Company's accruals do not
include any future legal or consulting costs. The Company does not believe that
these costs will be material. In addition, the Company has not included any
amounts for unasserted claims at these or any other sites because the Company's
potential liability has not been asserted or established and amounts, if any, of
potential liability are impossible to determine. During 1993, 1992 and 1991, the
Company expensed approximately $0.8 million, $8.6 million and $2.8 million,
respectively, in connection with the Superfund Sites.

F-19
<PAGE> 84

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 1993, Industrial Constructors Corp. ("ICC") served the Company
with a complaint in Federal District Court for the District of Idaho alleging
that the Company failed to comply with the terms of the contract between the
Company and ICC relating to the earth moving work contracted to ICC at the
Company's Grouse Creek gold project. ICC has alleged that the Company owes ICC
in excess of $5.0 million not previously paid, including an approximate $1.0
million retention currently held by the Company under the terms of the contract.
The Company terminated ICC's work at the Grouse Creek gold project effective
November 26, 1993, pursuant to its rights in the contract and is proceeding to
rebid the second season of work originally contracted to ICC. The Company has
answered the complaint denying the allegations of ICC and has filed a
counterclaim against ICC in excess of $2.0 million for damages incurred by the
Company as a result of ICC's failure to comply with the terms of the contract.
The litigation is in the early stages of discovery; however, the Company hopes
to be able to mediate the dispute with ICC prior to proceeding to trial.

A jury trial is scheduled to commence in May 1994 in Idaho State District
Court with respect to a lawsuit previously filed against the Company by Star
Phoenix Mining Company ("Star Phoenix"), a former lessee of the Star Morning
Mine, over a dispute between the Company and Star Phoenix with respect to the
Company's November 1990 termination of Star Phoenix's lease of the Star Morning
Mine property. Star Phoenix, which is in bankruptcy, alleges the Company
wrongfully terminated the lease agreement and interfered with Star Phoenix's
contractual relationship with a major vendor and the purchaser of concentrates
from the Star Phoenix operations. In addition, certain principals of Star
Phoenix who guaranteed a portion of the Star Phoenix obligations have made
similar claims against the Company. In each case the plaintiffs have asserted
that they have incurred damages amounting to millions of dollars as a result of
the Company's actions. It is the Company's position that the plaintiff's claims
are without merit and that the Company terminated the lease agreement in
accordance with the terms of the agreement. The Company believes it has
sufficient defenses to all the plaintiffs' claims, and that the Company will
ultimately prevail in this litigation.

The Company is subject to other legal proceedings and claims which have
arisen in the ordinary course of its business and have not been finally
adjudicated. These actions, when ultimately concluded and determined, and any
remaining unaccrued potential liability at the Superfund sites addressed above
will not, in the opinion of management, have a material effect on results of
operations or the financial condition of the Company and its consolidated
subsidiaries.

NOTE 9: EMPLOYEE BENEFIT PLANS

The Company and certain subsidiaries have pension plans covering
substantially all employees. One plan covering eligible salaried and hourly
employees provides retirement benefits and is based on the employee's
compensation during the highest 36 months of the last 120 months before
retirement. Three other pension plans covering eligible hourly employees provide
benefits of stated amounts for each year of service. It is the Company's policy
to make contributions to these plans sufficient to meet the minimum funding
requirements of applicable laws and regulations, plus such additional amounts,
if any, as the Company and its actuarial consultants consider appropriate.
Contributions are intended to provide not only for benefits attributed to
service to date, but also for those expected to be earned in the future. Plan
assets for these plans consist principally of equity securities, insurance
contracts and corporate and U.S. government obligations.

F-20
<PAGE> 85

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net periodic pension cost (income) for the plans consisted of the following
in 1993, 1992 and 1991 (in thousands):

<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Service cost.......................................... $ 665 $ 872 $ 961
Interest cost......................................... 1,735 1,732 1,899
Return on plan assets................................. (2,265) (2,849) (2,924)
Amortization of transition asset...................... (443) (434) (434)
Amortization of unrecognized prior service cost....... 45 45 45
Amortization of unrecognized net (gain) loss from
earlier periods..................................... -- (305) 6
------- ------- -------
Net pension income.................................. $ (263) $ (939) $ (447)
------- ------- -------
------- ------- -------
</TABLE>

The following table sets forth the funded status of the plans and amounts
recognized in the Company's consolidated balance sheets at December 31, 1993 and
1992 (in thousands):

<TABLE>
<CAPTION>
1992 1993
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.............................................. $ 26,171 $ 27,771
Nonvested benefits........................................... 395 764
-------- --------
Accumulated benefit obligations................................ 26,566 28,535
Effect of projected future salary and wage increases........... 1,701 2,205
-------- --------
Projected benefit obligations.................................. $ 28,267 $ 30,740
-------- --------
-------- --------
Plan assets.................................................... $ 35,299 $ 35,135
Projected benefit obligations.................................. (28,267) (30,740)
-------- --------
Plan assets in excess of projected benefit obligations......... 7,032 4,395
Unrecognized net gain.......................................... (2,643) (253)
Unrecognized prior service cost................................ 519 778
Unrecognized net asset at January 1............................ (3,950) (3,515)
-------- --------
Pension asset recognized in consolidated balance sheets........ $ 958 $ 1,405
-------- --------
-------- --------
</TABLE>

The projected benefit obligation was calculated applying the following
average rates:

<TABLE>
<CAPTION>
1992 1993
---- ----
<S> <C> <C>
Discount rate.......................................................... 7.00% 6.50%
Long-term compensation increase........................................ 6.00% 5.00%
Long-term rate of return on plan assets................................ 8.50% 8.50%
</TABLE>

In 1988, 1991 and again in 1992, the Company offered a special early
retirement option to participants in the Hecla retirement plan with no actuarial
reduction in their accrued benefit for early retirement. The costs associated
with the 1988 special early retirement program were accrued in 1988 and are
being funded out of general corporate funds until the participant reaches normal
retirement age or age 60 with 30 years of service, at which time payments will
be made by the related pension trust. The 1991 and 1992 special early retirement
programs are being funded out of the related pension trust.

F-21
<PAGE> 86

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS No. 106), which requires that
these postretirement benefits be accrued over the period in which active
employees provide services to the Company. At January 1, 1992, the cumulative
effect of recording these postretirement benefits was to increase the 1992 net
loss by $1.6 million or $0.051 per share.

Net periodic postretirement benefit cost for 1993 and 1992 included the
following components (in thousands):

<TABLE>
<CAPTION>
1992 1993
---- ----
<S> <C> <C>
Service cost.......................................................... $ 22 $ 28
Interest cost......................................................... 179 164
---- ----
Net postretirement benefit cost....................................... $201 $192
---- ----
---- ----
</TABLE>

Postretirement benefit costs under the previous method were $40,000 in
1991.

The following table sets forth the status of the postretirement benefits
programs (other than pensions) and amounts recognized in the Company's
consolidated balance sheet at December 31, 1993 and 1992 (in thousands):

<TABLE>
<CAPTION>
1992 1993
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $(2,011) $(1,569)
Fully eligible, active plan participants....................... (113) (355)
Other active plan participants................................. (220) (242)
------- -------
(2,344) (2,166)
Unrecognized net (gain) loss................................... 50 (191)
------- -------
Accumulated postretirement benefit obligation recognized in
consolidated balance sheet..................................... $(2,294) $(2,357)
------- -------
------- -------
</TABLE>

The actuarial assumptions used in determining the Company's accumulated
postretirement benefit obligation are provided in the table below. Due to the
short period which the Company provides medical benefits to its retirees, the
increases in medical costs are assumed to be 6% in each year. A 1% change in the
assumed health care cost trend rate would not have a significant impact on the
accumulated postretirement benefit obligation or the aggregate of service and
interest cost for 1993 or 1992.

