Rule 424(b)(5)
Registration No. 33-59659
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 5, 1995)
3,950,000 SHARES
HECLA MINING COMPANY
COMMON STOCK
($0.25 PAR VALUE)
The outstanding shares of common stock, par value $0.25 per
share ("Common Stock") of Hecla Mining Company ("Hecla" or the
"Company") are, and the shares of Common Stock offered hereby
(the "Shares") will be, listed on the New York Stock Exchange
(the "NYSE") under the symbol "HL." On February 18, 1997, the
last reported sale price of the Common Stock as reported on the
NYSE Composite Tape was $6 5/8 per share. See "Recent Devel-
opments--Common Stock Prices."
SEE "RISK FACTORS" BEGINNING AT PAGE 7 OF THE PROSPECTUS AC-
COMPANYING THIS PROSPECTUS SUPPLEMENT, AND "RECENT
DEVELOPMENTS" BEGINNING AT PAGE S-2 OF THIS PROSPECTUS
SUPPLEMENT, FOR A DISCUSSION OF CERTAIN INFORMATION THAT SHOULD
BE CAREFULLY CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON
STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PRO-
SPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
PRICE TO PLACEMENT AGENT PROCEEDS TO
PUBLIC DISCOUNT(1) THE COMPANY(2)
Per Share......................... $6.25 4.3% $5.98125
Total............................. $24,687,500.00 $1,061,562.50 $23,625,937.50
<FN>
(1) Hecla has agreed to indemnify Muzinich & Co., Inc., as
Placement Agent (the "Placement Agent") against certain
liabilities, including liabilities under applicable
securities laws. See "Underwriting."
(2) Before deducting expenses payable by Hecla estimated at
$150,000.
</FN>
It is expected that delivery of the Shares will be made at the
offices of Muzinich & Co., Inc., 450 Park Avenue, New York, New
York or through the facilities of The Depositary Trust Company,
on or about February 24, 1997.
The date of this Prospectus Supplement is February 19, 1997.
The information in the Prospectus Supplement is quali-
fied in its entirety by the more detailed information and con-
solidated financial statements and notes thereto appearing or
incorporated by reference in the accompanying Prospectus. In
determining whether to purchase the Shares being offered, pro-
spective investors should carefully consider the information
contained in this Prospectus Supplement, the accompanying Pro-
spectus and incorporated by reference therein. References to
"Hecla" and the "Company" in the Prospectus Supplement and the
accompanying Prospectus include Hecla Mining Company and its
subsidiaries.
THE COMPANY
The Company, originally incorporated in 1891, is prin-
cipally engaged in the exploration, development, mining and pro-
cessing of precious and non-ferrous metals, including gold, sil-
ver, lead and zinc, and certain industrial minerals. The Com-
pany has experienced losses from operations for 1996 and each of
the last six years. See "Recent Developments--Recurring Losses"
below, and "Risk Factors--Recent Losses" in the accompanying
Prospectus.
The Company's principal executive offices are located
at 6500 Mineral Drive, Coeur d'Alene, Idaho 83814-8788, and its
telephone number at such address is (208) 769-4100.
RECENT DEVELOPMENTS
FOURTH QUARTER RESULTS
The Company reported a net loss applicable to holders
of Common Stock for the fourth quarter of 1996 of $1.9 million,
or $0.04 per share of Common Stock compared to a loss of $0.8
million or $0.02 per share of Common Stock for the 1995 fourth
quarter period. The fourth quarter loss in 1996 is primarily
attributable to decreased gold production and lower precious
metals prices as compared to the 1995 fourth quarter period.
The 1996 fourth quarter loss was partially offset by a $2.5 mil-
lion gain on the sale of an additional 1.5% net smelter return
royalty on the Rosebud property to Euro-Nevada Mining Corpora-
tion Inc.
For the fiscal year ended December 31, 1996, the Com-
pany experienced a net loss applicable to holders of Common
Stock of $40.4 million, or $0.79 per share of Common Stock.
S-2
See "--Recurring Losses" below and "Risk Factors--
Recent Losses" in the accompanying Prospectus.
