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

and

six

months ended

June

30,

2018

and

2017

(in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net sales to unaffiliated customers:
Greens Creek	$	74,605		$	71,339		$	140,455		$	130,189
Lucky Friday		3,287			(187	)		8,264			19,823
Casa Berardi		56,103			43,822			111,651			85,534
San Sebastian		13,264			19,305			26,598			41,277
	$	147,259		$	134,279		$	286,968		$	276,823
Income (loss) from operations:
Greens Creek	$	25,516		$	15,418		$	48,668		$	29,532
Lucky Friday		(5,261	)		(8,212	)		(9,407	)		(4,332	)
Casa Berardi		1,014			(1,708	)		4,264			(3,953	)
San Sebastian		(361	)		11,892			4,656			25,346
Other		(17,152	)		(13,415	)		(32,476	)		(26,747	)
	$	3,756		$	3,975		$	15,705		$	19,846

The following table presents identifiable assets by reportable segment as of

June

30,

2018

and

December

31,

2017

(in thousands):

	June 30, 2018		December 31, 2017
Identifiable assets:
Greens Creek	$	678,862	$	671,960
Lucky Friday		429,213		432,400
Casa Berardi		792,891		804,505
San Sebastian		68,812		62,198
Other		424,016		393,894
	$	2,393,794	$	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, which we currently have at our Greens Creek and Lucky Friday units, 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 also 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.

The consideration we receive for our concentrate sales fluctuates due 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

June

30,

2018,

metals contained in concentrates and exposed to future price changes totaled

1.2

million ounces of silver,

5,842

ounces of gold,

11,696

tons of zinc, and

2,792

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 June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Greens Creek		51	%		53	%		49	%		47	%
Lucky Friday		2	%		—	%		3	%		7	%
Casa Berardi		38	%		33	%		39	%		31	%
San Sebastian		9	%		14	%		9	%		15	%
		100	%		100	%		100	%		100	%

Sales of products by metal for the

three

- and

six

-month periods ended

June

30,

2018

and

2017

were as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Silver	$	38,425		$	46,077		$	73,647		$	97,434
Gold		77,635			66,975			150,679			129,676
Lead		10,690			8,101			19,917			21,720
Zinc		27,614			20,500			57,723			50,365
Less: Smelter and refining charges		(7,105	)		(7,374	)		(14,998	)		(22,372	)
	$	147,259		$	134,279		$	286,968		$	276,823

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

- and

six

-month periods ended

June

30,

2018

and

2017

(in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017

Canada	$	94,524	$	83,215	$	183,192	$	183,434
Korea		41,537		18,972		74,240		47,943
Japan		3,897		11,804		17,670		24,094
China		198		15,401		67		15,352
United States		4,407		4,080		8,488		9,285
Total, excluding gains/losses on forward contracts	$	144,563	$	133,472	$	283,657	$	280,108

Sales by significant product type for the

three

- and

six

-month periods ended

June

30,

2018

and

2017

were as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017

Doré and metals from doré	$	75,526	$	67,533	$	149,018	$	136,513
Lead concentrate		42,149		44,087		76,483		93,004
Zinc concentrate		22,579		16,344		48,231		40,562
Bulk concentrate		4,309		5,508		9,925		10,029
Total, excluding gains/losses on forward contracts	$	144,563	$	133,472	$	283,657	$	280,108

Sales of products for the

three

- and

six

-month periods ended

June

30,

2018

included net gains of

$2.7

million and

$3.3

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

three

- and

six

-month periods ended

June

30,

2017

included net gains of

$0.8

million and net losses of

$3.2

million, respectively, on the forward contracts. See

Note

for more information.

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

three

- and

six

-month periods ended

June

30,

2018

and

2017:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

CIBC		28	%		23	%		38	%		24	%
Scotia		18	%		23	%		10	%		22	%
Korea Zinc		28	%		14	%		26	%		17	%
Teck Metals Ltd.		17	%		15	%		11	%		15	%
Trafigura		—	%		12	%		—	%		6	%

Our trade accounts receivable balance related to contracts with customers was

$9.7

million at

June

30,

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. The amount of 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 accounting standards. Therefore, we have

not

recognized an asset for such costs as of

June

30,

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, and on

March 13, 2017

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

six

months of

2018

and

2017,

suspension costs

not

related to production of

$9.4

million and

$7.6

million, respectively, along with

$2.4

million and

$2.0

million, respectively, in non-cash depreciation expense, are reported in a separate line item on our consolidated statements 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 a further 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

June

30,

2018

was approximately

$428.1

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.