<TABLE>
<CAPTION>
1992 1993
---- ----
<S> <C> <C>
Discount rate.......................................................... 7.00% 6.50%
Trend rate for medical benefits........................................ 6.00% 6.00%
</TABLE>

The Company has a Deferred Compensation Plan which permits eligible
officers and directors to defer a portion of their compensation. The deferred
compensation, which together with Company matching amounts and accumulated
interest is accrued but unfunded, is distributable in cash after retirement or
termination of employment, and at December 31, 1993 and 1992, amounted to
approximately $1.2 million. The Company has insured the lives of certain
officers, who participate in the deferred compensation program, to assist in the
funding of the deferred compensation liability. The Company is the owner and
beneficiary of the insurance policies. At December 31, 1993, the cash surrender
value of these policies was $2.4 million, which is net of $2.2 million of policy
loans.

F-22
<PAGE> 87

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contribute up to 15%. The Company makes a matching contribution of 25% of an
employee's contribution up to, but not exceeding, 5% of the employee's earnings.
The Company's contributions for both 1993 and 1992 were approximately $158,000
and $149,000 for 1991.

NOTE 10: SHAREHOLDERS' EQUITY

Preferred Stock

In June 1993, the Company completed a public offering of 2.3 million shares
of Series B Cumulative Convertible Preferred Stock, par value $0.25 per share
(the "Preferred Shares"). The shares were sold for $50 each and the Company
received net proceeds of $110,346,000 from the offering. 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.

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 not redeemable by
the Company prior to July 1, 1996. After such date, the shares will be
redeemable at the option of the Company at any time, in whole or in part,
initially at $52.45 per share and thereafter at prices declining ratably on each
July 1 to $50 per share on or after July 1, 2003.

Holders of the Preferred Shares have no voting rights except if the Company
fails to pay the equivalent of six quarterly dividends. If these dividends are
not paid, the holders of Preferred Shares, voting as a class, shall be entitled
to elect two additional directors. The holders of Preferred Shares also have
voting rights related to certain amendments to the Company's Articles of
Incorporation.

The Preferred Shares rank senior to the common stock and any outstanding
shares of Series A Preferred Shares. The Preferred Shares have a liquidation
preference of $50 per share plus all accrued and unpaid dividends.

Shareholder Rights Plan

In 1986, the Company adopted a Shareholder Rights Plan. Pursuant to this
plan, holders of common stock received one preferred share purchase right for
each common share held. The plan was amended effective November 9, 1990. The
rights will be triggered once an Acquiring Person, as defined, acquires 15% or
more of the Company's outstanding common shares. The 15% triggering threshold
may be reduced by the Board of Directors to not less than 10%. When exercisable,
the right would, subject to certain adjustments and alternatives, entitle
rightholders, other than the Acquiring Person or group, to purchase common stock
of the Company or the acquiring company having a market value of twice the
$47.50 exercise price of the right. The rights are nonvoting, may be redeemed at
any time at a price of 5c per right prior to the tenth day after an Acquiring
Person acquires 15% of the Company's common stock, and expire in 1996.
Additional details are set forth in the Rights Agreement filed with the
Securities and Exchange Commission on May 19, 1986, and in the amendments dated
November 29, 1990 and September 30, 1991.

Stock Option Plans

In connection with the Company's 1991 acquisition of CoCa, the Company
assumed three preexisting CoCa employee stock option plans ("CoCa Plans"), and
converted all options then outstanding under the CoCa Plans into options to
acquire shares of the Company's common stock. No further options will be granted
under these CoCa Plans.

F-23
<PAGE> 88

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. At December 31, 1993 and
1992, there were 129,148 and 101,748 shares, respectively, available for grant
in the future under the plan. The plan expires in 1997.

The Company had an incentive stock option plan under which options were
granted to purchase common stock at a price not less than the fair market value
at date of grant. This plan expired in 1992.

The aggregate amounts charged (credited) to operations in connection with
the plans were $309,000, $(165,000) and $170,000 in 1993, 1992 and 1991,
respectively.

Transactions concerning stock options are summarized as follows:

<TABLE>
<CAPTION>
INCENTIVE
STOCK OPTION PLAN NONSTATUTORY STOCK
TOTAL OPTION PLAN
---------------------- ----------------------- TOTAL
SHARES PRICE SHARES PRICE SHARES
-------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Outstanding, December 31, 1990......... 151,606 $8.54-10.87 424,281 $ 7.12-18.26 575,887
Year ended December 31, 1991:
Exercised............................ (104,980) 8.54-10.87 (38,653) 7.12-8.54 (143,633)
-------- -------- --------
Outstanding, December 31, 1991......... 46,626 8.54-10.87 385,628 7.12-18.26 432,254
Year ended December 31, 1992:
Granted.............................. -- -- 66,000 10.50 66,000
Exercised............................ -- -- (37,525) 7.12-8.54 (37,525)
Expired.............................. (46,626) 8.54-10.87 (7,500) 10.37 (54,126)
-------- -------- --------
Outstanding, December 31, 1992......... -- -- 406,603 7.12-18.26 406,603
Year ended December 31, 1993:
Granted.............................. -- -- --
Exercised............................ -- (86,443) 7.12-12.25 (86,443)
Expired.............................. -- (18,500) 10.38-12.25 (18,500)
-------- -------- --------
Outstanding, December 31, 1993......... -- 301,660 $ 7.12-18.26 301,660
-------- -------- --------
-------- -------- --------
</TABLE>

At December 31, 1993, the Company has outstanding 459,433 warrants to
acquire the Company's common stock at an exercise price of $17.81 and 12,859
warrants to acquire the Company's common stock at an exercise price of $12.42.
The warrants outstanding are exercisable until May 5, 1994. However, such
warrants will expire if, at any time after May 15, 1990, upon 60 calendar days'
prior notice, the Company's common stock has had an average per share closing
public market price of not less than $22.24 for at least 60 consecutive trading
days prior to such expiration notice.

F-24
<PAGE> 89

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11: BUSINESS SEGMENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales to unaffiliated customers:
Metal................................................. $ 77,044 $ 57,420 $ 34,851
Industrial minerals................................... 40,524 43,231 44,953
Specialty metals...................................... -- -- 2,043
-------- -------- --------
$117,568 $100,651 $ 81,847
-------- -------- --------
-------- -------- --------
Income (loss) from operations:
Metals................................................ $ (3,153) $(34,992) $(10,359)
Industrial minerals................................... 5,842 4,620 4,449
Specialty metals...................................... (2,004) (15,332) (504)
General corporate..................................... (14,746) (9,339) (7,630)
-------- -------- --------
$(14,061) $(55,043) $(14,044)
-------- -------- --------
-------- -------- --------
Capital expenditures:
Metals (including $12,826 in Mexico in 1993).......... $ 14,527 $ 19,815 $ 44,821
Industrial minerals (including $5,800 in Mexico in
1993)............................................... 3,401 3,203 11,938
Specialty metals...................................... -- -- --
General corporate assets.............................. 957 158 548
-------- -------- --------
$ 18,885 $ 23,176 $ 57,307
-------- -------- --------
-------- -------- --------
Depreciation, depletion and amortization:
Metals................................................ $ 16,847 $ 9,305 $ 6,818
Industrial minerals................................... 4,314 4,188 3,718
Specialty metals...................................... -- -- 33
General corporate assets.............................. 692 819 392
-------- -------- --------
$ 21,853 $ 14,312 $ 10,961
-------- -------- --------
-------- -------- --------
Identifiable assets:
Metals (including $21,028 in Mexico in 1993).......... $167,794 $127,833 $126,912
Industrial minerals (including $7,054 in Mexico in
1993)............................................... 47,452 46,488 68,068
Specialty metals...................................... -- -- 4,197
General corporate assets.............................. 32,996 42,850 78,431
Idle facilities....................................... 9,879 5,272 55,270
-------- -------- --------
$258,121 $222,443 $332,878
-------- -------- --------
-------- -------- --------
</TABLE>

Net sales and identifiable assets of each segment are those that are
directly identified with those operations. General corporate assets consist
primarily of cash, receivables, investments and corporate property, plant and
equipment. As a result of depressed metals prices, operations were suspended at
the Greens Creek mine in April 1993 and the property was placed on a
care-and-maintenance basis pending resumptions of operations. At December 31,
1993, the Company's recorded net book value of identifiable assets of the Greens
Creek mine was approximately $50.3 million. This amount has been classified in
the Idle Facilities category at December 31, 1993.

