Note 7 - Commitments, Contingencies and Obligations

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

7:

Commitments, Contingencies, and Obligations

General

We follow U.S. Generally Accepted Accounting Principles guidance in determining our accruals and disclosures with respect to loss contingencies, and evaluate such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is

not

probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Rio Grande Silver Guaranty

Our wholly-owned subsidiary, Rio Grande Silver Inc. (“Rio”), is party to a joint venture with Emerald Mining & Leasing, LLC (“EML”) and certain other parties with respect to a land package in the Creede Mining District of Colorado that is adjacent to other land held by Rio. Rio holds a

70%

interest in the joint venture. In connection with the joint venture, we are required to guarantee certain environmental remediation-related obligations of EML to a

third

party up to a maximum liability to us of

$2.5

million. As of

December

 

31,

2017,

we have

not

been required to make any payments pursuant to the guaranty. We

may

be required to make payments in the future, limited to the

$2.5

million maximum liability, should EML fail to meet its obligations to the

third

party. However, to the extent that any payments are made by us under the guaranty, EML, in addition to other parties, has jointly and severally agreed to reimburse and indemnify us for any such payments. We have

not

recorded a liability relating to the guaranty as of

December 

31,

2017.

Lucky Friday Water Permit Matters

In the past, the Lucky Friday unit experienced multiple regulatory issues relating to its water discharge permits and water management more generally. All of these issues have been resolved except for one: in

December 2013,

the EPA issued to Hecla Limited a request for information under Section

308

of the Clean Water Act directing Hecla Limited to undertake a comprehensive groundwater investigation of Lucky Friday

’s tailings pond

no.

3

to evaluate whether the pond is causing the discharge of pollutants via seepage to groundwater that is discharging to surface water. We completed the investigation mandated by the EPA and submitted a draft report to the agency in

December 2015.

We are waiting for the EPA’s response and we cannot predict what the impact of the investigation will be.

Hecla Limited strives to maintain its water discharges at the Lucky Friday unit in full compliance with its permits and applicable laws, however, we cannot provide assurance that in the future it will be able to fully comply with the permit limits and other regulatory requirements regarding water management.

Johnny M Mine Area near San Mateo, McKinley County, New Mexico

In

May 2011,

the EPA made a formal request to Hecla Mining Company for information regarding the Johnny M Mine Area near San Mateo, McKinley County, New Mexico, and asserted that Hecla Mining Company

may

be responsible under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") for environmental remediation and past costs the EPA has incurred at the site. Mining at the Johnny M was conducted for a limited period of time by a predecessor of our subsidiary, Hecla Limited. In

August 2012,

Hecla Limited and the EPA entered into a Settlement Agreement and Administrative Order on Consent for Removal Action (“Consent Order”), pursuant to which Hecla Limited agreed to pay (i)

$1.1

million to the EPA for its past response costs at the site and (ii) any future response costs at the site under the Consent Order, in exchange for a covenant

not

to sue by the EPA. Hecla Limited paid the

$1.1

million to the EPA for its past response costs and in

December 2014,

submitted to EPA the Engineering Evaluation and Cost Analysis (“EE/CA”) for the site. The EE/CA evaluates

three

alternative response actions:

1

)

no

action,

2

) off-site disposal, and

3

) on-site disposal. The range in estimated costs of these alternatives is

$0

to

$221

million. In the EE/CA, Hecla Limited recommended that EPA approve on-site disposal, which is currently estimated to cost

$5.6

million, on the basis that it is the most appropriate response action under CERCLA. In

June 2015,

the EPA approved the EE/CA, with a few minor conditions. The EPA still needs to publish the EE/CA for public notice and comment, and the agency will

not

make a final decision on the appropriate response action until the public comment process is complete. It is anticipated that Hecla Limited will implement the response action selected by the EPA pursuant to an amendment to the Consent Order or a new order. Based on the foregoing, we believe it is probable that Hecla Limited will incur a liability for remediation at the site. In the

fourth

quarter of

2014,

we accrued

$5.6

million, which continues to be our best estimate of that liability as of the date of this report. There can be

no

assurance that Hecla Limited

’s liability will

not

be more than

$5.6

million, or that its ultimate liability will

not

have a material adverse effect on Hecla Limited’s or our results of operations or financial position.