RECURRING LOSSES
The Company has experienced losses from operations for
each of the last six years. For the year ended December 31,
1996, the Company reported a net loss of approximately $32.4
million (before preferred dividends of $8.1 million) or $0.63
per share of Common Stock compared to a net loss of
approximately $101.7 million (before preferred stock dividends
of $8.1 million) or $2.11 per share of Common Stock for the year
ended December 31, 1995. The 1996 decreased net loss was due to
a variety of factors, the most significant of which was the
write-down of the Company's interest in the Grouse Creek mine in
the third quarter of 1995 totaling $97.0 million, compared to
1996 adjustments totaling $35.7 million for severance, holding,
reclamation, closure costs, and carrying value adjustments for
property, plant and equipment and certain assets at the Grouse
Creek and American Girl mines.
If the Company's estimates of the market prices of
gold, silver, lead and zinc are realized in 1997, the Company
expects to record income or (loss) in the range of a $(2.0) mil-
lion loss, to income of $2.0 million, after the expected
dividends to preferred shareholders totaling approximately $8.1
million for the year ending December 31, 1997. 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 1997 will be
as projected. Additionally, there can be no assurance the
Company will be profitable in the future.
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METAL PRICES
The following table sets forth the average daily clos-
ing prices of the following metals for 1995, 1996 and January
1997.
1995 1996 January 1997
Gold (1)
(per oz.) $384.16 $387.70 $355.10
Silver (2)
(per oz.) 5.19 5.18 4.76
Lead (3)
(per lb.) 0.29 0.35 0.31
Zinc (4)
(per lb.) 0.47 0.46 0.49
____________________
(1) London Final
(2) Handy & Harman
(3) London Metals Exchange -- Cash
(4) London Metals Exchange -- Special High Grade -- Cash
As of February 18, 1997, the closing prices of these
metals were: gold -- $345.00 per oz.; silver -- $5.21 per oz.;
lead -- $0.29 per lb.; and zinc -- $0.54 per lb.
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RESERVE DATA AS OF DECEMBER 31, 1996
ORE RESERVES DATA
AS OF DECEMBER 31, 1996
Proven and Probable
Hecla's Share
of Reserves (1) Ore Grade
--------------- ------------------------------------------------------------
Mine-(Hecla Gold Silver Lead Zinc
Interest in %) (Tons) (oz/ton) (oz/ton) (%) (%)
---------------------------------------------------------------------------------------------------------------------------
Grouse Creek (approx. 80%)(2) 481,840 0.040 0.3 - -
La Choya (3) 3,005,231 0.024 - - -
Lucky Friday (4) 1,245,660 - 14.9 11.3 2.2
Greens Creek (29.73%)(5) 2,641,702 0.151 19.5 4.6 12.6
Rosebud (50.0%)(6) 638,317 0.392 2.7 - -
Contained Metal
--------------------------------------------------------------------------------
Mine-(Hecla Gold Silver Lead Zinc
Interest in %) ounces ounces tons tons
---------------------------------------------------------------------------------------------------------------------------
Grouse Creek (approx. 80%)(2) 23,843 179,042 - -
La Choya (3) 115,418 - - -
Lucky Friday (4) - 18,512,024 140,608 26,872
Greens Creek (29.73%)(5) 398,046 51,587,608 120,096 333,849
Rosebud (50.0%)(6) 249,942 1,713,945 - -
------- ---------- ------- -------
787,249 71,992,619 260,704 360,721
======= ========== ======= =======
<FN>
(1) The Company reports ore reserves from estimates of the
quantities and grades of mineralized material at the Company's
mines which the Company believes can be recovered and sold at
prices in excess of the cash cost of production. The estimates
are based largely on current costs and on projected prices and
demand for the Company's products. Ore reserves are stated
separately for each of the Company's mines based upon factors
relevant to each mine. Ore reserves represent diluted in-place
grades and do not reflect losses in the recovery process. The