F-25
<PAGE> 90

REPORT OF INDEPENDENT ACCOUNTANTS

To The Board of Directors and Shareholders
Hecla Mining Company

We have audited the supplemental consolidated balance sheets of Hecla
Mining Company and subsidiaries as of December 31, 1993 and 1992, and the
related supplemental consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These supplemental consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the supplemental consolidated financial statements based
on our audits. We did not audit the financial statements of Equinox Resources
Ltd. ("Equinox") which statements reflect total assets constituting 4% and 6% as
of December 31, 1993 and 1992, and revenues constituting 12%, 1%, and 0% and net
loss constituting 34%, 11%, and 1% for each of the three years in the period
ended December 31, 1993, respectively, of the related supplemental consolidated
totals. Separate financial statements of Equinox included in the supplemental
consolidated financial statements were audited and reported on separately by
other auditors, whose report dated February 28, 1994, expressed an unqualified
opinion on those statements before adjustments to convert Canadian dollars to
U.S. dollars and to conform certain Equinox accounting policies to U.S.
generally accepted accounting principles consistent with those of Hecla Mining
Company as described in Note 2 to the supplemental consolidated financial
statements. We also audited the adjustments described in Note 2 to the
supplemental consolidated financial statements.

We conducted our audits in accordance with generally accepted auditing
standards. 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 presentation. We believe
that our audits provide a reasonable basis for our opinion.

The supplemental consolidated financial statements give retroactive effect
to the amalgamation of a subsidiary of Hecla Mining Company and Equinox on March
11, 1994, which has been accounted for as a pooling of interests as described in
Note 2 to the supplemental consolidated financial statements. Generally accepted
accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling of interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation; however, they will
become the historic consolidated financial statements of Hecla Mining Company
and subsidiaries after financial statements covering the business combination
are issued.

In our opinion, based on our audits and the reports of the other auditors,
the supplemental consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Hecla
Mining Company and subsidiaries as of December 31, 1993 and 1992 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles applicable after financial statements are issued
for a period which includes the date of consummation of the business
combination.

As discussed in Notes 6 and 9 to the supplemental consolidated financial
statements, Hecla Mining Company changed its method of accounting for income
taxes and postretirement benefits other than pensions in 1992.
COOPERS & LYBRAND

Portland, Oregon
March 15, 1994

F-26
<PAGE> 91

HECLA MINING COMPANY AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1993
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 3,967 $ 40,031
Short-term investments............................................... 58 27,636
Accounts and notes receivable........................................ 16,481 18,841
Income tax refund receivable......................................... 390 --
Inventories.......................................................... 14,351 15,020
Other current assets................................................. 1,449 2,003
-------- --------
Total current assets......................................... 36,696 103,531
Investments............................................................ 5,057 6,565
Properties, plants and equipment, net.................................. 189,189 229,055
Other noncurrent assets................................................ 5,188 7,002
-------- --------
Total assets................................................. $236,130 $346,153
-------- --------
-------- --------
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses................................ $ 11,737 $ 17,312
Accrued payroll and related benefits................................. 2,139 2,056
Preferred stock dividends payable.................................... -- 2,012
Accrued taxes........................................................ 1,271 928
Current portion of deferred income taxes............................. 285 --
-------- --------
Total current liabilities.................................... 15,432 22,308
Deferred income taxes.................................................. 1,038 359
Long-term debt......................................................... 71,219 50,009
Accrued reclamation costs.............................................. 26,505 24,947
Other noncurrent liabilities........................................... 3,723 3,858
-------- --------
Total liabilities............................................ 117,917 101,481
-------- --------
Minority interest in consolidated subsidiary........................... 775 --
-------- --------
Commitments and contingencies (Notes 2, 3 and 8)
SHAREHOLDERS' EQUITY
Preferred stock, 25c par value, authorized 5,000,000 shares, issued and
outstanding 1993 -- 2,300,000, liquidation preference $117,012....... -- 575
Common stock, 25c par value, authorized 100,000,000 shares; issued
1993 -- 40,320,761, issued 1992 -- 36,324,517........................ 9,080 10,080
Capital surplus........................................................ 118,206 265,687
Retained earnings (deficit)............................................ (8,922) (30,774)
Net unrealized loss on marketable equity securities.................... (16) (8)
Less common stock reacquired, at cost; 1993 -- 62,226 shares,
1992 -- 63,753 shares................................................ (910) (888)
-------- --------
Total shareholders' equity................................... 117,438 244,672
-------- --------
Total liabilities and shareholders' equity................... $236,130 $346,153
-------- --------
-------- --------
</TABLE>

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

F-27
<PAGE> 92

HECLA MINING COMPANY AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Sales of products.......................................... $117,568 $101,621 $ 92,888
-------- -------- --------
Cost of sales and other direct production costs............ 84,853 84,814 80,141
Depreciation, depletion and amortization................... 21,161 13,774 13,526
-------- -------- --------
106,014 98,588 93,667
-------- -------- --------
Gross profit (loss)................................... 11,554 3,033 (779)
-------- -------- --------
Other operating expenses:
General and administrative............................... 14,983 9,206 8,140
Exploration.............................................. 6,363 8,186 5,656
Research................................................. 1,538 1,358 150
Depreciation and amortization............................ 737 851 669
Provision for closed operations and environmental
matters............................................... 3,764 13,608 2,327
Reduction in carrying value of mining properties......... 41 30,791 2,561
-------- -------- --------
27,426 64,000 19,503
-------- -------- --------
Loss from operations.................................. (15,872) (60,967) (20,282)
-------- -------- --------
Other income (expense)..................................... (2,205) 5,449 1,562
-------- -------- --------
Loss before income taxes and cumulative effect of changes
in accounting principles................................. (18,077) (55,518) (18,720)
Income tax benefit......................................... 2,556 345 938
-------- -------- --------
Loss before cumulative effect of changes in accounting
principles............................................... (15,521) (55,173) (17,782)
Cumulative effect of changes in accounting principles...... -- (103) --
-------- -------- --------
Net loss................................................... (15,521) (55,276) (17,782)
Preferred stock dividends.................................. -- -- (4,070)
-------- -------- --------
Net loss applicable to common shareholders................. $(15,521) $(55,276) $(21,852)
-------- -------- --------
-------- -------- --------
Net loss per common share:
Loss before cumulative effect of changes in accounting
principles and after preferred stock dividends........ $ (0.46) $ (1.58) $ (0.57)
Cumulative effect of changes in accounting principles.... -- (0.01) --
-------- -------- --------
$ (0.46) $ (1.59) $ (0.57)
-------- -------- --------
-------- -------- --------
Cash dividends per common share............................ $ -- $ -- $ --
-------- -------- --------
-------- -------- --------
Weighted average number of common shares outstanding....... 33,579 34,778 38,010
-------- -------- --------
-------- -------- --------
</TABLE>

