Note

Business Segments and Sales of Products

We discover, acquire, develop, produce, and market concentrates and doré containing silver, gold, lead and zinc. We are currently organized and managed in

four

segments, which represent our operating units: the Greens Creek unit, the Lucky Friday unit, the Casa Berardi unit, and the San Sebastian unit.

General corporate activities

not

associated with operating units and their various exploration activities, as well as discontinued operations and idle properties, are presented as “other.” Interest expense, interest income and income taxes are considered general corporate items, and are

not

allocated to our segments.

The following tables present information about reportable segments for the

three

months ended

March

31,

2018

and

2017

(in thousands):

	Three Months Ended March 31,
	2018			2017
Net sales to unaffiliated customers:
Greens Creek	$	65,850		$	58,850
Lucky Friday		4,977			20,010
Casa Berardi		55,548			41,712
San Sebastian		13,334			21,972
	$	139,709		$	142,544
Income (loss) from operations:
Greens Creek	$	23,152		$	14,114
Lucky Friday		(4,146	)		3,880
Casa Berardi		3,250			(2,245	)
San Sebastian		5,017			13,454
Other		(15,324	)		(13,332	)
	$	11,949		$	15,871

The following table presents identifiable assets by reportable segment as of

March

31,

2018

and

December

31,

2017

(in thousands):

	March 31, 2018		December 31, 2017
Identifiable assets:
Greens Creek	$	669,042	$	671,960
Lucky Friday		432,369		432,400
Casa Berardi		802,017		804,505
San Sebastian		67,576		62,198
Other		427,087		393,894
	$	2,398,091	$	2,364,957

Our products consist of both metal concentrates, which we sell to custom smelters and brokers, and unrefined bullion bars (doré), which

may

be sold as doré or further refined before sale to precious metals traders. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer.

For sales of metals from refined doré, the performance obligation is met and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. For sales of doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of title and control of the doré containing the agreed-upon metal quantities to the customer. Refining, selling and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred.

For concentrate sales, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment. Concentrates sold at our Lucky Friday unit typically leave the mine and are received by the customer within the same day. However, there is a period of time between shipment of concentrates from our Greens Creek unit and their physical receipt by the customer, and judgment is required in determining when control has been transferred to the customer for those shipments. We have determined the performance obligation is met and title is transferred to the customer upon shipment of concentrate parcels from Greens Creek because, at that time,

) legal title is transferred to the customer,

) the customer has accepted the parcel and obtained the ability to realize all of the benefits from the product,

) the concentrate content specifications are known, have been communicated to the customer, and the customer has the significant risks and rewards of ownership of it,

) it is very unlikely a concentrate parcel from Greens Creek will be rejected by a customer upon physical receipt, and

) we have the right to payment for the parcel.

Judgment is required in identifying the performance obligations for our concentrate sales. Most of our concentrate sales involve “frame contracts” with smelters that can cover multiple years and specify certain terms, under which individual parcels of concentrates are sold. However, some terms are

not

specified in the frame contracts and/or can be renegotiated as part of annual amendments to the frame contract. We have determined parcel shipments represent individual performance obligations satisfied at a point in time when control of the shipment is transferred to the customer.

Our concentrate sales involve variable consideration, as they are subject to changes in metals prices between the time of shipment and their final settlement. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement with the customer. Also, it is unlikely a significant reversal of revenue for any

one

concentrate parcel will occur. As such, we use the expected value method to price the parcels until the final settlement date occurs, at which time the final transaction price is known. At

March

31,

2018,

metals contained in concentrates and exposed to future price changes totaled

1.5

million ounces of silver,

6,151

ounces of gold,

11,030

tons of zinc, and

1,800

tons of lead. However, as discussed in

Note

, we seek to mitigate the risk of negative price adjustments by using financially-settled forward contracts for some of our sales.

Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated by us with the customers, which represent components of the transaction price. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges typically do

not

vary materially from our estimates. Costs charged by customers include fixed treatment and refining costs per ton of concentrate and

may

include price escalators which allow the customers to participate in the increase of lead and zinc prices above a negotiated baseline. Costs for shipping concentrates to customers are recorded to cost of sales as incurred.