Company's estimates of proven and probable reserves for the
Lucky Friday mine, the Rosebud mine, the Grouse Creek mine and
the La Choya mine at December 31, 1996 are based on a gold price
of $386 per ounce, silver price of $5.20 per ounce, lead price
of $0.38 per pound and zinc price of $0.52 per pound,
respectively. Proven and probable reserves for the Greens Creek
mine are based on calculations of reserves provided to the
Company by the operator of this property. These calculations
have been reviewed but not independently confirmed by the
Company. Kennecott Greens Creek Mining Company's (the mine
operator) estimates of proven and probable reserves for the
Greens Creek mine as of December 1996, are derived from
successive generations of reserve and feasibility analyses for
three different areas of the mine, each using a separate
assessment of metal prices. The prices used were:
East Ore Area West Ore Area Southwest Ore Area
Gold (per ounce) $ 340 $ 350 $ 360
Silver (per ounce) 4.50 4.75 5.00
Lead (per pound) 0.33 0.28 0.28
Zinc (per pound) 0.60 0.57 0.50
Changes in reserves represent general indicators of the results
of efforts to develop additional reserves as existing reserves
are depleted through production. Grades of ore fed to process
may be different from stated reserve grades because of variation
in grades in areas mined from time to time, mining dilution and
other factors. Reserves should not be interpreted as assurances
of mine life or of the profitability of current or future opera-
tions.
(2) Two distinct ore deposits have been identified at the
Grouse Creek mine: the Sunbeam deposit and the Grouse deposit.
Both deposits are mineable by open pit methods. The Company
currently plans to continue mining ore from the Sunbeam pit
through the second quarter of 1997. In 1996, management and the
Company's Board of Directors decided to defer the development of
the Grouse ore body as it is uneconomical at current metals
prices. The Company intends to suspend operations at the Grouse
Creek mine when mining and milling of
S-5
the Sunbeam pit ore is completed. The mine will then be placed
on a care-and-maintenance status. In connection with the
decision to suspend operations at the Grouse Creek mine, the
Company determined that the mineralized material contained in
the Grouse pit cannot be mined and processed economically at
current metals prices. Accordingly, the Grouse deposit is
presently not considered a reserve and is not included in the
Company's reserves at December 31, 1996. Proven and probable
reserves include Hecla's approximate 80% share of 5,733 ounces
of gold and 34,435 ounces of silver contained in mined
stockpiles. On January 31, 1997, Great Lakes Minerals Inc.
("Great Lakes") and the Company entered into a letter agreement
terminating the Grouse Creek Joint Venture and conveying Great
Lakes' 20% interest in the Grouse Creek project to Hecla. Great
Lakes retained a 5% defined net proceeds interest in the
project. The Company has assumed 100% of the interests and
obligations associated with the property.
(3) At December 31, 1996, estimated recoverable gold ounces on
the heap leach pad totaling 44,197 gold ounces are included in
ore reserves. The ounces were placed on the pad during 1994-
1996 and are currently estimated to be recovered over the mine's
remaining life.
(4) Includes 62,834 and 12,053 tons of lead and zinc,
respectively, and 11,144,579 ounces of silver from the adjacent
Lucky Friday expansion project, formerly referred to as the Gold
Hunter development project.
(5) Ore reserves at the Greens Creek mine represent in-place
material, diluted and adjusted for expected mining recovery.
Process plant recoveries of ore reserve grades by the mine are
expected to be 75% for silver, 72% for gold, 89% for zinc and
84% for lead. Payable recoveries of ore reserve grades by
smelters and refiners are expected to be 66% for silver, 58% for
gold, 69% for zinc and 69% for lead.