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

F-28
<PAGE> 93

HECLA MINING COMPANY AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net loss..................................................... $(15,521) $(55,276) $(17,782)
Noncash elements included in net loss:
Depreciation, depletion and amortization.................. 21,898 14,625 14,195
Deferred income tax benefit............................... (1,429) (120) (964)
Loss (gain) on disposition of properties, plants and
equipment............................................... (1,865) (9,628) 1,336
(Gain) loss on investments................................ (552) 2,373 64
Accretion of interest on long-term debt................... 5,891 5,602 4,465
Provision for reclamation and closure costs............... 2,898 13,243 1,635
Reduction in carrying value of mining properties.......... 568 31,329 3,432
Gain on retirement of long-term debt...................... -- (510) (323)
Minority interest in net loss of consolidated
subsidiary.............................................. 503 76 43
Change in:
Accounts and notes receivable............................. (1,555) 6,231 (2,360)
Income tax refund receivable.............................. -- -- 390
Inventories............................................... (3,048) 4,174 (669)
Other current assets...................................... (927) 848 (554)
Accounts payable and accrued expenses..................... (2,832) 221 5,848
Accrued payroll and related benefits...................... -- (443) (83)
Preferred stock dividends payable......................... -- -- 2,012
Accrued taxes............................................. 359 (1,770) (343)
Noncurrent liabilities.................................... (251) (2,366) (3,058)
-------- -------- --------
Net cash provided by operating activities.................... 4,137 8,609 7,284
-------- -------- --------
Investing activities:
Purchase of investments and increase in cash surrender value
of life insurance......................................... (256) (412) (593)
Purchase of short-term investments, net...................... (23) 27 (27,578)
Proceeds from sale of investments and subsidiary............. 738 -- 273
Additions to properties, plants and equipment................ (25,529) (23,551) (56,836)
Proceeds from disposition of properties, plants and
equipment................................................. 1,036 11,493 1,511
Other, net................................................... 1,012 (272) (2,162)
-------- -------- --------
Net cash applied to investing activities..................... (23,022) (12,715) (85,385)
-------- -------- --------
Financing activities:
Proceeds from (repayment) of debt............................ 3,291 (2,427) --
Common stock issued under stock option plans................. 3,055 669 1,425
Preferred stock issuance, net of issuance costs.............. -- -- 110,346
Acquisition of treasury stock................................ (4) -- --
Preferred stock dividends.................................... -- -- (4,070)
Common stock issued for cash................................. 4,835 -- 6,464
-------- -------- --------
Net cash provided (used) by financing activities............. 11,177 (1,758) 114,165
-------- -------- --------
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents......... (7,708) (5,864) 36,064
Net decrease in cash for the two month period ended December
31, 1992.................................................. -- (80) --
Cash and cash equivalents at the beginning of year........... 17,619 9,911 3,967
-------- -------- --------
Cash and cash equivalents at the end of year................. $ 9,911 $ 3,967 $ 40,031
-------- -------- --------
-------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during year for:
Interest (net of amount capitalized)...................... $ 249 $ 186 $ 347
-------- -------- --------
-------- -------- --------
Income tax payments, net.................................. $ 171 $ 222 $ 325
-------- -------- --------
-------- -------- --------
See Notes 2, 5, and 7 for noncash investing and financing activities.
</TABLE>

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

F-29
<PAGE> 94

HECLA MINING COMPANY AND SUBSIDIARIES

SUPPLEMENTAL CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS AND SHARES IN THOUSANDS)

<TABLE>
<CAPTION>
NET UNREALIZED
PREFERRED STOCK COMMON STOCK RETAINED LOSS ON
--------------- ---------------- CAPITAL EARNINGS TREASURY MARKETABLE EQUITY
SHARES AMOUNT SHARES AMOUNT SURPLUS (DEFICIT) STOCK SECURITIES
------ ------ ------ ------- -------- --------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1990............ $ 32,756 $8,189 $ 93,513 $ 64,950 $ (906) $ (13)
Net loss............................... (15,521)
Net change in unrealized loss on
marketable equity securities......... (3)
Stock issued under stock option plans
Hecla.............................. 26 6 141
CoCa............................... 130 32 1,147
Equinox............................ 131 33 519
Stock issued under CoCa employee
stock ownership plan............... 34 9 165
Acquisition of treasury stock........ (4)
Stock issued for cash................ 788 196 4,639
Stock issued on exercise of
warrants........................... 195 49 860
Stock issued on a finder's fee for a
resource........................... 3 1 23
------ ------ ------ ------- -------- --------- -------- -----
Balances, December 31, 1991............ 34,063 8,515 101,007 49,429 (910) (16)
Net loss............................. (55,276)
Stock issued under stock option plans
Hecla.............................. 17 4 117
CoCa............................... 20 5 170
Equinox............................ 36 9 136
Stock issued for Mexican mineral
concessions........................ 185 46 1,748
Stock issued
to retire long-term debt........... 1,120 280 10,921
Stock issued on debenture
conversion......................... 68 17 341
Stock issued on exercise of
warrants........................... 60 15 268
Stock issued on acquisition of
investment......................... 69 17 341
Stock issued for property
acquisition........................ 7 2 37
Stock issued on amalgamation......... 680 170 3,120
Equinox net loss for the two month
period ended December 31, 1992..... (3,075)
------ ------ ------ ------- -------- --------- -------- -----
Balances, December 31, 1992............ 36,325 9,080 118,206 (8,922) (910) (16)
Net loss............................. (17,782)
Preferred stock dividends ($1.77 per
share)............................. (4,070)
Stock issued under stock option plans
Hecla.............................. 87 22 590
CoCa............................... 52 13 435
Equinox............................ 88 22 343
Net change in unrealized loss on
marketable equity securities....... 8
Treasury stock issued net
of purchase........................ 22
Stock issued for Mountain West
Products........................... 655 164 6,141
Preferred stock issuance, net of
issuance costs..................... 2,300 575 109,771
Stock issued to retire
long-term debt..................... 2,200 550 23,870
Stock issued for property
acquisition........................ 13 4 92
Stock issued for cash, net........... 900 225 6,239
------ ------ ------ ------- -------- --------- -------- -----
Balances, December 31, 1993............ 2,300 $575 40,320 $10,080 $265,687 $(30,774) $ (888) $ (8)
------ ------ ------ ------- -------- --------- -------- -----
------ ------ ------ ------- -------- --------- -------- -----
</TABLE>

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

F-30
<PAGE> 95

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION -- The accompanying supplemental consolidated
financial statements include the accounts of Hecla Mining Company, its
majority-owned subsidiaries, its proportionate share of the accounts of the
joint ventures in which it participates, and the accounts of Equinox Resources
Ltd. and its subsidiaries (collectively, the "Company"). All significant
intercompany transactions and accounts are eliminated. The accompanying
supplemental consolidated financial statements of Hecla Mining Company and
subsidiaries ("Hecla") have been prepared to give retroactive effect to the
amalgamation involving Equinox Resources Ltd. ("Equinox") on March 11, 1994.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation,
however, they will become the historical consolidated financial statements of
the Company after financial statements covering the date of consummation of the
business combination are issued.

Prior to November 1, 1992, Equinox's fiscal year end was October 31.
Accordingly, the December 31, 1992 and 1991 supplemental consolidated statements
of operations include the fiscal year results for Hecla for the year ended
December 31 and for Equinox for the fiscal year ended October 31. Subsequent to
October 31, 1992, Equinox had a December 31 year end. Accordingly, the year
ended December 31, 1993 reflects operating results from January 1 through
December 31, 1993 for both Hecla and Equinox. Equinox sales and net loss for the
two month period ended December 31, 1992 were $1,901,000 and $3,076,000,
respectively. The net loss has been reflected in the supplemental consolidated
statement of changes in shareholders' equity during the year ended December 31,
1992.

B. COMPANY'S BUSINESS AND CONCENTRATIONS OF CREDIT RISK -- The Company is
engaged in mining and mineral processing. Sales of metals products are made
principally to domestic and foreign custom smelters and metal traders.
Industrial minerals are sold principally to domestic manufacturers and
wholesalers. Sales to significant metals customers, as a percentage of total
sales of metals products, were as follows:

<TABLE>
<CAPTION>
1991 1992 1993
---- ---- ----
<S> <C> <C> <C>
Custom smelters........................................ 26.9% 37.1% 24.0%
Custom metal traders:
Customer A........................................ 15.2% 21.1% 15.1%
Customer B........................................ 21.8% 16.4% 14.8%
Customer C........................................ 11.8% 13.9% 13.7%
Customer D........................................ 13.7% 7.7% 11.7%
</TABLE>

During 1993, 1992 and 1991, the Company sold 16.7%, 26%, and 17% of its
products to companies in foreign countries, respectively.

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

F-31
<PAGE> 96

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

carrying value of marketable equity securities is based on the lower of
aggregate cost or quoted market value. The cost of investments sold is
determined by specific identification.

Short-term investments represent investments in certificates of deposits,
commercial paper and U.S. Treasury Notes and are recorded at amortized cost,
plus accrued interest, which approximates market value.

