HL Hecla Mining Company

1. Description of Plan

The following descriptions and disclosures about the Hecla Mining Company Capital Accumulation Plan (“Plan”) provide only general information. Participants should refer to the most recent version of the summary Plan description and the Plan document for a more complete description of its provisions.

General

The Plan is a defined contribution plan, which originally became effective on January 1, 1986. The Plan provides for incentive savings through investments, which qualify under the Internal Revenue Service of the United States of America (“IRS”) code section 401(a) for tax deferral status. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted, which included provisions, among others, that provided temporary relief for those retirement plan participants affected by COVID-19. Participants who met certain criteria could take a penalty-free hardship withdrawal, borrow from their accounts at higher limits and suspend making payments on their participant loans until 2021.

During the period between March 27, 2020 and September 22, 2020, participants impacted by COVID-19 (as defined in the Plan document) could borrow from their account up to the lesser of $100,000 or the vested account balance and could suspend loan repayments due during that period until January 2021. The CARES Act also removed the 10% early withdrawal penalty for a COVID-19 related distribution up to $100,000 made during 2020. Participants who took a COVID-19 related distribution could spread the income over a three-year period for income tax purposes or avoid income taxes if the distribution is repaid within the three-year period following the distribution.

Eligible Employees

All salaried and substantially all non-union hourly employees of Hecla Mining Company (the “Company”), and its subsidiaries, who are residents of the United States are immediately eligible to enroll in the plan upon employment. Non-resident aliens that have no earned income from the Company within the U.S., hourly employees at the Company’s Lucky Friday Mine who are included in the United Steelworkers of America Local 5114, and employees engaged through lease arrangements are not allowed to participate in the Plan.

Contributions

The Plan allows eligible employees to contribute from 1% to 50% of their compensation. Employees who do not affirmatively specify their instructions with regard to participation in the Plan will automatically have 3% of their compensation reduced for contribution. Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions. Contributions may be suspended at any time upon thirty days written notice by the participant, with reinstatement and changes in suspended contributions effective for the following payroll period. Participants may also contribute amounts to the Plan previously contributed to another qualified plan. Contributions are subject to certain IRS limitations.

The Company makes matching contributions equal to 100% of deferred contributions, up to 6% of the participant’s compensation. Upon payment of matching contributions in common stock by the Company, the common stock is converted to shares of the Hecla Common Stock Fund in each eligible participant’s account having value equal to their matching contribution. The number of shares of the Company’s common stock paid for matching contributions and the conversion to shares of Hecla Common Stock Fund are each based on the closing prices on a day during the first week following the quarter end. The specific day used for each depends on the timing of processing. Upon receipt, participants may reallocate their investment in the Hecla Common Stock Fund into the other investment options offered by the Plan, subject to customary blackout restrictions as applicable. The Company made $4,331,419 and $4,533,914 of non-cash employer matching contributions during the years ended December 31, 2021 and 2020, respectively.

The Company may also make a discretionary profit-sharing contribution for any plan year. For the years ended December 31, 2021 and 2020, the Company did not make any discretionary profit-sharing contributions.

Participant Accounts

Individual accounts are maintained for each participant. Each participant’s account is credited with the participant’s contribution, employer’s matching contribution, earnings within the Plan and an allocation of the Company’s discretionary profit-sharing contribution, if any. Allocations of the Company’s contribution and plan earnings are based on participant account balances, as defined in the Plan document. The participant’s benefit is limited to the benefit that has accumulated in the participant’s account. Participants may direct the investment of their account balances into the investment options offered by the Plan. Participants may elect to change the amounts invested in any one or all of the individual options at any time.

All of the Plan’s assets are managed and held by Vanguard Fiduciary Trust Company, the Trustee, which operates under the direction of certain officers of the Company. Participants may invest in one or more of the various mutual funds, money market funds, and the Hecla Mining Company common stock fund sponsored by the Trustee.

Vesting

Participant contributions and the Company’s matching and discretionary contributions are 100% vested at all times.

