Hecla Mining Company (NYSE:HL) today reported silver production of 2.4 million ounces for the second quarter of 2008, a 60% increase over the same period a year ago. Second quarter financial results showed a loss applicable to common shareholders of $44.4 million, or 35 cents per share, on revenue of $64 million. The results include several one-time or transactional items related to the purchase of the Greens Creek Joint Venture, the sale of the Venezuelan operations and the sale of Great Basin Gold stock which resulted in a combined charge of $39.3 million. Absent those items, Hecla would have reported pre-tax net loss of $1.7 million in the second quarter of 2008(1). Income applicable to common shareholders in the second quarter of 2007 was $24.2 million, or 20 cents per share, on revenue of $44.4 million. Second quarter 2007 results also included a number of unusual items, most notably the sale of the Hollister Development Block.

Unusual or one-time items that impacted Hecla's results from operations during the second quarter of this year included:

-- a loss of $30.7 million relating to the recently sold Venezuelan properties which consisted of a loss on impairment of $11.4 million and a loss from operations of $19.3 million (which included a foreign exchange loss of $13.3 million from the repatriation of $38.7 million USD from Venezuela to the United States);

-- cost of sales were $17 million higher due to the valuation of in-process inventory associated with the Greens Creek Joint Venture acquisition (received revenue of approximately the same amount related to the sale of the inventory); and

-- a gain of $8.1 million from the sale of Great Basin Gold stock previously received in connection with the sale of its interest in the Hollister project.

Other items that impacted second quarter net income included a 42% decrease in the price of zinc from $1.66 per pound in the second quarter of 2007 to $0.96 in the second quarter of 2008, increased smelter treatment and refining charges, and higher energy and steel costs. These factors resulted in increased cash costs per ounce of silver at the Lucky Friday and Greens Creek silver operations compared to a year ago. Additionally, the noncash stock option expense totaled $2.9 million in the second quarter of 2008.

For the first six months of 2008, Hecla recorded a loss applicable to common shareholders of $32.3 million, or 26 cents per common share, compared to income applicable to common shareholders of $32.2 million, or 27 cents per common share, during the same period in 2007.

SECOND QUARTER 2008 HIGHLIGHTS

-- Completion of the acquisition of the Greens Creek Joint Venture on April 16, 2008

-- Sale of the subsidiaries holding Hecla's Venezuelan properties for approximately $25 million

-- Silver production of 2.4 million ounces, a 60% increase from the second quarter of 2007, at an average cash cost per ounce of $3.43

-- Highest quarterly silver production in nearly 5 years

-- Record zinc production

-- Capital expenditures of $20.3 million, as Hecla invests in the future of the Greens Creek and Lucky Friday mines

-- Positive underground exploration drilling results at Greens Creek and Lucky Friday

Hecla Mining Company President and Chief Executive Officer Phillips S. Baker, Jr., said, "The second quarter has been a transformational quarter for Hecla. We acquired the remainder of the Greens Creek Joint Venture and sold our Venezuelan interests. Both transactions had one-time impacts on the second quarter financial results as we completed the transition related to these two assets. In the long term, the Greens Creek acquisition and the Venezuelan disposition provide our shareholders with 100% of the world's lowest-cost and fifth-largest silver mine, a substantially lower political risk profile, and a 60% increase in 2008 annual silver production to 9 million ounces. We have already seen a 60% increase in silver production for the second quarter compared to the same period a year ago."

Baker continued, "Over the past 100 years Hecla has materially changed itself before, but this year's transformation is unique. Hecla now controls 100% of the two largest silver mines in the U.S. that will produce more than 35% of all U.S. silver production, and has large exploration programs in the historic southern Colorado (Creede) mining district, the historic Silver Valley (Idaho), and the world-class Mexican silver belt. We expect our mines' strong cash flow to continue to fund growth in production, margins and resources. We've added considerable mining and exploration expertise through our acquisition of the Greens Creek Joint Venture, and we've retained some talented people from our Venezuelan interests, so we are even better positioned to add value to both internal and newly acquired assets."