Management of the Company reviews the net carrying value of all facilities,
including idle facilities, on a regular, periodic basis. These reviews consider,
among other factors, (1) the net realizable value of each major type of asset,
on a property-by-property basis, to reach a judgment concerning possible
permanent impairment of value and any need for a write-down in asset value, (2)
the ability of the Company to fund all care, maintenance and standby costs, (3)
the status and usage of the assets, while in a standby mode, to thereby
determine whether some form of amortization is appropriate, and (4) current
projections of metal prices that affect the decision to reopen or make a
disposition of the assets. The Company estimates 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, 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 and, where
appropriate, from the continuity of existing, developed ore bodies, future
production costs and future metal prices over the estimated remaining mine life.

F-32
<PAGE> 97

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

common stock equivalents (stock options) outstanding during each reporting
period unless the common stock equivalents are anti-dilutive. Due to the net
losses in 1993, 1992 and 1991, common stock equivalents are anti-dilutive and
therefore have been excluded from the computation.

K. INTEREST EXPENSE -- Interest costs incurred during the construction of
qualifying assets are capitalized as part of the asset cost.

NOTE 2: BUSINESS COMBINATIONS

Equinox

On December 29, 1993, Hecla, two wholly owned Canadian subsidiaries of
Hecla, and Equinox, a mining, exploration and development company, incorporated
under the laws of the Province of British Columbia and headquartered in
Vancouver, Canada, executed an Acquisition Agreement providing for Hecla's
acquisition of Equinox. Pursuant to the Acquisition Agreement and related Plan
of Arrangement, upon consummation of the transactions contemplated thereby on
March 11, 1994, (i) Equinox common shareholders received 0.3 common share of
Hecla ("Hecla common shares"), for each outstanding Equinox common share, (ii)
holders of Equinox's Series "A" production participating preferred shares
received newly issued production notes of Hecla with the same material terms and
conditions, and (iii) outstanding Equinox options and warrants became
exercisable for Hecla common shares. In connection with the acquisition of
Equinox, Hecla issued approximately 6.3 million Hecla common shares, including
shares issuable upon exercise of outstanding Equinox options and warrants.

F-33
<PAGE> 98

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The acquisition of Equinox has been accounted for as a pooling-of-interests
and, accordingly, the Company's consolidated financial statements have been
restated for all periods prior to the acquisition to include the financial
positions, results of operations, and cash flows of Equinox. Separate operating
results of the combining entities for the three years in the period ended
December 31, 1993 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Sales of products
Hecla.................................................... $117,568 $100,651 $ 81,847
Equinox.................................................. -- 970 11,041
-------- -------- --------
$117,568 $101,621 $ 92,888
-------- -------- --------
-------- -------- --------
Net loss applicable to common shareholders:
Hecla.................................................... $ 15,430 $ 49,289 $ 15,805
Equinox.................................................. 91 5,987 6,047
-------- -------- --------
$ 15,521 $ 55,276 $ 21,852
-------- -------- --------
-------- -------- --------
</TABLE>

The accompanying supplemental consolidated financial statements include
adjustments to (i) convert Canadian dollars to U.S. dollars and (ii) conform
Equinox's accounting policies to U.S. generally accepted accounting principles
consistent with those of Hecla, principally relating to exploration,
reclamation, and the reduction in carrying value of mining properties. The
effect of conforming Equinox's financial statements for these accounting
policies was to increase (decrease) Equinox's net loss by $(3,028,000),
$396,000, and $(402,000) during 1993, 1992 and 1991, respectively.

Eastmaque Gold Mines Ltd.

On December 8, 1992, Equinox amalgamated with Eastmaque Gold Mines Ltd.
("Eastmaque") under the provisions of the Company Act of British Columbia. Both
companies were involved in the exploration and development of resource
properties. The transaction has been accounted for as a purchase and the results
of operations of Eastmaque have been included from the date of amalgamation. The
combination was effected through the issuance of 69,000 common shares during the
year ended October 31, 1992 and 680,000 common shares on December 6, 1992 at a
total deemed value of approximately $3.6 million, the issuance of 415,000
warrants and 415,000 Class A preferred shares and costs of approximately
$108,000. The estimated fair value of the net assets of Eastmaque at the date of
amalgamation was approximately $4.8 million consisting principally of resource
property and inventory assets totalling $9.6 million offset by liabilities of
$4.8 million.

Mountain West Bark Products, Inc.

F-34
<PAGE> 99

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3: INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1992 1993
------- -------
<S> <C> <C>
Concentrates, bullion, metals in transit and other products...... $ 2,879 $ 2,615
Industrial minerals products..................................... 4,192 5,260
Materials and supplies........................................... 7,280 7,145
------- -------
$14,351 $15,020
------- -------
------- -------
</TABLE>

NOTE 4: INVESTMENTS

Investments consist of the following components (in thousands):

<TABLE>
<CAPTION>
CARRYING MARKET
VALUE COST VALUE
------- ------ ------
<S> <C> <C> <C>
December 31, 1993:
Marketable equity securities.................................... $ 377 $ 385 $377
Other investments............................................... 6,188 6,188
------- ------
$ 6,565 $6,573
------- ------
------- ------
December 31, 1992:
Marketable equity securities.................................... $ 251 $ 267 $251
Other investments............................................... 4,806 4,806
------- ------
$ 5,057 $5,073
------- ------
------- ------
</TABLE>

F-35
<PAGE> 100

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On June 30, 1993, the Company sold substantially all of its interest in
Acadia Mineral Ventures Limited, a previously consolidated subsidiary, to
Kingswood Resources, Inc., a Canadian exploration and development company, for
Canadian $350,000 cash, plus 5,000,000 common shares of Kingswood Resources,
Inc. The Company recognized a loss on the sale of approximately $120,000 in the
second quarter of 1993.

NOTE 5: PROPERTIES, PLANTS AND EQUIPMENT

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

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1993
-------- --------
<S> <C> <C>
Mining properties.............................................. $ 47,317 $ 59,642
Deferred development costs..................................... 127,529 156,969
Plants and equipment........................................... 172,034 182,664
Land........................................................... 6,176 6,163
-------- --------
353,056 405,438
Less accumulated depreciation, depletion and amortization...... 163,867 176,383
-------- --------
Net carrying value............................................. $189,189 $229,055
-------- --------
-------- --------
</TABLE>

Based on its periodic reviews of the status of various mining properties
and investments, the Company determined in the fourth quarter of 1992 that
certain adjustments were appropriate to properly reflect estimated net
realizable values. These adjustments consisted primarily of the write-downs of
various properties, plants and equipment totaling approximately $30.8 million.
The major portion of the adjustments related to the $13.5 million write-down of
the Company's interest in the Apex processing facility, a hydrometallurgical
processing plant near St. George, Utah. The Company continues to evaluate the
feasibility of custom recoveries of specialty metals and chemical products. Also
in 1992, due to depressed silver prices, the Company recorded write-downs of
approximately $9.0 million related to the Consolidated Silver and Hog Heaven
silver properties, located in north Idaho and northwest Montana, respectively.
The Lisbon Valley Project in Utah, a joint venture which is fully developed for
uranium and vanadium production, was also written down in 1992 by approximately
$3.5 million to its estimated net realizable value. Included in the 1992
write-downs were approximately $1.5 million and $0.4 million related to the
Company's interests in the Creede and Hardscrabble gold and silver properties,
respectively, both located in Colorado.

Also included in the 1992 write-down is $2.9 million related principally to
the Zenda property ($1.1 million) and the Van Stone mine ($1.7 million). Both
were a result of decreases in estimates of metal prices and in the case of Van
Stone, underground reserves. Certain non-recourse loans of approximately $3.5
million which were payable only from the net production proceeds of the Van
Stone property were also written off.

In 1993, the Company also recorded approximately $2.6 million as a
reduction of the carrying value of mineral properties. This principally related
to the American Girl (including Oro Cruz) joint venture which was written down
$1.7 million to reflect updated information regarding reserves and operating
costs. An additional $.7 million was recorded as a write-down of the Zenda
property to reduce the carrying value to net realizable value.

