Certain statements contained in this Form 10-Q, including in Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosure About Market Risk, are intended to be covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Our forward-looking statements include our current expectations and projections about future results, performance, results of litigation, prospects and opportunities. We have tried to identify these forward-looking statements by using words such as "may," "will," "expect," "anticipate," "believe," "intend," "feel," "plan," "estimate," "project," "forecast" and similar expressions. These forward-looking statements are based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

These risks, uncertainties and other factors include, but are not limited to, those set forth under Part I, Item 1A - Business - Risk Factors in our annual report filed on Form 10-K for the year ended December 31, 2006. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to Hecla Mining Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Hecla Mining Company has provided precious and base metals to the U.S. economy and worldwide since its incorporation in 1891. We discover, acquire, develop, produce, and market silver, gold, lead and zinc. In doing so, we intend to manage our business activities in a safe, environmentally responsible and cost-effective manner.

We produce both metal concentrates, which we sell to custom smelters, and unrefined gold bullion bars (doré), which may be sold as doré or further refined before sale to precious metals traders. We are organized and managed into four segments that encompass our operating units and significant exploration interests:

• The Lucky Friday unit;

• The Greens Creek unit;

• The La Camorra unit and various exploration activities in Venezuela; and

• The San Sebastian unit and various exploration activities in Mexico.

The map below shows the locations of our operating units and our exploration projects, as well as our corporate offices located in Coeur d'Alene, Idaho and Vancouver, British Columbia. We sold our interest in the Hollister Development Block in April 2007 (For further discussion, see the Note 12 of Notes to the Interim Consolidated Financial Statements).

[[Image Removed: (MAP OF OPERATIONS)]]

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

• Expanding our proven and probable reserves, and production capacity, at operating or formerly-operating properties;

• Investing in the generation of new exploration projects in the vicinities of four world-class mining districts we believe to be under-explored and under-invested, which are: North Idaho's Silver Valley in the historic Coeur d'Alene Mining District, the world's most prolific silver-producing district near Durango, Mexico, Alaska's Admiralty Island located offshore of Juneau, and the geologically rich gold mining region in eastern Venezuela; and

• Seeking opportunities to capitalize on the recent increase in investment in mining properties and companies through acquisition.

We believe our growth plans are credible due to our financial capability, which includes:

• Cash balance of $96.9 million and current investments of $83.7 million at June 30, 2007;

• Two effective shelf registration statements with the Securities and Exchange Commission. One allows us to sell up to $275.0 million in common stock, preferred stock, warrants and debt securities in order to raise capital for potential acquisitions and for general corporate purposes. The other allows us to issue up to $175.0 million in common stock and warrants in connection with business combination transactions; and

• A $30.0 million revolving credit agreement, with no amount outstanding at June 30, 2007.

During 2007, we anticipate production of approximately 6.0 million ounces of silver and between 115,000 to 120,000 ounces of gold.

Results of Operations

For the second quarter and first six months of 2007, we recorded income applicable to common shareholders of $24.2 million and $32.2 million ($0.20 and $0.27 per common share, respectively), compared to income applicable to common shareholders of $9.2 million and $47.3 million ($0.08 and $0.40 per common share) during the same periods in 2006. The following factors resulted in the improved results for the second quarter of 2007, and positively impacted the results for the first six months of 2007, compared to the same periods in 2006:

• The sale of our interest in the Hollister Development Block gold exploration project in April 2007, which resulted in a pre-tax gain of $63.8 million (See Note 12 of Notes to the Interim Consolidated Financial Statements for further discussion).

• Increased gross profit at our Lucky Friday and Greens Creek units, by $7.1 million and $5.0 million, respectively, for the second quarter of 2007, and by $11.7 million and $6.5 million, respectively, for the first six months of 2007, compared to the same 2006 periods (see the Lucky Friday Segment and Greens Creek Segment sections below).

• Increased average prices for all metals produced at our operations, illustrated by the following table comparing the average prices for the three and six months ended June 30, 2007 and 2006:

                                               Three months ended June 30,         Six months ended June 30,

                                                2007                2006             2007             2006

Silver - London PM Fix ($/ounce)           $         13.34     $         12.28   $       13.33    $       10.99
Gold - London PM Fix ($/ounce)             $           667     $           627   $         659    $         591
Lead - LME Final Cash Buyer ($/pound)      $          0.99     $          0.50   $        0.90    $        0.53
Zinc - LME Final Cash Buyer ($/pound)      $          1.66     $          1.49   $        1.62    $        1.26

The factors above, which positively impacted our 2007 operating results, were partially offset by the items listed below, when comparing 2007 and 2006 second quarter results. The following factors also contributed to the decrease in income applicable to common shareholders for the six months ended June 30, 2007, compared to the first six months of 2006:

• Recognition of $44.7 million to increase our current estimated liabilities for environmental remediation in Idaho's Coeur d'Alene Basin and the Bunker Hill Superfund Site. During the second quarter of 2007, we finalized a proposed multi-year clean-up plan for the upper portion of the Coeur d' Alene Basin, together with an estimate of related costs to implement the plan. Based on that work and a reassessment of our potential liabilities in the Basin, we increased our accural for remediation in the Basin by $42 million. We also accrued an additional $2.7 million for the remaining Bunker Hill Superfund Site work. For additional discussion, see Bunker Hill Superfund Site and Coeur d'Alene River Basin Environmental Claims in Note 5 of Notes to Consolidated Financial Statements.

• Decreased gross profit at our La Camorra unit, by $11.4 million and $12.7 million, respectively, for the second quarter and first six months of 2007, compared to the same periods in 2006 (see the La Camorra Segment section below).

• The sale of our Noche Buena gold exploration property in Mexico during April 2006, generating a $4.4 million pre-tax gain.

The decrease in results reported for the first six months of 2007, compared to the same 2006 period, is also attributed to the sale of our investment in Alamos Gold, Inc. in January 2006, for $57.4 million in cash proceeds, generating a pre-tax gain of $36.4 million.

The Lucky Friday Segment

     The following is a comparison of the operating results and key production
statistics of our Lucky Friday segment (dollars are in thousands, except for per
ounce amounts):


                                             Three Months Ended June 30,         Six Months Ended June 30,

                                               2007               2006              2007            2006

Sales                                     $        21,981    $        11,704   $       38,832    $    21,225
Cost of sales and other direct
production costs                                   (9,169 )           (6,208 )        (17,412 )      (11,893 )
Depreciation, depletion and
amortization                                         (977 )             (820 )         (1,914 )       (1,493 )

Gross profit                              $        11,835    $         4,676   $       19,506    $     7,839


Tons of ore milled                                 83,571             65,703          168,419        129,427
Silver ounces produced                            804,117            742,125        1,656,230      1,368,917
Lead tons produced                                  4,852              4,092            9,598          7,686
Zinc tons produced                                  2,060              1,374            4,105          2,406
Silver ounces per ton                               10.45              12.29            10.70          11.66
Lead percent                                         6.28               6.77             6.21           6.56
Zinc percent                                         3.14               2.89             3.14           3.14
Total cash cost per silver ounce (1)      $         (0.72 )  $          4.97   $         0.56    $      5.13
By-product credits                        $        13,335    $         6,370   $       23,967    $    11,371
By-product credit per silver ounce        $         16.59    $          8.58   $        14.47    $      8.31

(1) A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

The $7.1 million and $11.7 million increases in operating income for the second quarter and first six months of 2007, compared to the same 2006 periods, respectively, resulted primarily from higher average metals prices and increased production, partially offset by lower silver and lead ore grades. Full production on the 5900 level expansion was reached in the fourth quarter of 2006, and approximately 809,000 and 1,559,000 ounces of silver were mined from the 5900 level expansion area during the second quarter and first six months of 2007. Upgrades to the mill completed in 2006 have allowed for increased capacity and created operating efficiencies that, when coupled with the increased production from the 5900 level, increased tons of ore milled by 27% and 30% for the for the three-month and six-month periods ended June 30, 2007, compared to the same periods in 2006.

The 114% and 89% improvements in total cash costs per silver ounce in the second quarter and first six months of 2007, compared to the same 2006 periods, are attributed to higher by-product credits resulting from increased average lead and zinc prices and production. Mining at wider strike lengths and wider faces at the Lucky Friday has allowed us to take advantage of the high base metal prices. Ore was mined at greater widths to include stringers that give us access to zinc that otherwise would not be mined. This results in an economic benefit, but also temporarily lowers the silver grade below life-of-mine reserve levels, as anticipated, and delays some silver production to later periods. Increased productivity and lower transportation costs, due to increased production from the 5900 level, have also contributed to the improved total cash cost per ounce. While value from lead and zinc is significant, we believe that identification of silver as the primary product, with zinc and lead as by-products, is appropriate because:

• Silver accounts for a higher proportion of revenue than any other metal and is expected to do so in the future;

• The Lucky Friday unit is situated in a mining district long associated with silver production; and

• The Lucky Friday unit generally utilizes selective mining methods to target silver production.

We periodically review our proven and probable reserves to ensure that reporting of primary products and by-products is appropriate. Because we consider zinc and lead to be by-products of our silver production, the values of these metals have offset increases in operating costs due to the increased average prices.

