Good day, ladies and gentlemen, and welcome to the Q3 2008, Hecla Mining Earnings Call. My name is Kim, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions) I would now like to turn the presentation over to your host for today's conference, Ms. Vicki Veltkamp, Hecla's Vice President of Investor and Public Relations. Please proceed ma'am.

Thank you all for joining us today. I am Vicki Veltkamp, and this is the Hecla third quarter conference call 2008. Our call is being web cast live today at www.hecla-mining.com. On our website you can find today's news release. Today's presentation will be made by Phil Baker, Hecla's President and CEO, and he's joined by Jim Sabala, our Senior Vice President and CFO; Ron Clayton, our Senior Vice President of Operations; and Dean McDonald, our Vice President of Exploration. But before we start, I need to remind you that any forward-looking statements made today by the management team comes under the Private Securities Litigation Reform Act. It involves a number of risks that could cause actual results to differ from projections. In addition to our filings at the SEC, we are allowed to disclose mineral deposits that we can economically and legally extract or produce. So investors are cautioned about our use of such terms as measured, indicated, and inferred resources and we urge you to consider those disclosures that are in our SEC filings. Now I'll the turn the call over to Hecla Mining Company's President and Chief Executive Officer, Phil Baker.

Thanks Vicki. Hello everyone, and thanks for joining the call. This third quarter is our first full quarter of earnings with Greens Creek, one of the world's greatest silver mines with its low cost and long lived production. I just want to point out what a positive impact Greens Creek is having on Hecla. This quarter it's provided Hecla with our second largest quarterly silver production in the last 20 years, 88% over last year. Also it has provided the most zinc production we have ever had, and it's gone to our cash flow from operations. This is our fourth highest in last 20 years. And this is during the period when the mine is not fully optimized. Of course our acquisition and integration of Greens Creek is happening when we are facing a financial tsunami. First we had the credit crisis, and then we have had an unprecedented decline in the price of metals we produce. As we have done in the past, we are responding to this extraordinarily challenging time. When the long term debt markets became unavailable, we raised a $163 million in equity. So during the quarter we used those proceeds to reduce the debt from $360 million to $199, and since the end of the quarter we reduced another $37 million, leaving us today with only about a $161 million outstanding. To repay this debt we're going to consider all our options, but given the improvements of the credit markets and the amount of debt we have compared to the original credit approvals, we certainly will try to restructure the remaining debt. While metals prices have declined quickly, there has been a delay in cost coming down, so we are proactively working to accelerate cost reduction from suppliers at the mines, and on cost we…

Thank you, Phil. During the third quarter of 2008 we made significant progress on a number of fronts, despite of extremely challenging metal and financial markets. In particular, we completed the public offering of 34 million shares, which allowed us to repay 163 million of our $240 million bride loan. The remaining $40 million has been extended to February 2009, subject to the company providing a business plan to the bank group in December. We completed the integration of the Greens Creek operation in the Hecla Mining Company, and in early October we notified Rio Tinto we would no longer require their services. With the acquisition of Greens Creek, we increased silver production by 88%. The Company also experienced corresponding increases in lead, zinc, and gold production. On the financial front, sales for the third quarter of 2008 increased by 24.7 million, or 62%, included in the sales is a mark-to-market charge of $11.6 million relative to the difference between provisional metal pricing, impacts and final settlement prices. During the quarter, we realized silver, gold, zinc, and lead prices of $12.30 per ounce, $848 per ounce, $0.87 per pound, and $0.73 per pound respectively, compared with average spot prices of $15.03, 870, $0.87and $0.80 respectively. Operating cost increased to $43.2 million, which is a result of increased ownership of the Greens Creek mine and a general increase in overall operating costs. Cash cost per ounce of silver produced is $4.46 for the quarter, compared to a negative $4.93 in the prior year's comparable period. This increase is a result of the overall increase in cash cost, including increases in treatment and freight cost, and a decrease in by product credits during the period. Most of our other operating expenses were comparable with prior periods; with the exception of exploration which…