F-36
<PAGE> 101

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The net carrying values of the major mining properties of the Company that
were on a standby or idle basis at December 31, 1993 and 1992 were approximately
$55.7 million and $7.2 million, respectively. Operations at the Greens Creek
mine, with a net carrying value of $50.3 million at December 31, 1993, were
suspended in April 1993 pending improvement in lead, zinc and silver prices.

On February 8, 1994, the Company sold a 20 percent interest in its Grouse
Creek gold project to Great Lakes Minerals Inc. of Toronto, Ontario ("Great
Lakes"). The purchase price of $6.8 million represents 20 percent of the amount
spent by the Company on acquisition, exploration and development of the project
through June 30, 1993, including a fixed premium of $1.25 million. In addition,
Great Lakes will fund its pro-rata share of the total construction cost for
Grouse Creek from July 1, 1993 to the completion of the project which is
currently estimated at $90 million, and has the option to increase its ownership
to a maximum of 30 percent by contributing additional funds on a proportional
basis.

NOTE 6: INCOME TAXES

Major components of the Company's income tax provision (benefit) are as
follows (in thousands):

F-37
<PAGE> 102

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The sources of significant temporary differences which gave rise to the
deferred tax provision (benefit) and their effects were as follows (in
thousands):

The components of the net deferred tax liability as of December 31, 1993
and 1992, were as follows (in thousands):

<TABLE>
<CAPTION>
1993
-------------------------------------
DEFERRED TAX
------------------------
ASSETS LIABILITIES TOTAL
-------- ----------- --------
<S> <C> <C> <C>
Accrued reclamation costs.................................. $ 7,589 $ 7,589
Investment valuation differences........................... 1,754 1,754
Miscellaneous.............................................. 2,039 2,039
Postretirement benefits other than pensions................ 742 742
Other liabilities.......................................... 188 188
Deferred compensation...................................... 406 406
Accounts receivable........................................ 456 456
Properties, plants and equipment........................... $ (17,042) (17,042)
Deferred income............................................ (440) (440)
Pension costs.............................................. (477) (477)
Deferred state income taxes, net........................... (2,271) (2,271)
-------- ----------- --------
Total temporary differences........................... 13,174 (20,230) (7,056)
-------- ----------- --------
Mexican net operating losses............................... 1,280 1,280
Federal net operating losses............................... 57,961 57,961
State net operating losses................................. 4,359 4,359
Tax credit carryforwards................................... 1,626 1,626
-------- ----------- --------
Total net operating losses and tax credits................. 65,226 65,226
-------- ----------- --------
Valuation allowance........................................ (58,529) (58,529)
-------- ----------- --------
Net deferred tax assets and liabilities.................... $ 19,871 $ (20,230) $ (359)
-------- ----------- --------
-------- ----------- --------
</TABLE>

F-38
<PAGE> 103

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1992
-------------------------------------
DEFERRED TAX
------------------------
ASSETS LIABILITIES TOTAL
-------- ----------- --------
<S> <C> <C> <C>
Accrued reclamation costs.................................. $ 8,008 $ 8,008
Investment valuation differences........................... 1,670 1,670
Miscellaneous.............................................. 1,236 1,236
Postretirement benefits other than pensions................ 738 738
Other liabilities.......................................... 698 698
Deferred compensation...................................... 532 532
Accounts receivable........................................ 456 456
Properties, plants and equipment........................... $ (11,999) (11,999)
Deferred income............................................ (516) (516)
Pension costs.............................................. (315) (315)
Deferred state income taxes, net........................... (1,153) (1,153)
-------- ----------- --------
Total temporary differences........................... 13,338 (13,983) (645)
-------- ----------- --------
Federal net operating losses............................... 48,090 48,090
State net operating losses................................. 3,248 3,248
Tax credit carryforwards................................... 1,630 1,630
Alternative minimum tax credit carryforwards............... 156 156
-------- ----------- --------
Total net operating losses and tax credits................. 53,124 53,124
-------- ----------- --------
Valuation allowance........................................ (53,802) (53,802)
-------- ----------- --------
Net deferred tax assets and liabilities.................... $ 12,660 $ (13,983) $ (1,323)
-------- ----------- --------
-------- ----------- --------
</TABLE>

<TABLE>
<CAPTION>
1992 1993
-------- --------
<S> <C> <C>
Balance at beginning of year................................... $(29,098) $(53,802)
Net increase in allowance related to uncertainty of recovery of
net operating loss carryforwards............................. (27,132) (4,727)
Utilization of capital loss carryforwards...................... 2,428 --
-------- --------
Balance at end of year......................................... $(53,802) $(58,529)
-------- --------
-------- --------
</TABLE>

<TABLE>
<CAPTION>
1991 % 1992 % 1993 %
------- --- -------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Computed "statutory" benefit...................... $(6,147) (34) $(18,876) (34) $(6,365) (34)
Effect of adjustments associated with the
alternative minimum tax......................... 3,594 20 -- -- -- --
Investment and foreign tax credits................ (202) (1) -- -- -- --
Nonutilization of net operating losses............ 32 -- 18,490 33 5,564 30
State income taxes, net of federal tax benefit.... 167 1 41 -- (137) (1)
------- --- -------- --- ------- ---
Income tax benefit................................ $(2,556) (14) $ (345) (1) $ (938) (5)
------- --- -------- --- ------- ---
------- --- -------- --- ------- ---
</TABLE>

F-39
<PAGE> 104

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Certain of the Company's net operating loss carryovers are attributed to
preference related items, and therefore are not available to offset alternative
minimum taxable income. However, they are available to offset future regular
taxable income. At December 31, 1993, Hecla and its subsidiaries had tax basis
net operating loss carryovers available to offset future regular and alternative
minimum taxable income. These carryovers expire as follows (in thousands):

<TABLE>
<CAPTION>
REGULAR TAX NET ALTERNATIVE MINIMUM TAX
OPERATING LOSSES NET OPERATING LOSSES
---------------- -----------------------
<S> <C> <C>
1994.................................... $ 11,009 $
1995.................................... 12,590 5
1996.................................... 268 268
1997.................................... 2,020 695
1998.................................... 11,005 308
1999.................................... 6,235 1,199
2000.................................... 3,089 789
2001.................................... 4,538 1,683
2002.................................... 1,359 346
2003.................................... 1,150 623
2004.................................... 13,131 532
2005.................................... 17,201 878
2006.................................... 25,000 3,105
2007.................................... 27,088 17,414
2008.................................... 27,840 22,731
-------- -------
$163,523 $50,576
-------- -------
-------- -------
</TABLE>

For U.S. income tax purposes Equinox has net operating loss carryforwards
of approximately $6,950,000 which expire as follows (in thousands):

In addition to the above, the Company had Mexican tax net operating loss
carryovers totaling $1,280,000, which expire in 1998.

F-40
<PAGE> 105

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7: LONG-TERM DEBT AND CREDIT AGREEMENT

Long-term debt at December 31, 1993 and 1992, consisted of the following
(in thousands):

<TABLE>
<CAPTION>
1992 1993
------- -------
<S> <C> <C>
Zero coupon convertible notes.................................... $69,376 $48,433
Notes payable.................................................... 917 962
Other long-term debt............................................. 926 614
------- -------
$71,219.. $50,009
------- -------
------- -------
</TABLE>

Zero Coupon Convertible Notes

During 1989, the Company issued subordinated zero coupon convertible notes,
due June 14, 2004, with a face value at maturity of $201,250,000. These Liquid
Yield Option Notes ("LYONs") were issued at 30.832% of their face value at
maturity which results in an 8% yield compounded semiannually to maturity. These
notes are carried net of original issue discount, which is being amortized by
the interest method over the life of the issue. The outstanding balances at
December 31, 1993 and 1992, include the accrued original issue discount. The
noteholder, at his option, may convert each note with a face value of $1,000
into 20.824 shares of the Company's common stock. The notes are redeemable in
cash at any time at the option of the Company, in whole or in part, at
redemption prices equal to the issue price plus original issue discount to the
date of redemption. The Company will purchase any note with a face value of
$1,000 at the option of the holder on June 14, 1994 ("Put Feature"), at a
purchase price of $456.39 (issue price plus original issue discount to such
date). The Company, at its option, may pay such purchase price in cash, shares
of common stock or extension notes, but not in any combination thereof. However,
because of the Company's need to utilize cash for planned capital expenditures,
absent any action by the Company, it will pay for any LYONs delivered to it
pursuant to the Put Feature by issuing Company common stock. The Company is
unable to predict how many LYONs it may be required to purchase pursuant to the
Put Feature and cannot predict what effect the Put Feature will have on the
market price of Company common stock.