(6) Proven and probable mineral reserves at Rosebud reflect
only the Company's share (50%) pursuant to the September 6,
1996, sale of a 50% interest in the property to Santa Fe Pacific
Gold Corporation ("Santa Fe"). Pursuant to the terms of the
agreement, a limited liability corporation was established with
each party owning a 50% interest to develop the Rosebud gold
property. Under the terms of the agreement, Hecla will manage
the mining activities and ore will be hauled via truck
approximately 100 miles to Santa Fe's Twin Creeks Pinon Mill for
processing. Total mine site capital expenditures to bring the
mine into production are expected to be approximately $20-$25
million, of which $11.1 million has been expended through
December 31, 1996. Santa Fe funded the first $12.5 million of
mine-site development and Santa Fe is also responsible, under
the terms of the agreement, to fund costs of road and mill
facility improvements. Santa Fe also contributed exploration
property located near the Rosebud property to the joint venture,
and will fund the first $1.0 million in exploration
expenditures, and two-thirds of future exploration expenditures
beyond the initial $1.0 million. Construction and development
activities to date have included development of a second portal
to the mine, 2,500 feet of underground drifting, a six-mile
power line, an eight-mile access road, and surface plant
facilities necessary to support the underground operation. At
December 31, 1996, surface plant facilities are approximately
85% complete. Construction and development activities are
currently expected to be completed in the second quarter of
1997, with production anticipated to commence in the second
quarter of 1997. Since Rosebud is a development project with no
prior operating history, it is possible that the Company may
experience different economic relations than it currently
forecasts. It is not unusual in new mining operations to
experience unexpected problems during the development and start-
up phases. See "Risk Factors -- Project Development Risks" in
the accompanying Prospectus.
RESERVES -- That part of a mineral deposit which could be eco-
nomically and legally extracted or produced at the time of the
reserve determination. Reserves are customarily stated in terms
of "Ore" when dealing with metalliferous minerals.
PROVEN RESERVES -- Reserves for which tonnage is computed from
dimensions revealed in outcrops, trenches, workings or drill
holes and for which the grade and/or quality 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, depth and mineral
content of reserves are well established.
PROBABLE RESERVES -- Reserves for which tonnage and grade and/or
quality are computed from information similar to that used for
proven reserves, but the sites for inspection, sampling and
measurement are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for
proven reserves, is high enough to assume continuity between
points of observation.
</FN>
METALS PRODUCTION
The Company's gold production was 169,376 ounces in
1996 as compared to 169,777 ounces in 1995. Gold production is
expected to decline slightly in 1997 due to the 1996 closure of
the American Girl gold mine in which the Company maintains a 47%
interest and the 1997 suspension of operations at the Grouse
Creek mine, partly offset by expected increased gold production
from the Greens Creek and Rosebud mines. See "--Grouse Creek"
below and "Risk Factors--Volatility of Metals Production" in the
accompanying Prospectus.
S-6
PROPOSED CAPITAL EXPENDITURES
The Company's current Development Projects include the
Rosebud project, and the Lucky Friday expansion project (former-
ly referred to as the Gold Hunter project) located adjacent to
the Lucky Friday mine. A final feasibility study will be com-
pleted in early 1997 on the Lucky Friday expansion project, at
which time a decision will be made with respect to further de-
velopment. If the decision is made to go forward with the
project in early 1997, the estimated remaining development costs
will be incurred mostly during the remainder of 1997 with the
balance in early 1998. The Company currently estimates that
capital expenditures to be incurred in 1997 will be in the range
of $19.0 million to $32.5 million, including $0.8 million of
capitalized interest. These expenditures, excluding capitalized
interest, consist primarily of the Company's share of develop-
ment expenditures at the Rosebud project (estimated to be $10.0-
$11.0 million), the Lucky Friday expansion project (estimated to
be $2.0-$14.0 million), industrial minerals capitalized expendi-
tures (estimated to be $2.6-$2.8 million), Greens Creek mine
capitalized expenditures (estimated to be $2.0-$2.2 million),
and other capitalized expenditures (estimated to be $1.6-$1.7
million). The high end of the estimates with respect to the
Lucky Friday expansion project expenditures are subject to prep-
aration of a final feasibility study, final engineering esti-
mates, as well as approval of the Company's Board of Directors.