METALS PRICES

With the exception of zinc, prices for the other metals produced by Hecla improved in the second quarter compared to the same period a year ago. The average price of silver in the second quarter of 2008 was $17.17, an increase of 29% compared to the same period a year ago. The average gold price increased 34% to $896 per ounce, and the average lead price was 6% higher than a year ago, at $1.05 per pound.

OPERATIONS

From continuing operations in the second quarter of 2008, Hecla produced approximately 2.4 million ounces of silver, 15,257 ounces of gold, 16,000 tons of zinc, and 9,000 tons of lead at an average cash cost of $3.43 per ounce of silver, after by-product credits. Hecla anticipates producing a total of 9 million ounces of silver in 2008, at an average cash cost of approximately $3.25 per ounce, given current metals prices. The anticipated increase in cash costs per ounce for 2008 is the result of higher smelter charges and lower by-product metals prices. Even with increased costs, Hecla expects to maintain its position as a low-cost silver producer relative to its peers and continues to benefit from a wide margin between costs and current metals prices.

Greens Creek - The Greens Creek unit in Alaska produced a total of 2.2 million ounces of silver for Hecla's account during the first six months of 2008, with 1.7 million of those ounces produced in the second quarter. This reflects the 29.7% ownership share through April 16, 2008, and the 100% ownership thereafter. The average cash cost of silver at Greens Creek during the first half of 2008 was $0.50 per ounce, with cash costs in the second quarter averaging $2.10 per ounce, after by-product credits. Cash costs increases in the second quarter are largely due to increased diesel fuel and steel costs, as well as increased smelter treatment and freight charges, which are impacting mining companies worldwide.

Decreases in gross profit at Greens Creek during the second quarter and first six months of 2008 compared to the same 2007 periods were primarily the result of a one-time, noncash increase to cost of sales and other direct production costs of approximately $17 million to reflect the sale of concentrate inventory in the second quarter that was valued at market price on the date of the acquisition of the remaining 70.3% ownership completed on April 16, 2008.

Baker said, "The second half of the year will see an increase in production as a result of the acquisition of the remaining 70.3% of the Greens Creek Joint Venture and improvements in the production profile over the remainder of 2008. With the opening of the Northwest West longhole stopes in June, second half 2008 silver production is expected to be more than double Hecla's share of the first six months' production. At Greens Creek, variability in quarterly and even half-yearly production happens periodically, but will be more noticeable now that Hecla owns 100% of the mine. On the cost side, we are impacted by increases that are affecting the whole industry, but we can see dramatic containment of costs when we go to hydropower in the next few years."

Hecla's transition to operator of Greens Creek is progressing smoothly and operations are in line with expectations. The first six months of production from Greens Creek averaged about 1,950 tons per day. Performance during June was the best of the year at 2,369 tons per day, a 21% improvement due to the opening of the longhole stopes and improved mine planning. Capital expenditures during the second quarter at Greens Creek totaled $10.2 million and were targeted primarily at tailings facility expansion, purchase of underground mining equipment, underground mine development, and definition drilling.

Lucky Friday - For the first six months of 2008, the Lucky Friday unit in northern Idaho produced more than 1.4 million ounces of silver at an average cash cost per ounce of $3.76, after by-product credits. During the second quarter, Lucky Friday produced more than 665,000 ounces of silver at an average cash cost of $6.93 per ounce, after by-product credits. Increased cash costs per ounce in the second quarter of 2008 compared to the second quarter of 2007 can be almost equally attributed to increases in smelter treatment and freight charges, as well as mining and milling costs. The increases in smelter costs and consumables are the same items that are impacting mines worldwide.