The Greens Creek Segment

     The following is a comparison of the operating results and key production
statistics of our Greens Creek segment (dollars are in thousands, except for per
ton and per ounce amounts, and reflect our 29.73% share):


                                           Three Months Ended June 30,         Six Months Ended June 30,

                                             2007               2006              2007            2006

Sales                                   $        22,450    $        14,125   $       38,699    $    27,910
Cost of sales and other direct
production costs                                 (8,220 )           (5,234 )        (13,991 )      (10,255 )
Depreciation, depletion and
amortization                                     (2,099 )           (1,779 )         (4,230 )       (3,722 )

Gross profit                            $        12,131    $         7,112   $       20,478    $    13,933


Tons of ore milled                               48,466             51,505          102,820        103,394
Silver ounces produced                          688,623            520,750        1,393,551      1,134,844
Gold ounces produced                              4,497              3,750            9,349          8,478
Zinc tons produced                                3,951              3,689            8,553          8,226
Lead tons produced                                1,437              1,196            2,992          2,811
Silver ounces per ton                             18.19              13.73            17.23          14.63
Gold ounces per ton                               0.133              0.116            0.131          0.124
Zinc percent                                       9.13               8.37             9.34           9.18
Lead percent                                       3.75               3.11             3.66           3.55
Total cash cost per silver ounce (1)    $         (3.45 )  $         (2.28 ) $        (4.04 )  $     (1.74 )
By-product credits                      $        13,359    $        11,017   $       27,559    $    21,343
By-product credit per silver ounce      $         19.40    $         21.16   $        19.78    $     18.81

(1) A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

The 71% and 47 % increases in gross profit during the second quarter and first six months of 2007, respectively, compared to the same 2006 periods, were primarily the result of higher average metals prices, partially offset by increased production costs due to a shortage of qualified miners, the use of contract labor, and higher diesel prices.

The Greens Creek operation is currently powered by diesel generators and production costs have been significantly affected by increasing fuel prices. However, infrastructure has been installed that allows hydroelectric power to be supplied to Greens Creek by Alaska Electric Light and Power Company ("AEL&P"), via a submarine cable from North Douglas Island, near Juneau, to Admiralty Island, where Greens Creek is located. AEL&P has agreed to supply its excess power to Greens Creek, which will replace an estimated 23% to 35% of the diesel-generated power through 2008. Completion of a new hydroelectric plant by AEL&P is anticipated by 2009, at which time it is estimated they will supply 95% of Greens Creek power. This project is anticipated to reduce production costs at Greens Creek in the future.

The Greens Creek joint venture maintains a restricted trust for future reclamation funding. The balance of the restricted cash account was $29.3 million at June 30, 2007, of which our 29.73% portion was $8.7 million, and $28.6 million at December 31, 2006, of which our 29.73% portion was $8.5 million.

The 51% and 132% improvements in total cash cost per ounce for the second quarter and first six months of 2007, respectively, compared to 2006, are attributable to increased by-product credits, as 2007 zinc, lead and gold prices have continued to exceed prices during the same 2006 period, partially offset by higher production costs. While value from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product is appropriate because:

• We have historically presented Greens Creek as a producer primarily of silver, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year;

• Metallurgical treatment maximizes silver recovery;

• The Greens Creek deposit is a massive sulfide deposit containing an unusually high proportion of silver; and

• In most of its working areas, Greens Creek utilizes selective mining methods in which silver is the metal targeted for highest recovery.

The recent increase in the price of zinc changed the balance of revenue for Greens Creek, so that zinc competed with silver for the largest portion of revenue during the second quarter and first six months of 2007. We will continue to monitor the relationship of revenue contribution among the metals produced from Greens Creek, however, until zinc sustains its high price relative to silver for a longer period, we continue to view silver as our primary product.

We periodically review our proven and probable reserves to ensure that reporting of primary products and by-products is appropriate. Within our cost per ounce calculations, because we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset increases in operating costs due to increased prices.

The La Camorra Segment

     The following is a comparison of the operating results and key production
statistics of our Venezuelan operations, which include the La Camorra mine, a
custom milling business and Mina Isidora, where full production levels were
reached in the third quarter of 2006 (dollars are in thousands, except per ton
and per ounce amounts):


                                               Three Months Ended June 30,           Six Months Ended June 30,
                                                 2007               2006               2007              2006

Sales                                       $        15,669    $        31,065    $       35,714    $       46,641
Cost of sales and other direct
production costs                                    (16,749 )          (19,274 )         (31,620 )         (27,572 )
Depreciation, depletion and amortization             (4,427 )           (5,925 )          (9,197 )         (11,456 )

Gross profit (loss)                         $        (5,507 )  $         5,866    $       (5,103 )  $        7,613