These planned capital expenditures will depend, in large part,
on the Company's ability to obtain the required funds from oper-
ating activities, amounts available under its revolving and term
loan credit facility, and other potential financing arrange-
ments. As market circumstances permit, the Company may also
seek to finance certain of its cash requirements through the
sale of equity or debt securities, as appropriate. There can be
no assurance that actual capitalized expenditures will be as
projected based upon the uncertainties associated with the esti-
mates for development of the Rosebud and Lucky Friday expansion
projects and the Company's ability to generate adequate funding
for the projected capital expenditures.
The Company's estimate of its capital expenditure re-
quirements assumes, with respect to the Greens Creek and Rosebud
properties, that the Company's joint-venture partners will not
default with respect to their respective portions of development
costs and capital expenditures. See "Risk Factors--Project
Development Risks" in the accompanying Prospectus.
AMERICAN GIRL
In September 1996, the Company announced that the
operator of the American Girl gold mine, in which the Company
S-7
has a 47% joint venture interest, had determined that operations
at the American Girl mine would be suspended effective November
4, 1996. During the first six months of 1996 and continuing
into the third quarter of 1996, the American Girl gold mine
experienced significantly higher than anticipated operating
costs and lower than expected recovered gold ore grade. Based
on its periodic review of the carrying value of the Company's
mining properties, the Company determined that a third quarter
carrying value adjustment totaling $7.6 million was required to
properly reflect the estimated net realizable value of its
interest in the American Girl Joint Venture. The amount of the
adjustment was based on the Company's carrying value of its
interest in the American Girl mine in excess of estimated
discounted future cash flows. In addition to the carrying value
adjustment, the Company also recorded a $0.3 million provision
for closed operations to increase the Company's recorded
liability for reclamation and closure costs to its estimate of
its share of future closure and reclamation costs at the
American Girl mine.
GROUSE CREEK
In November 1996, the Company's management and the
Company's Board of Directors decided to place the development of
the Grouse ore body on hold due to the ore contained in the
Grouse ore body being uneconomical at current metal prices.
This resulted in the Company's decision to suspend operations at
the Grouse Creek mine. The Company currently plans to continue
mining the Sunbeam pit through the second quarter of 1997.
Thereafter, the mine will be placed on a care-and-maintenance
status. In connection with the decision to suspend operations
at the Grouse Creek mine, the Company determined that certain
adjustments were required to properly reflect the Company's
interest in the net realizable value of the property and future
severance, holding, reclamation, and closure efforts. The
Company thus recorded third quarter 1996 adjustments totaling
approximately $5.3 million and $22.5 million, to reduce the
carrying value of Grouse Creek mine assets to estimated net
realizable value and for future severance, holding, reclamation
and closure efforts at the Grouse Creek mine, respectively.
The Company estimates that its share of total produc-
tion at the Grouse Creek gold mine will be from 18,000 to 20,000
ounces of gold in 1997.
On January 31, 1997, Great Lakes and the Company en-
tered into a letter agreement terminating the Grouse Creek Joint
Venture and conveying Great Lakes' 20% interest in the Grouse
Creek project to the Company. Great Lakes retained a 5% defined
net proceeds interest in the project. The Company has assumed
S-8
100% of the interests and obligations associated with the prop-
erty.
BANK CREDIT AGREEMENT
The Company has a revolving and term loan facility
(the "Bank Agreement") that allows it to borrow up to $55.0 mil-
lion. Amounts may be borrowed on a revolving credit basis
through July 31, 1998, and are repayable in eight quarterly in-
stallments beginning on October 31, 1998. During the commitment
period, the Company pays an annual facility fee ranging from
$178,750 to $261,250, the amount of which is based on average
quarterly borrowings. The Bank Agreement, as amended, includes
certain collateral provisions, including the pledge of common
stock of certain of the Company's subsidiaries and providing the
lenders a security interest in accounts receivable. Under the
amended terms of the Bank Agreement, the Company is required to
maintain certain financial ratios, and meet certain net worth
and indebtedness tests for which the Company was in compliance
at December 31, 1996. Amounts available under the amended Bank
Agreement are based on a defined debt to cash flow test. As of
December 31, 1996, the Company had borrowings of $38.0 million
and the ability to borrow the remaining $17.0 million under the
facility. The interest rate for borrowings under the Bank
Agreement as of December 31, 1996 was 7.16%. As of February 18,
1997, the Company had borrowings of $45.0 million and the
ability to borrow the remaining $10.0 million.