The lower silver ore grade compared to a year ago is due to the nature of the ore body and methods being used to optimize the economics of the mine. Mining longer strike lengths has allowed Lucky Friday to take advantage of the high metals prices and the mill's ability to recover more zinc due to recent upgrades. Ore has been mined at greater widths to include stringers that provide access to silver, lead and zinc that otherwise would not be mined, but generate a positive margin at current prices. This results in an economic benefit and allows Lucky Friday to temporarily mine a grade of ore that is lower than life-of-mine reserve grade, delaying some production of metals included in the reserves to later periods.

Capital expenditures at Lucky Friday during the second quarter totaled $10.1 million, and included progress on evaluating the #4 Shaft project, further progress on construction of a new tailings pond which puts the mine in position to handle tailings for the next few decades, and upgrades to the shaft ore passes.

EXPLORATION

Hecla has increased its 2008 annual exploration budget to a range of $23 million to $27 million as it incorporates 100% of the Greens Creek exploration program and commences activities at the San Juan Silver Joint Venture project in southern Colorado. In the first six months of the year, approximately $12.9 million was spent on exploration, including approximately $6.5 million at Lucky Friday and in North Idaho's Silver Valley, $3.5 million at the San Sebastian and Rio Grande projects in Mexico and $1.1 million at Greens Creek (Hecla's share).

Greens Creek - A major underground drilling campaign during the second quarter at Greens Creek focused on the Gallagher zone, where drilling pinpointed the location and extent of the resource that dips to the west and plunges to the south. The mineralization is now better defined for over 200 feet and transitions from two bands of mineralization with widths totaling 63 feet to one thick band of mineralization with a 105-foot width. This adds 200 feet to the Gallagher zone that earlier was 700 feet in strike length, potentially adding 20% to the existing resource. Targets in the SW and East zones are the focus for the remaining 2008 exploration program at Greens Creek. Exploration drilling will focus on historic underground higher-grade intercepts in the SW zone and on results from recent surface drilling in the vicinity of the East zone.

The 2008 surface exploration program began May 17 with two drill rigs. Drilling targeted a prospective area known as the 'Northeast Contact', which represents an extension of the mine contact rocks into an area northeast of the current mine workings. The drilling shows that these newly defined mine contacts are relatively flat-lying, can be correlated for over 800 feet and are still open in both directions. Assays are pending on all of these holes, but additional targets along this trend will be evaluated by drilling during the summer.

Baker said, "Greens Creek's underground exploration program is exciting because we expect it to continue to add to the resource base, just as it has done over the past 20 years. The surface program has defined new mine 'contact' rocks to the northeast of the current workings. This new area has the potential to host new ore zones, which could result in a dramatic increase in resources in the future."

Silver Valley/Lucky Friday - The Gap drilling program, which tests the mineralized structure above the current mine resource at Lucky Friday, is being evaluated. All seven holes have intersected multiple vein zones and assay results from this drilling are still pending. An analysis of this program is expected to be completed by the end of the third quarter.

Elsewhere in northern Idaho's Silver Valley, the three-dimensional (3D) modeling and resource assessment has defined nine new, separate target areas for expansion of known mineralization. Baker said, "These targets are what we expected when we combined more than 100 years of historical data with 3D computer exploration techniques. It's now possible that these new target areas could be incorporated into next year's drilling program."

At Lucky Friday, exploration drilling off the 5900 level (where mining is currently taking place) to the east of the current resource returned significant grades from several intermediate veins. These results show the potential for additional resources to be developed between the 6100 and 6400 levels, east of previous resource boundaries, and indicate the possibility for extending the mining area farther east. The drilling to the west, past a fault that previously limited the resource, has encountered mineralization.

Mexico - Hecla's 500-square-mile San Sebastian land package is located in central Mexico, in the middle of the world's most prolific silver trend. Drilling, surface trenching and sampling are ongoing at this recently expanded property. The highlight of this quarter's exploration program is the identification of the Penascote target area that contains a strongly anomalous silver-in-soil anomaly, similar to the one observed over the past-producing Francine vein. In addition, three new vein systems were discovered northeast of Penascote.