Note

16:

Acquisitions

Acquisition of Klondex

July 20, 2018,

we acquired all of the issued and outstanding common shares of Klondex Mines Ltd. ("Klondex") for consideration valued at

$2.24

per Klondex share (the "Arrangement"). The acquisition resulted in our

100%

ownership of

three

producing gold mines, along with interests in various gold exploration properties, in northern Nevada. The acquisition is expected to increase our annual gold production, gives us ownership of operating gold mines and identified gold reserves and other mineralized material, and provides access to a large land package with known mineralization. Under the terms of the Arrangement, each holder of Klondex common shares had the option to receive either (i)

$2.47

in cash (the “Cash Alternative”), (ii)

0.6272

of a Hecla share per Klondex share (the “Share Alternative”), or (iii)

US$0.8411

in cash and

0.4136

of a Hecla share per Klondex share (the “Combined Alternative”), subject in the case of the Cash Alternative and the Share Alternative to pro-ration based on a maximum cash consideration of

$153.2

million and a maximum number of Hecla shares issued of

75,276,176.

Klondex shareholders also received shares of a newly formed company which holds the Canadian assets previously owned by Klondex (Havilah Mining Corporation ("Havilah")). Klondex had

180,499,319

issued and outstanding common shares prior to consummation of the Arrangement. An additional

1,549,626

Klondex common shares were issued immediately prior to consummation of the Arrangement related to conversion of in-the-money Klondex options and certain outstanding restricted share units, resulting in a total of

182,048,945

issued and outstanding Klondex common shares at the time of consummation of the Arrangement. In connection with the Arrangement, we also issued an aggregate of

4,136,000

warrants to purchase

one

share of our common stock (“Hecla Warrants”) to holders of warrants to purchase Klondex common shares. Of the Hecla Warrants,

2,068,000

have an exercise price of

$8.02

and expire in

April 2032,

and

2,068,000

have an exercise price of

$1.57

and expire in

February 2029.

In addition, we settled share-based payment awards held by Klondex directors and employees for cash of

$2.0

million. Consideration for the Arrangement was cash of

$161.7

million,

75,276,176

shares of our common stock valued at

$242.4

million, and issuance of the Hecla Warrants valued at

$10.2

million, for total consideration of

$414.2

million. The Hecla Warrants were valued using the Black-Scholes model and based on the exercise price and term of the warrants, the price of our common stock at the time of issuance of the warrants, and assumptions for the discount rate and volatility and dividend rate of our common stock. The cash consideration includes

$7.0

million for our subscription for common shares of Havilah and

$1.5

million for settlement of certain equity compensation instruments.

The following summarizes the preliminary allocation of purchase price to the fair value of assets acquired and liabilities assumed as of the date of acquisition (in thousands):

Consideration:
Cash payments	$	161,704
Hecla stock issued (75,276,176 shares at $3.22 per share)		242,389
Hecla warrants issued		10,155
Total consideration	$	414,248

Fair value of net assets acquired:
Assets:
Cash	$	12,874
Accounts receivable		3,453
Inventory - supplies		6,564
Inventory - finished goods, in-process material and stockpiled ore		10,302
Other current assets		2,583
Properties, plants, equipment and mineral interests		521,495
Non-current investments		1,596
Non-current restricted cash and investments		9,504
Total assets		568,371
Liabilities:
Accounts payable and accrued liabilities		17,270
Accrued payroll and related benefits		10,352
Accrued taxes		421
Lease liability		2,080
Debt		35,086
Asset retirement obligation		19,571
Deferred tax liability		69,343
Total liabilities		154,123
Net assets	$	414,248

The allocation of purchase price above is preliminary, as the valuation of certain components of properties, plants, equipment and mineral interests, along with the related deferred tax balances, are under review and subject to change. In the

fourth

quarter of

2018,

we adjusted the previously-reported allocation of purchase price by recognizing increases to the Properties, plants, equipment and mineral interests and Deferred tax liability balances of

$19.2

million.

Our results for the year ended

December

31,

2018

include sales of products of

$31.2

million and a net loss of

$26.7

million since the acquisition date related to the operations acquired through the Arrangement.

The unaudited pro forma financial information below represents the combined results of our operations as if the acquisition had occurred at the beginning of the periods presented. The unaudited pro forma financial information is presented for informational purposes only and is

not

indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the periods presented, nor is it indicative of future operating results.