EXPLORATION
For 1997, the Company has budgeted exploration expen-
ditures of approximately $4.0 - $5.0 million, although the
Company is currently evaluating a number of opportunities that
could potentially increase this amount by an additional $2.0 -
$4.0 million. The Company's planned exploration activities are
primarily associated with efforts at its existing operating and
development properties and certain other efforts in Mexico.
There can be no assurance that the Company's mineral exploration
efforts will be successful. See "Risk Factors --Exploration" in
the accompanying Prospectus.
LITIGATION
No decision has been rendered on the Company's appeal
to the Idaho Supreme Court, of the $20 million judgment rendered
against the Company by the Idaho District Court in June 1994, in
the Star Phoenix litigation. The Idaho Supreme Court heard oral
arguments in the case in April 1996. A decision from the Idaho
Supreme Court is expected in early 1997 and could be issued at
any time. The Company expects to prevail in this matter,
S-9
although there can be no assurance in this regard. Accordingly,
the Company has not provided for this contingency as of December
31, 1996. See "Risk Factors--Environmental Matters and Legal
Proceedings" in the accompanying Prospectus.
HEDGING ACTIVITIES
In the normal course of its business, the Company uses
forward sales commitments and commodity put and call option con-
tracts to manage its exposure to fluctuations in the prices of
certain metals which it produces. Contract positions are de-
signed to ensure that the Company will receive a defined minimum
price for certain quantities of its production. Gains and loss-
es, and the related costs paid or premiums received, for option
contracts which hedge the sales prices of commodities are de-
ferred and included in income as part of the hedged transaction.
Revenues from the aforementioned contracts are recognized at the
time contracts are closed out by either delivery of the underly-
ing commodity or settlement of the net position in cash. The
Company is exposed to certain losses on forward sales contracts,
generally the amount by which the contract price exceeds the
spot price of a commodity, in the event of nonperformance by the
counterparties to these agreements. None of the aforementioned
activities have been entered into for speculative purposes as of
December 31, 1996 or January 31, 1997.
As of December 31, 1996, the Company had forward sales
commitments through January 1997 for 1,000 troy ounces of gold
at an average price of $412 per troy ounce. The Company has
also purchased options to put 34,440 troy ounces of gold to
counterparties at an average price of $396 per troy ounce. Con-
currently, the Company sold options to allow the counterparties
to call 34,440 troy ounces of gold from the Company at an aver-
age price of $461 per troy ounce. There was no net cost associ-
ated with the purchase and sale of these options which expire,
in tandem, on a monthly basis through December 1997. As of De-
cember 31, 1996, the estimated fair value of the Company's pur-
chased gold put options was approximately $772,000. If the Com-
pany had chosen to close its offsetting short gold call option
positions, it would have incurred a liability of approximately
$2,000. The London Final gold price, at December 30, 1996, was
$369.25. Additionally, the Company had entered into spot de-
ferred sales commitments for 25,000 ounces of gold at $381 per
ounce for delivery on January 15, 1997.
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At January 31, 1997, the Company's significant metal
contract hedging positions were as follows:
Average Contract Estimated Asset (Deferred Revenue
January 31, 1997 Price Amount Fair Value Carrying Value)
---------------- ------- -------- ---------- ------------------------
(Thousands) (Thousands)
Spot Deferred
Contracts:
Gold $383/oz 20,000 ozs. $741 --
Purchased gold
put options $396/oz 31,570 ozs. $1,410 --
Sold gold call
options $461/oz. 31,570 ozs $(1) --
The nature and purpose of these forward sales con-
tracts does not presently expose the Company to any significant
net loss. See "Risk Factors -- Hedging Activities" in the
accompanying Prospectus.