Payment of Benefits

Distributions are made upon termination of employment, death, disability or retirement. When terminated, participants receive a notice of options with regards to their account approximately 30 days from the date of termination. Participants or their beneficiaries receive payment of benefits as follows: (a) balances of less than $1,000 in cases in which the participant or beneficiary did not take alternative action are distributed as a cash payment, (b) balances of between $1,000 and $5,000 in cases in which the participant or beneficiary did not take alternative action are automatically rolled over into an Individual Retirement Account, or (c) balances greater than $5,000 may be kept in the Plan until a determined distribution date, rolled over, or distributed in installments, as opted by the participant or beneficiary. Withdrawals from the Plan may also be made upon circumstances of financial hardship or termination of the Plan, in accordance with provisions specified in the Plan.

Notes Receivable from Participants

Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of (a) $50,000, minus the highest outstanding loan balance or balances, if any, the participant had at any one time during the one-year period ending immediately before the date of the new loan, or (b) 50% of their account balance. The loans are secured by the balance in the participant’s account and bear interest at a rate commensurate with prevailing rates as determined by the Plan administrator, which currently range from 4.25% to 6.50%. Principal and interest are repaid ratably through payroll deductions over periods ranging up to 5 years, unless the loan is for the purchase of the participant’s principal residence, in which case the Plan Administrator may permit a longer repayment term up to 15 years. Each participant may have up to, but no more than, two notes outstanding at any one time.

Administrative Expenses

Certain expenses of maintaining the Plan are paid directly by the Company and are excluded from these financial statements. Certain administrative expenses are paid from Plan assets and include loan, distribution, withdrawal and other fees. Investment related expenses paid to investment advisors and others described in each fund prospectus or other published documents are deducted by the investment funds or accounts prior to the allocation of the Plan’s investment earnings activity; these expenses are therefore included in net appreciation (depreciation) in fair value of investments in the statements of changes in net assets available for benefits.

2. Summary of Accounting Policies

Basis of Accounting

The Plan financial statements are presented on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.

Investment Valuation and Income Recognition

The Plan’s investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Net appreciation (depreciation) in fair value of investments consists of realized gains and losses and unrealized appreciation and depreciation on investments. Realized and unrealized appreciation (depreciation) in the fair value of investments is based on the difference between the fair value of the assets at the beginning of the year, or at the time of purchase for assets purchased during the year, and the related fair value on the day investments are sold with respect to realized appreciation (depreciation), or on the last day of the year for unrealized appreciation (depreciation). Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Notes Receivable from Participants

Notes Receivable from participants are valued at their unpaid principal balance plus accrued interest. The Plan considers all notes receivable from participants at the end of a calendar quarter, following a calendar quarter for which there is any outstanding payment due, as in default. Defaulted notes receivable from participants are deemed distributed and recorded as benefits paid to participants in the statements of changes in net assets available for benefit.

Payment of Benefits

Benefits are recorded when paid.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein, and disclosures of contingent assets and liabilities. Actual results could differ materially from those estimates.

Risks and Uncertainties

The Plan invests in funds that invest in a combination of stocks, bonds, fixed income securities and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits.

The fair value of the Plan’s investment in the Hecla Mining Company common stock fund (or “Hecla Common Stock Fund”) amounted to $17,531,288 and $27,123,946, of Hecla Mining Company common stock and money market funds of $73,645 and $100, as of December 31, 2021 and 2020, respectively. Such investments represented 10.7% and 17.3% of the Plan’s total net assets available for Plan benefits as of December 31, 2021 and 2020, respectively. For risks and uncertainties regarding the Company, participants should refer to the December 31, 2021, Form 10-K of Hecla Mining Company filed with the Securities and Exchange Commission (“SEC”).

On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a global pandemic, adversely affecting global economic activity and financial markets.  As the COVID-19 outbreak continues to evolve, the full financial impact that will be recognized in subsequent periods cannot be determined at this time.

3. Plan Termination

Although it has not expressed intent to do so, the Company has the right, under the Plan, to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. All assets remaining in the Plan after payment of any expenses properly chargeable against the Plan shall be paid to participants in such a manner as the Plan Administrator shall determine.