F-41
<PAGE> 106

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Notes Payable

In 1992, Equinox issued common stock having a fair market value of $716,000
in exchange for an investment and marketable securities of $358,000 and in
payment of notes payable for $358,000.

Revolving Credit Agreement

The Company's interest costs were as follows (in thousands):

<TABLE>
<CAPTION>
1991 1992 1993
------ ------- -------
<S> <C> <C> <C>
Total interest cost........................ $6,958 $ 6,911 $ 5,223
Less amount capitalized.................... (145) (2,070) (3,533)
------ ------- -------
Total interest expense........... $6,813 $ 4,841 $ 1,690
------ ------- -------
------ ------- -------
</TABLE>

F-42
<PAGE> 107

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8: CONTINGENCIES

The Company has received notices from the United States Environmental
Protection Agency ("EPA") that it and numerous other parties are potentially
responsible to remediate alleged hazardous substance releases at several sites
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 ("CERCLA" or "Superfund"). In addition, in January of 1985, the Company was
named, along with a number of other parties, as a third-party defendant in a
suit initially brought by the State of Colorado against ASARCO Inc. in December
1983 in Colorado Federal District Court under CERCLA to recover natural resource
damages allegedly caused by releases of hazardous substances into the
environment from the Yak Tunnel, located near Leadville, Colorado ("Leadville
Site"). The third-party complaint seeks contribution from the third-party
defendants for damages which ASARCO may be held liable for in the primary
action. In August 1986, the Company was named a defendant in a lawsuit brought
in Colorado Federal District Court by the United States of America against the
Company and a number of other parties seeking to recover the United States'
response costs under CERCLA incurred or to be incurred at the Leadville Site
covered by the State of Colorado lawsuit filed previously. The state and federal
government CERCLA litigation related to the Leadville Site was consolidated into
a single lawsuit on February 2, 1987. In September 1991, the Company entered
into an Order on Consent with the EPA and the Department of Justice pursuant to
which the Company and the federal government agreed to a three-step process for
settling the Company's liability to the federal government at the Leadville
Site. As a step in the three-step settlement process, on January 6, 1993, the
Colorado Federal District Court entered a Partial Consent Decree between the
United States and the Company which resolves all issues concerning the Company's
alleged liability to the United States for response costs at the site, except
for response costs related to certain mill tailings impoundments located at the
Leadville Site. The Company paid the United States $450,000 under the decree.
The other two steps in the settlement process at the site relate to the Company
finalizing a study of any environmental impacts associated with the tailings
impoundments and implementing the appropriate response activity to address these
impacts. In July 1993, the Company completed and delivered to EPA the study
report analyzing the environmental impacts associated with the tailings
impoundments. Based on that study report, EPA has selected a response action for
the tailings impoundments which requires capping and providing of vegetation
cover for the tailings impoundments. The Company has recently finalized the
terms of a consent decree with the federal government providing for the payment
by the Company of $516,000 to cover a portion of EPA's past costs at the site
and a portion of the costs of the selected response action for the tailings
impoundments. The consent decree is in the process of being signed by all
parties and must also be approved by the Colorado Federal District Court. Upon
final approval of the consent decree, the Company will be released from
liability for response costs for the entire Leadville Site. In November 1991,
the Company finalized a settlement with two primary liability insurers
concerning insurance coverage for the Company's environmental liability at the
Leadville Site. The monies received in the insurance settlement in November 1991
are sufficient to cover the Company's CERCLA liability at the site.

F-43
<PAGE> 108

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to the hillsides located within the site. The EPA's Record of Decision covering
the nonpopulated areas of the site was issued on September 22, 1992. On November
4, 1992, the EPA issued special notice letters under CERCLA to the Company and a
number of other PRPs at the site demanding reimbursement of the federal
government's past response costs and implementation of the remedial activity
covered by the two previous Records of Decision issued for the site. In November
1992, the major PRPs at the site, including the Company, agreed to an allocation
of most of the future remedial activity at the site under the Records of
Decision. The allocation is between two PRP groups. One PRP group is principally
made up of mining companies who operated upstream from the site, and the second
PRP group is made up of Gulf USA and other companies who had mining, smelting,
or related operations within the site. The allocation for remedial activity
among the two PRP groups is based upon a number of factors, including each PRP's
level of activity affecting the site and an estimate of the costs to implement
the various portions of the site remediation. On January 11, 1993, the Company
and certain other PRPs who had received the special notice letters submitted to
the EPA an offer which the PRPs deemed should satisfy the government's
requirements under CERCLA for a good-faith offer. Under the terms of the offer,
the Company and a subset of the participating PRPs would assume responsibility
for most residential and commercial soils remediation and other incidental and
related activities. A different PRP sub-group, of which the Company is not a
member but which includes Gulf USA, would be responsible for implementing most
of the remaining site's remedial activities. The responsibility of each PRP
group would be several from the responsibilities of the other group, but would
be joint and several among the PRPs within each group. The Company estimates
most of the proposed remedial activity at the site will be undertaken over a
period of five to seven years. The PRPs' goodfaith offer did not include payment
of any of the government's past response costs. In October 1993, Gulf USA filed
voluntary bankruptcy under Chapter 11 of the United States Bankruptcy Code.
Notwithstanding Gulf's bankruptcy filing, the PRP group including the Company
has recently finalized the terms of a consent decree with the federal government
and the State of Idaho generally along the allocation of liability set forth in
the PRPs' goodfaith offer. The Company and the other PRPs participating in the
consent decree have also agreed to an allocation of costs to implement the work
at the Bunker Hill Site under the terms of the consent decree. The consent
decree at the Bunker Hill Site is in the process of being executed by all
parties and will also be subject to Idaho Federal District Court approval.

F-44
<PAGE> 109

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

but that no carrier had a duty to defend the Company in the EPA proceeding. The
Company has not reduced its environmental accrual to reflect any anticipated
insurance proceeds.

F-45
<PAGE> 110

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and any remaining unaccrued potential liability at the Superfund sites addressed
above will not, in the opinion of management, have a material effect on results
of operations or the financial condition of the Company and its consolidated
subsidiaries.

NOTE 9: EMPLOYEE BENEFIT PLANS

Net periodic pension cost (income) for the plans consisted of the following
in 1993, 1992 and 1991 (in thousands):

The following table sets forth the funded status of the plans and amounts
recognized in the Company's consolidated balance sheets at December 31, 1993 and
1992 (in thousands):

F-46
<PAGE> 111

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The projected benefit obligation was calculated applying the following
average rates:

The Company provides certain postretirement benefits, principally health
care and life insurance benefits for qualifying retired employees. The costs of
these benefits are being funded out of general corporate funds. Prior to 1992,
the cost of some of these benefits was expensed when payments were made. Other
health care and life insurance benefits had been previously accrued. Effective
January 1, 1992, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
(SFAS No. 106), which requires that these postretirement benefits be accrued
over the period in which active employees provide services to the Company. At
January 1, 1992, the cumulative effect of recording these postretirement
benefits was to increase the 1992 net loss by $1.6 million or $0.051 per share.

Net periodic postretirement benefit cost for 1993 and 1992 included the
following components (in thousands):

Postretirement benefit costs under the previous method were $40,000 in
1991.

F-47
<PAGE> 112

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assumed health care cost trend rate would not have a significant impact on the
accumulated postretirement benefit obligation or the aggregate of service and
interest cost for 1993 or 1992.