Carpenter Snow Creek and Barker-Hughesville Sites in Montana

In

July 2010,

the EPA made a formal request to Hecla Mining Company for information regarding the Carpenter Snow Creek Superfund site located in Cascade County, Montana. The Carpenter Snow Creek site is located in a historic mining district, and in the early

1980s

Hecla Limited leased

6

mining claims and performed limited exploration activities at the site. Hecla Limited terminated the mining lease in

1988.

In

June 2011,

the EPA informed Hecla Limited that it believes Hecla Limited, among several other viable companies,

may

be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA stated in the

June 2011

letter that it has incurred approximately

$4.5

million in response costs and estimated that total remediation costs

may

exceed

$100

million. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site.

In

February 2017,

the EPA made a formal request to Hecla Mining Company for information regarding the Barker-Hughesville Mining District Superfund site located in Judith Basin and Cascade Counties, Montana. The Barker-Hughesville site is located in a historic mining district, and between approximately

June

and

December 1983,

Hecla Limited was party to an agreement with another mining company under which limited exploration activities occurred at or near the site. Neither the EPA nor any other party has made any claims against Hecla Limited (or Hecla Mining Company), however, it is possible that such a claim will be made in the future. Unless and until such a claim is made, Hecla Limited cannot estimate the amount or range of liability, if any, relating to this matter.

Senior Notes

On

April 12, 2013,

we completed an offering of

$500

million aggregate principal amount of

6.875%

Senior Notes due

2021.

The net proceeds from the offering of the Senior Notes were used to partially fund the acquisition of Aurizon Mines Ltd. ("Aurizon") and for general corporate purposes, including expenses related to the Aurizon acquisition. Through the acquisition of Aurizon, we acquired our Casa Berardi mine and other interests in Quebec, Canada. In

2014,

we completed additional issuances of our Senior Notes in the aggregate principal amount of

$6.5

million, which were contributed to

one

of our pension plans to satisfy the funding requirement for

2014.

Interest on the Senior Notes is payable on

May 1

and

November 1

of each year, commencing

November 1, 2013.

See

Note

6

for more information.

Other Commitments

Our contractual obligations as of

December

 

31,

2017

included approximately

$5.8

million for various costs. In addition, our open purchase orders at

December 

31,

2017

included approximately

$0.2

million,

$2.0

million and

$10.5

million for various capital and non-capital items at the Lucky Friday, Casa Berardi and Greens Creek units, respectively. We also have total commitments of approximately

$12.5

million relating to scheduled payments on capital leases, including interest, primarily for equipment at our Greens Creek, Lucky Friday and Casa Berardi units (see

Note

6

for more information). As part of our ongoing business and operations, we are required to provide surety bonds, bank letters of credit, and restricted deposits for various purposes, including financial support for environmental reclamation obligations and workers compensation programs. As of

December 

31,

2017,

we had surety bonds totaling

$117.4

million in place as financial support for future reclamation and closure costs, self-insurance, and employee benefit plans. The obligations associated with these instruments are generally related to performance requirements that we address through ongoing operations. As the requirements are met, the beneficiary of the associated instruments cancels or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure of the sites. We believe we are in compliance with all applicable bonding requirements and will be able to satisfy future bonding requirements as they arise.

Other Contingencies

We also have certain other contingencies resulting from litigation, claims, EPA investigations, and other commitments and are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. We currently have

no

basis to conclude that any or all of such contingencies will materially affect our financial position, results of operations or cash flows. However, in the future, there

may

be changes to these contingencies, or additional contingencies

may

occur, any of which might result in an accrual or a change in current accruals recorded by us, and there can be

no

assurance that their ultimate disposition will

not

have a material adverse effect on our financial position, results of operations or cash flows.