COMMON STOCK PRICES
The high and low sales prices per share for the Common
Stock as reported on the NYSE Composite Tape for the first, sec-
ond, third and fourth quarters of 1996 were: $9.50 and $7.00,
$8.375 and $7.00, $7.50 and $5.625, $6.75 and $5.50, respec-
tively. The Company has paid no dividends on its Common Stock
since 1990.
THE OFFERING
Common Stock Offered.............. 3,950,000 Shares
Common Stock outstanding (1):
Before the Offering (2)...... 51,137,239 Shares
After the Offering........... 55,087,239 Shares
_________________
(1) Excludes options to purchase shares of Common Stock, which
as of February 18, 1997 consisted of 545,992 shares of
Common Stock underlying outstanding stock options.
(2) As of February 18, 1997.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the
Shares are estimated to be $23,475,937.50, after payment of
Placement Agent fees of $1,061,562.50, and expenses paid by the
S-11
Company estimated to be $150,000. Initially, the Company will
use such proceeds to repay indebtedness under its existing $55.0
million revolving and term loan facility. As of February
18, 1997, approximately $45.0 million was outstanding under the
Bank Agreement at an average interest rate of 7.01% as of such
date. See "Recent Developments--Bank Credit Agreement." The
Company currently estimates that capital expenditures for 1997
will be in the range of $19.0 million to $32.5 million,
including capitalized interest of $0.8 million. The Company
currently anticipates that it will make borrowings under the
Bank Agreement to meet capital expenditure requirements, in
particular, its obligations with respect to the planned
continued development of the Rosebud project and the Lucky
Friday expansion project (assuming continued development is
approved). See "Recent Developments--Proposed Capital
Expenditures."
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges was
inadequate to cover fixed charges by $57.6 million in 1992,
$22.3 million in 1993, $26.0 million in 1994, $102.9 million in
1995, and $34.0 million in 1996. However, earnings for these
periods reflect write-downs and other non-cash charges of $59.0
million in 1992, $19.1 million in 1993, $34.0 million in 1994,
$125.8 million in 1995, and $56.5 million in 1996. For purposes
of computing the ratio of earnings to fixed charges, earnings
consist of earnings before the cumulative effect of accounting
changes, income taxes and fixed charges, adjusted to exclude
capitalized interest. Fixed charges consist of total interest,
whether expensed or capitalized, dividends on preferred stock,
amortization of debt expense and one-third of rents, which is
deemed to be representative of an interest factor.
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" and should be read together
with the disclosure under "Certain U.S. Federal Income Tax
Considerations" in the accompanying Prospectus, including the
section "--Federal Tax Considerations as a Real Property Holding
Corporation" thereunder. 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
S-12
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 of 1986, as amended, existing (and, where noted, 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. Proposed Treasury regulations
(the "Proposed Regulations") that are proposed to be effective
with respect to dividends paid after December 31, 1997 would
change in certain respects some of the certification and
reporting requirements discussed below. It is not certain
whether, or in what form, such proposed regulations will be
finalized.
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).
S-13
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 to 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
Generally, a Non-U.S. Shareholder will not be subject
to United States federal income tax on the gain realized upon
the disposition of such shareholder's shares of Common Stock
unless (i) the Company is or has been a "U.S. real property
holding corporation" for federal income tax purposes (which the
Company believes that it is likely to be, see "Certain U.S.
Federal Income Tax Considerations--Federal Tax Considerations as
a Real Property Holding Corporation" in the accompanying
Prospectus) and the Non-U.S. Shareholder held, directly or
indirectly, at any time during the five-year period ending on
the date of disposition, 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, (ii) 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, (iii) 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 (iv) the Non-U.S.
Shareholder is subject to 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 United States federal estate tax purposes) of the
United States at the time of his or her death will be includable
S-14
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")
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 either is subject to the 30%
withholding 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 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 shareholder 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 to or 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.
The Proposed Regulations would, if adopted, alter the foregoing
rules in certain respects. Among other things, the Proposed
Regulations would provide certain presumptions under which a
Non-U.S. Shareholder would be subject to backup withholding in
the absence of required certifications. Backup withholding is
S-15
not an additional tax. 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.