Tons of ore processed                                37,430             60,832            98,059           115,379
Gold ounces produced                                 21,546             38,399            53,025            76,019
Gold ounces per ton                                   0.758              0.699             0.558             0.700
Total cash cost per gold ounce (1)          $           577    $           340    $          514    $          348

(1) A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

The reduction in gross profit for the second quarter and first six months of 2007, compared to the same periods in 2006, primarily resulted from the following:

• Decreased production from Mina Isidora due to a temporary suspension of operations there during the second quarter of 2007. A road blockade in early May disrupted access to Mina Isidora and impacted gold production. The issues with the community and a small number of employees resulting in the blockade have been resolved, which primarily consisted of Hecla continuing its program of improving local infrastructure. Operations at the mine were restored in July, and gold doré pours are expected to resume in the first half of August 2007.

• Escalating labor, commodity and transportation costs. The higher transportation costs are related to haulage of ore mined from Mina Isidora and ore purchased from small third-party mining operations to our milling facility located approximately 70 miles from Mina Isidora.

• Reduced production from the La Camorra mine due to mining at greater depths, lower productivity, lower gold grades, and reduced reserves. We reached the end of the currently known mine life at the La Camorra mine in June 2007, and production from the La Camorra unit has transitioned primarily to Mina Isidora.

• $0.9 million and $1.3 million in expense recognized during the second quarter and first six months of 2007 related to voluntary termination of personnel at the La Camorra mine (see further discussion below).

In order to mine more efficiently at greater depths and potentially develop further proven and probable reserves, we made the decision in 2003 to construct a production shaft at the La Camorra mine, which was placed into service during the third quarter of 2005. However, proven and probable ore reserves continued to decrease at the La Camorra mine since 2005, as it exhibited lower ore grades, and no significant results have been returned from drilling in the La Camorra vicinity. As a result, reduced production levels from the La Camorra mine continued, and we reached the end of the known mine life there in June 2007. Depreciation expense related to the shaft has negatively affected gross profit for the La Camorra unit since it was commissioned, and continued to do so until the shaft was depreciated to its salvage value in the second quarter of 2007. We have applied for permits in order to continue exploration activity on concessions surrounding the La Camorra mine during 2007. In addition to the results produced by our exploration programs, assessment of our longer-term plans at the La Camorra mine will be impacted by the degree of success of our plan to reduce the workforce there by approximately 200 workers through voluntary termination incentives in 2007, at a total cost of approximately $3.5 million to operations.

We anticipate an improvement in the total cash cost per ounce at the La Camorra unit later in 2007, as gold production transitions away from the La Camorra mine to Mina Isidora. The expected improvement is due to higher gold grades at Mina Isidora, partially offset by the use of a more expensive mining method due to the dip of the vein, and increased ore transportation costs.

Functional Currency for Venezuelan Operations

Effective January 1, 2007, we implemented a change in the functional currency for our Venezuelan operations from the U.S. dollar to the Bolívar, the national currency in Venezuela. We believe that significant changes in the economic facts and circumstances affecting our Venezuelan operations indicate that a change in the functional currency is appropriate, under the provisions of FASB Statement No. 52 ("SFAS 52"). The functional currency change resulted in a reduction of approximately $7.2 million in the carrying value of net assets, with a translation adjustment for the same amount recorded to the opening balance of accumulated other comprehensive income. Further discussion of the functional currency change can be found in Note 13 of Notes to the Interim Consolidated Financial Statements.

Business Risks in Venezuela

The Venezuelan Criminal Exchange Law imposes strict criminal and economic sanctions on the exchange of Venezuelan currency with other foreign currency under false pretenses. Approvals for foreign currency exchange are limited and we are evaluating opportunities to minimize our exposure to devaluation. As a consequence, our cash balances denominated in Bolívares, at the official rate of 2,150 Bolívares to $1.00, that are maintained in Venezuela have increased from a U.S. dollar equivalent of approximately $21.6 million at December 31, 2006, to $24.4 million at June 30, 2007. Additionally, during the next six months we intend to convert into Venezuelan currency the proceeds from Venezuelan export sales made over the past 180 days, or a total value of approximately $15.8 million. During the first half of 2007, we exchanged the U.S. dollar equivalent of approximately $26.7 million at the official exchange rate of 2,150 Bolívares to $1.00 for approximately $15.2 million, at an open market exchange rate of Bolívares 3,781 to $1.00, incurring a foreign exchange loss for the difference. Although we are making the appropriate applications through the Venezuelan government, our cash balances denominated in the Venezuelan Bolívar may continue to grow and any future conversions or devaluation of the Bolívar may result in further losses when and if in the future we decide to distribute money outside Venezuela. At August 7, 2007, the open market exchange rate was approximately Bolívares 4,280 to $1.00.

. . .