4. Related Party and Party-in-Interest Transactions

Certain Plan investments are shares of mutual funds managed by Vanguard Fiduciary Trust Company, the trustee, and therefore, these transactions qualify as party-in-interest transactions. Certain Plan investments are shares of Hecla Mining Company common stock; therefore, these transactions also qualify as party-in-interest transactions.

5. Income Tax Status

The Plan uses a prototype plan and trust document created by the Vanguard Group. The Vanguard Group received a Determination Letter from the IRS dated June 30, 2020, informing it that the prototype plan and trust document are qualified and exempt under Section 401(a) of the Internal Revenue Code (“IRC”). Although the Plan has been amended since receiving the Vanguard Group determination letter, management of the Company and the Plan Administrator believe the Plan is designed, and is currently being operated, in compliance with the applicable requirements of the IRC. Therefore, the Company and the Plan Administrator believe that the Plan is qualified, and the related trust is tax-exempt.

Accounting principles generally accepted in the United States of America require Plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2021 and 2020, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

6. Fair Value Measurement

The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted net assets and liabilities;

Level 2: Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for Plan assets, as well as the general classification of such items pursuant to the fair value hierarchy:

Mutual Funds and Money Market Fund — Valued at the daily closing price as reported by the fund. Mutual funds and money market fund held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value (NAV) and to transact at that price. The mutual funds and money market fund held by the Plan are deemed to be actively traded.

Common Stock —The Company’s common stock held in the Hecla Common Stock Fund is stated at fair value as quoted on a recognized exchange and valued at the last reported sales price on the last business day of the Plan year.

There have been no changes in the methodology used at December 31, 2021 and 2020. The Plan held no assets as of December 31, 2021 and 2020 included in Level 3 of the fair value hierarchy.

The tables below set forth the Plan’s assets that were accounted for at fair value as of December 31, 2021 and 2020, and the fair value calculation input hierarchy level that applies to each asset category.

EIN: 77-0664171

Plan Number: 004

Form: 5500

(a)

(b)
Identity of Issuer, Borrower,
Lessor or Similar Party

(c)
Description of Investment
Including Maturity Date,
Rate of Interest, Collateral,
Par or Maturity Value

(d)
Cost

(e)
Value

Money Market

*

Vanguard

Federal Money Market Fund

**

  $ 9,993,863

Mutual Funds

*

Vanguard

Target Retirement 2025 Fund

**

  24,645,490

*

Vanguard

Target Retirement 2035 Fund

**

   17,162,841

*

Vanguard

Target Retirement 2030 Fund

**

   13,700,386

*

Vanguard

Target Retirement 2045 Fund

**

    12,129,438

*

Vanguard

Target Retirement 2050 Fund

**

10,918,056

*

Vanguard

Target Retirement 2040 Fund

**

9,057,918

*

Vanguard

500 Index Fund

**

    6,768,394

*

Vanguard

Target Retirement 2020 Fund

**

    6,248,637

American Funds

Growth Fund of America; R-4 Class

**

  5,905,386

*

Vanguard

Growth and Income

**

4,893,825

*

Vanguard

Target Retirement 2055 Fund

**

    3,438,139

*

Vanguard

Strategic Equity Fund

**

     3,320,885

*

Vanguard

Target Retirement 2015 Fund

**

    2,538,915

*

Vanguard

Target Retirement 2060 Fund

**

    2,060,868

*

Vanguard

Windsor II Fund

**

     1,979,684

*

Vanguard

Total Bond Market Index Fund

**

1,974,522

Artisan

International Fund

**

     1,514,141

*

Vanguard

Total Stock Market Index Fund Admiral Shares

**

    1,429,742

*

Vanguard

Target Retirement Income Fund

**

1,245,890

*

Vanguard

Small-Cap Value Index Fund

**

1,171,114

*

Vanguard

Target Retirement 2065 Fund

**

522,405

*

Vanguard

Total International Bond Index Fund

**

        144,523

Total Mutual Funds

132,771,199

Common Stock

*

Hecla Mining Company

3,372,764 shares of common stock

**

     17,531,288

Participant Loans

*

Participant loans

–

      2,309,891

Total Investments

$ 162,606,241

* Represents party-in-interest to the Plan

** The cost of participant directed investments is not required to be disclosed.