Sales of metal concentrates and metal products are made principally to custom smelters, brokers and metals traders. The percentage of sales contributed by each segment is reflected in the following table:

	Three Months Ended March 31,
	2018			2017

Greens Creek		46	%		41	%
Lucky Friday		4	%		14	%
Casa Berardi		40	%		29	%
San Sebastian		10	%		16	%
		100	%		100	%

Sales of products by metal for the thee-month periods ended

March

31,

2018

and

2017

were as follows (in thousands):

	Three Months Ended March 31,
	2018			2017

Silver	$	35,222		$	51,357
Gold		73,044			62,701
Lead		9,227			13,619
Zinc		30,109			29,865
Less: Smelter and refining charges		(7,893	)		(14,998	)
		139,709			142,544

The following is sales information by geographic area based on the location of smelters and brokers (for concentrate shipments) and location of parent companies (for doré sales to metals traders) for the

three

-month periods ended

March

31,

2018

and

2017

(in thousands):

	Three Months Ended March 31,
	2018			2017

Canada	$	88,668		$	100,219
Korea		32,703			28,971
Japan		13,773			12,290
United States		4,081			5,205
Other		(131	)		(48	)
Total, excluding gains/losses on forward contracts		139,094			146,637

Sales by significant product type for the

three

-month periods ended

March

31,

2018

and

2017

were as follows (in thousands):

	Three Months Ended March 31,
	2018		2017

Doré and metals from doré	$	73,492	$	68,981
Lead concentrate		34,334		48,917
Zinc concentrate		25,652		24,218
Bulk concentrate		5,616		4,521
Total, excluding gains/losses on forward contracts		139,094		146,637

Sales of products for the

first

three

months of

2018

and

2017

included net gains of

$0.6

million and net losses of

$4.1

million, respectively, on financially-settled forward contracts for silver, gold, lead and zinc contained in our concentrate sales. See

Note

for more information.

Sales of products to significant customers as a percentage of total sales were as follows for the

three

-month periods ended

March

31,

2018

and

2017:

	Three Months Ended March 31,
	2018			2017

CIBC		47	%		24	%
Scotia		2	%		20	%
Korea Zinc		23	%		20	%
Teck Metals Ltd.		4	%		15	%
Ocean Partners		10	%		10	%

Our trade accounts receivable balance related to contracts with customers was

$19.7

million at

March

31,

2018

and

$14.8

million at

December

31,

2017,

and included

allowance for doubtful accounts.

We have determined our contracts do

not

include a significant financing component. For doré sales and sales of metal from doré, payment is received at the time the performance obligation is satisfied. Consideration for concentrate sales is variable, and we receive payment for a significant portion of the estimated value of concentrate parcels within a relatively short period of time after the performance obligation is satisfied.

We do

not

incur significant costs to obtain contracts, nor costs to fulfill contracts which are

not

addressed by other standards. Therefore, we have

not

recognized an asset for such costs as of

March

31,

2018

December

31,

2017.

The sales and income (loss) from operations amounts reported above include results from our Lucky Friday segment. The Lucky Friday mine is our only operation where some of our employees are subject to a collective bargaining agreement, and the most recent agreement expired on

April 30, 2016.

February 19, 2017,

the unionized employees voted against our contract offer. On

March 13, 2017,

the unionized employees went on strike and have been on strike since that time. Production at Lucky Friday was suspended from the start of the strike until

July 2017,

when limited production resumed. For the

first

quarter of

2018

and

2017,

suspension costs

not

related to production of

$4.1

million and

$1.2

million, respectively, along with

$0.9

million and

$0.4

million, respectively, in non-cash depreciation expense, are reported in a separate line item on our consolidated statement of operations. We cannot predict how long the strike will last or whether an agreement will be reached. As a result of the strike or other related events, operations at Lucky Friday could continue to be disrupted, which could adversely affect our financial condition and results of operations. If the strike continues for an extended period or it is determined an eventual resolution is unlikely, it

may

be appropriate in the future to review the carrying value of properties, plants, equipment and mineral interests at Lucky Friday. Under such review, if estimated undiscounted cash flows from Lucky Friday were less than its carrying value, an impairment loss would be recognized for the difference between the carrying value and the estimated fair value. The carrying value of properties, plants, equipment and mineral interests at Lucky Friday as of

March

31,

2018

was approximately

$422

million. However, Lucky Friday has significant identified reserves and mineralized material and a current estimated mine life of approximately

years.

April 30, 2018,

we settled with the National Labor Relations Board ("NLRB") an unfair labor practice claim made by the union. As part of the settlement, Hecla Limited rescinded its last, best and final contract offer implemented in

March 2017.

We do

not

believe the settlement with the NLRB will resolve any of the key differences in the ongoing labor dispute. On

May 4, 2018,

we gave notice to the union that the parties to the labor dispute are at impasse, and implemented portions of our revised final offer presented in

December 2017.