The Company has an employees' Capital Accumulation Plan ("Plan") which is
available to all salaried and certain hourly employees after completion of one
year of service. Employees may contribute from 2% to 10% of their compensation
to the Plan. Effective January 1, 1993, nonhighly compensated employees may
contribute up to 15%. The Company makes a matching contribution of 25% of an
employee's contribution up to, but not exceeding, 5% of the employee's earnings.
The Company's contributions for both 1993 and 1992 were approximately $158,000
and $149,000 for 1991.

NOTE 10: SHAREHOLDERS' EQUITY

Preferred Stock

Shareholder Rights Plan

F-48
<PAGE> 113

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Board of Directors to not less than 10%. When exercisable, the right would,
subject to certain adjustments and alternatives, entitle rightholders, other
than the Acquiring Person or group, to purchase common stock of the Company or
the acquiring company having a market value of twice the $47.50 exercise price
of the right. The rights are nonvoting, may be redeemed at any time at a price
of 5c per right prior to the tenth day after an Acquiring Person acquires 15% of
the Company's common stock, and expire in 1996. Additional details are set forth
in the Rights Agreement filed with the Securities and Exchange Commission on May
19, 1986, and in the amendments dated November 29, 1990 and September 30, 1991.

Stock Option Plans

The Company 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. At
December 31, 1993 and 1992, there were 129,148 and 101,748 shares, respectively,
available for grant in the future under the plan. The plan expires in 1997.

The Company had an incentive stock option plan under which options were
granted to purchase common stock at a price not less than the fair market value
at date of grant. This plan expired in 1992.

The aggregate amounts charged (credited) to operations in connection with
the plans were $309,000, $(165,000) and $170,000 in 1993, 1992 and 1991,
respectively.

Transactions concerning stock options are summarized as follows:

<TABLE>
<CAPTION>
INCENTIVE
STOCK OPTION PLAN NONSTATUTORY STOCK
TOTAL OPTION PLAN
---------------------- ----------------------- TOTAL
SHARES PRICE SHARES PRICE SHARES
-------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Outstanding, December 31, 1990......... 151,606 $8.54-10.87 424,281 $7.12-18.26.. 575,887
Year ended December 31, 1991:
Exercised............................ (104,980) 8.54-10.87 (38,653) 7.12-8.54 (143,633)
-------- -------- --------
Outstanding, December 31, 1991......... 46,626 8.54-10.87 385,628 7.12-18.26 432,254
Year ended December 31, 1992:
Granted.............................. -- -- 66,000 10.50 66,000
Exercised............................ -- -- (37,525) 7.12-8.54 (37,525)
Expired.............................. (46,626) 8.54-10.87 (7,500) 10.37 (54,126)
-------- -------- --------
Outstanding, December 31, 1992......... -- -- 406,603 7.12-18.26 406,603
Year ended December 31, 1993:
Granted.............................. -- -- --
Exercised............................ -- (86,443) 7.12-12.25 (86,443)
Expired.............................. -- (18,500) 10.38-12.25 (18,500)
-------- -------- --------
Outstanding, December 31, 1993......... -- 301,660 $7.12-18.26 301,660
-------- -------- --------
-------- -------- --------
</TABLE>

F-49
<PAGE> 114

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As a result of the acquisition of Equinox, the outstanding options under
the Equinox stock option plan became exercisable for Hecla common shares.
Transactions concerning the Equinox options, giving effect to the common share
exchange ratio, are as follows:

<TABLE>
<CAPTION>
SHARES PRICE
-------- ------------
<S> <C> <C>
Outstanding, December 31, 1990...................... 169,500 $4.14
Year ended December 31, 1991:
Granted........................................... 135,000 4.21
Exercised......................................... (130,500) 4.21
--------
Outstanding, December 31, 1991...................... 174,000 4.14-4.21
Year ended December 31, 1992:
Granted........................................... 177,900 3.78-19.56
Exercised......................................... (36,900) 3.78
--------
Outstanding, December 31, 1992...................... 315,000 3.78-19.56
Year ended December 31, 1993:
Granted........................................... 25,500 6.00-6.52
Exercised......................................... (88,200) 3.80-6.55
--------
Outstanding, December 31, 1993...................... 252,300 $3.78-19.56
-------- ------------
-------- ------------
</TABLE>

Additionally, as a result of the acquisition of Equinox, outstanding
Equinox warrants became exercisable for Hecla common shares. At December 31,
1993, there were 415,131 warrants outstanding to acquire Hecla common shares at
$8.55 per share, which expire in August, 1996. If the Company's shares trade at
a price of $12.58 per share for 20 consecutive trading days, upon Hecla's
election and notice to warrantholders, the holders of Equinox warrants must
exercise their warrants or lose their right to exercise.

F-50
<PAGE> 115

HECLA MINING COMPANY AND SUBSIDIARIES

NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11: BUSINESS SEGMENTS
(IN THOUSANDS)

<TABLE>
<CAPTION>
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales to unaffiliated customers:
Metal................................................. $ 77,044 $ 58,390 $ 45,892
Industrial minerals................................... 40,524 43,231 44,953
Specialty metals...................................... -- -- 2,043
-------- -------- --------
$117,568 $101,621 $ 92,888
-------- -------- --------
-------- -------- --------
Income (loss) from operations:
Metals................................................ $ (3,990) $(40,198) $(15,418)
Industrial minerals................................... 5,842 4,620 4,449
Specialty metals...................................... (2,004) (15,332) (504)
General corporate..................................... (15,720) (10,057) (8,809)
-------- -------- --------
$(15,872) $(60,967) $(20,282)
-------- -------- --------
-------- -------- --------
Capital expenditures:
Metals (including $12,826 in Mexico in 1993).......... $ 21,171 $ 20,190 $ 45,961
Industrial minerals (including $5,800 in Mexico in
1993)............................................... 3,401 3,203 11,938
Specialty metals...................................... -- -- --
General corporate assets.............................. 957 158 548
-------- -------- --------
$ 25,529 $ 23,551 $ 58,447
-------- -------- --------
-------- -------- --------
Depreciation, depletion and amortization:
Metals................................................ $ 16,892 $ 9,618 $ 10,052
Industrial minerals................................... 4,314 4,188 3,718
Specialty metals...................................... -- -- 33
General corporate assets.............................. 692 819 392
-------- -------- --------
$ 21,898 $ 14,625 $ 14,195
-------- -------- --------
-------- -------- --------
Identifiable assets:
Metals (including $21,028 in Mexico in 1993).......... $172,944 $138,191 $136,735
Industrial minerals (including $7,054 in Mexico in
1993)............................................... 47,452 46,488 68,068
Specialty metals...................................... -- -- 4,197
General corporate assets.............................. 38,766 44,206 81,486
Idle facilities....................................... 17,694 7,245 55,667
-------- -------- --------
$276,856 $236,130 $346,153
-------- -------- --------
-------- -------- --------
</TABLE>

F-51
<PAGE> 116
(PHOTO 3)

COMMENCEMENT OF OPERATIONS AT THE LA CHOYA GOLD MINE

(PHOTO 4)

HEADFRAME AT THE LUCKY FRIDAY SILVER AND LEAD MINE
<PAGE> 117

- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Investment Considerations............. 12
Metals Prices......................... 17
The Company........................... 18
Recent Developments................... 19
Use of Proceeds....................... 21
Price Range of Common Stock and
Dividend Policy..................... 21
Capitalization........................ 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 33
Description of LYONs.................. 51
Description of Capital Stock.......... 53
Description of Credit Facility........ 57
Certain United States Tax Consequences
for Non-U.S. Shareholders........... 57
Underwriting.......................... 60
Legal Matters......................... 61
Experts............................... 61
Available Information................. 61
Information Incorporated by
Reference........................... 62
Glossary of Certain Mining Terms...... 63
Index to Financial Statements......... F-1
</TABLE>

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

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

6,500,000 SHARES

[HECLA]

HECLA MINING COMPANY

COMMON STOCK

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

PROSPECTUS
------------------------------
MERRILL LYNCH & CO.

SALOMON BROTHERS INC
MAY 4, 1994

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