	(unaudited)
	Year Ended December 31,
(in thousands, except per share amounts)	2018			2017			2016
Sales	$	680,261		$	785,859		$	834,789
Net (loss) income		(19,574	)		(35,203	)		73,724
(Loss) income applicable to common shareholders		(20,126	)		(35,755	)		73,172
Basic and diluted (loss) income per common share		(0.04	)		(0.08	)		0.16

The pro forma financial information includes adjustments to eliminate amounts related to the Canadian assets previously owned by Klondex, which were transferred to Havilah and

not

acquired by us, and costs related to the acquisition.

Acquisition of Mines Management

September 13, 2016,

we completed the acquisition of Mines Management and its subsidiaries through the merger of a wholly owned subsidiary of ours with and into Mines Management, pursuant to which we acquired all of the issued and outstanding common stock of Mines Management Inc. for total consideration of

$52.1

million. The acquired entities hold

100%

ownership of the Montanore project in northwestern Montana, a significant undeveloped silver and copper deposit which we believe provides long-term production growth potential if permitted and developed. Montanore is approximately

miles away from our Rock Creek project acquired through our acquisition of Revett Mining Company, Inc. in

June 2015.

The consideration was comprised of

$4.0

million in cash used to fund Mines Management's operating activities prior to completion of the merger and for settlement of outstanding warrants to purchase shares of Mines Management's common stock, and

$48.1

million in Hecla common stock. In the merger, each outstanding common share of Mines Management was exchanged for

0.2218

of a share of our common stock. Mines Management had

36,498,625

outstanding common shares and outstanding options to purchase

963,079

shares of Mines Management common stock, resulting in

8,309,006

new shares of Hecla stock issued as consideration. The value of Hecla stock issued as consideration was based upon the closing price at the time of consummation of

$5.79

per share.

The following summarizes the allocation of purchase price to the fair value of assets acquired and liabilities assumed as of the date of acquisition (in thousands):

Consideration:
Cash	$	4,025
Hecla stock issued (8,309,006 shares at $5.79 per share)		48,109
Total consideration	$	52,134
Fair value of net assets acquired:
Assets:
Cash	$	94
Properties, plants, equipment and mineral interests		74,320
Restricted cash		1,185
Other assets		329
Total assets		75,928
Liabilities:
Accounts payable and accrued liabilities		2,357
Deferred tax liability		20,313
Non-current reclamation liability		1,124
Total liabilities		23,794
Net assets	$	52,134

The

$74.3

million fair value for Properties, plants, equipment, and mineral interests is comprised of

$0.8

million for plant and equipment,

$0.1

million for land, and

$73.4

million for mineral interests.

September 2016,

we issued

181,048

shares of our common stock for payment of approximately

$1.0

million in acquisition-related costs, which are included in

Acquisition costs

on our

Consolidated Statements of Operations and Comprehensive Income (Loss)

not

indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the periods presented, nor is it indicative of future operating results.

	(unaudited)
	Year Ended December 31,
(in thousands, except per share amounts)	2016
Sales of products	$	645,957
Net income (loss)		68,778
Income (loss) applicable to common shareholders		68,226
Basic and diluted income (loss) per common share		0.17

The unaudited pro forma financial information includes adjustments to

) eliminate acquisition-related costs totaling

$4.7

million for the year ended

December

31,

2016

which are non-recurring and

) reflect the issuance of Hecla stock as consideration in the acquisition and for payment of acquisition costs. A net loss by the acquired entities since the acquisition date of

$32

thousand is included in our net income reported for the year ended

December

31,

2016.

Takeover Bid for Dolly Varden Silver Corporation

June 27, 2016,

we announced a takeover bid for all of the outstanding shares of Dolly Varden Silver Corporation ("Dolly Varden")

not

owned by us and our affiliates for cash of

CAD$0.69

per share. Dolly Varden owns

100%

of the Dolly Varden historic silver property in northwestern British Columbia, Canada. Our wholly owned subsidiary owns

4,478,087

Dolly Varden shares and warrants to purchase

1,351,762

Dolly Varden shares, representing approximately

18.5%

of Dolly Varden's shares outstanding on a partially diluted basis. Based on Dolly Varden's outstanding shares and options and warrants to acquire Dolly Varden shares, and excluding shares and warrants held by us and our affiliates, total consideration would have been approximately

CAD$13.6

million. In late

July 2016,

we withdrew the bid due to the failure of a required condition precedent to its consummation.