PLAN OF DISTRIBUTION
The Company has entered into an Engagement Agreement,
dated as of February 18, 1997 (the "Engagement Agreement"), with
Muzinich & Co., Inc., as Placement Agent. Pursuant to the
Engagement Agreement, the Company has retained the Placement
Agent as its agent, and the Placement Agent has agreed to use
its best efforts, to offer the Shares to domestic and foreign
institutional investors on a "best efforts", minimum 3,200,000
Shares, maximum 4,500,000 Shares basis. The total number of
Shares offered by the Placement Agent is 3,950,000. The
Placement Agent will not acquire Shares for its own account.
Pursuant to the Engagement Agreement, the Placement
Agent will receive from the Company a 4.3% cash commission on
the gross offering price per Shares sold. The Company will
also pay all reasonable legal fees and expenses incurred by the
Placement Agent (with fees and expenses in excess of $20,000
subject to pre-approval by the Company).
The Placement Agent has the right to offer the Shares
through members of the National Association of Securities
Dealers, Inc. in the United States or through other sales agents
outside the United States, and will pay such dealers a
concession in the amount of approximately one-half of its
commission.
The Company has agreed to indemnify the Placement
Agent against certain liabilities, including liabilities under
the Act, or to contribute to payments that the Placement Agent
may be required to make in respect thereof.
S-16
LEGAL MATTERS
Certain legal matters in connection with the Shares
offered hereby will be passed upon for Hecla by Wachtell, Lip-
ton, Rosen & Katz, New York, New York, and for the Placement
Agent by Haythe & Curley, New York, New York.
EXPERTS
The consolidated financial statements as of December
31, 1996 and 1995 and the consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996, incorporated
by reference in this Prospectus, have been incorporated herein
in reliance on the report, which includes an explanatory
paragraph concerning changes in the methods of accounting for
remediation liabilities in 1996, the impairment of long-lived
assets in 1995 and investments in 1994, of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that
firm as experts in accounting and auditing.
S-17
No dealer, salesperson or other person 3,950,000 SHARES
has been authorized to give any information
or to make any representations, other than
those contained in or incorporated by
reference in this Prospectus Supplement
or the Prospectus, in connection with the
offer made by this Prospectus Supplement
and Prospectus and, if given or made, such
information or representations must not be
relied upon as having been authorized by
the Company or any underwriter or dealer.
Neither the delivery of this Prospectus
Supplement or the Prospectus nor any sale HECLA MINING COMPANY
made hereunder shall, under any circum-
stances, create an implication that there
has been no change in the facts set forth
in this Prospectus Supplement and Prospectus,
or in the affairs of the Company since the date
hereof. This Prospectus Supplement and the
Prospectus do not constitute an offer or
solicitation by anyone in any jurisdiction in
which such offer or solicitation is not
authorized or in which the person making such
offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to COMMON STOCK
make such offer or solicitation. ($0.25 PAR VALUE)
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
The Company.................. S-2
Recent Developments.......... S-2
Common Stock Prices.......... S-11
The Offering................. S-11
Use of Proceeds.............. S-11
Ratio of Earnings to
Fixed Charges.............. S-12
Certain United States Tax
Consequences for Non-U.S.
Shareholders............... S-12
Plan of Distribution......... S-16
Legal Matters................ S-17
Experts...................... S-17
PROSPECTUS
Available Information........ 2
Information Incorporated
by Reference............... 3
The Company.................. 5
Risk Factors................. 7
Use of Proceeds.............. 20
Ratio of Earnings to
Fixed Charges.............. 20
Description of Debt
Securities................. 20
Description of Preferred
Stock...................... 42
Description of Common Stock.. 44
Description of Depositary
Shares..................... 44
Description of Warrants...... 48
Current Capital Structure.... 50 PROSPECTUS SUPPLEMENT
Certain Provisions of the Amended
and Restated Certificate of DATED FEBRUARY 19, 1997
Incorporation and By-Laws.. 54
Certain U.S. Federal Income Tax
Considerations............. 56
Plan of Distribution......... 71
Legal Opinions............... 73
Experts...................... 73