Thanks, Jim, and good morning. As Phil mentioned earlier, the two largest impacts to our margin somewhere to the entire mining industry have come in the form of prices we received for the metals we produce, and the amount of precious metals we are paid for on our concentrates. There is not much we can do about the prices, which certainly affected us, so I am going to focus my comments on some of the major components impacting our costs and what we are doing about it. So far this year we've seen higher treatment charges that have increased our cost by a $1.36 per silver ounce produced, increases in concentrate transportation have added an additional $0.20 per ounce. The good news, on the smelter side, is that the treatment and silver refining terms contain escalators and de-escalators that have softened the impact as the commodity prices have declined. The second major impact is we've also seen from 10% to 30% cost increases for non-diesel fuel consumables, such as steel and cement. Diesel fuels averaged 155% of what we paid for it a year ago. Again, there is some good news on this horizon. We are beginning to see some improvement in consumable pricing, and in some cases we have escalators and de-escalators built into our arrangements with our suppliers. From a labor cost standpoint, we've also seen some increases over the last couple of years, but in many cases our compensation programs contain a relatively high percentage of that risk pay which is tied to profitability. For example, Lucky Friday, a component is tied to both profitability and the silver price. There are some reductions that accrue automatically, when the silver price decreases and costs go up. It has a negative impact on our employees, which is unfortunate. I…

Thank you, Ron. Exploration at Hecla has been advancing on a number of fronts - from near mine exploration at key operating properties to exploration initiatives that are more regional in scope; however, due to market conditions, Hecla has a planned reduction in exploration spending to about $3.5 million in the fourth quarter, with programs focusing on core targets at the Lucky Friday, Greens Creek, and the San Juan joint venture. Drilling at the Lucky Friday mine focused on the east and central part of the resource to the 7100 level, and confirmed veins are coalescing into larger, higher-grade veins at depth. These drilling intersections are some of the most impressive in the history of drilling at the Lucky Friday, and represent an even better ore body below the current Lucky Friday mine workings. As well, deep drilling below 7500 level continues to extend high-grade resources to the east. Not mentioned in the press release are the encouraging drill results to the east, both above and below to 5900 level, that suggests further additions to the resource near current mine workings. Drilling around the eastern extension of the 6700 level has defined discreet mineral pods beyond the reported resource boundary that could also represent future mineable areas. This has been a banner [deep] quarter for exploration at the Lucky Friday. Seven deep holes into the 2500 foot gap zone above the Lucky Friday extension defined a huge envelope of continuous mineralization, with zones of high grade silver. All of these holes intersected multiple veins upto 3.5 feet wide and ranging in grades up to 21 ounces per ton, silver plus base metals. This drilling shows strongly developed mineralized structures exist throughout much of the gap area, and appear to coincide with the resource trend below 40-50 level. It clearly demonstrates…

Thank you Ron, we’ll take questions.

Operator, could you give the instructions for the question-and-answer period now, please.

(Operator Instructions). Your first question comes from the line of [Anthony Sorrentino of Sorrentino Metals]. Please proceed.

Hello, everyone.

Hi, Anthony.

What are the payment obligations of the credit facility as currently structured?

We have amortization scheduled under the term facility at $18 million at the end of the fourth quarter and then roughly $40 million for each of the next two years with $11 million for first quarter of 2011. Also we have a bridge payment that is due in the first quarter of next year. So, when we think about a long lived asset, that’s one of the things we’re going have to end up doing; extending the terming the facility.

Right, would you consider the sale of assets to reduce that?

We’re willing to consider all options Anthony and nothing is off the table.

Alright, what is capital spending been cut to for the fourth quarter and all of 2008?

Capital spending in the fourth quarter is roughly about $18 million. We might see a bit of savings from that. So, it's down from the third quarter, but we're in the midst of finishing some programs, and it didn’t make sense not to complete them. The total for the year will be about $73 million. For next year I would anticipate somewhere around half of that.

Okay. One final question. If metals prices remain where they are today, would you be required to take an impairment charge against any of your assets?

I'll let Jim answer that question and we certainly just filed our 10-Q and we've done that analysis and we did not have an impairment, but I'll let him talk about the future.

Sure. I'll talk a little bit about the process of impairment. As I think everyone is aware, impairment is measured based on a long-term forecast. So, you literally have to take your business plan, put it out 10 to 15 years and your biggest risk factor when you do that is what the metals price is. So, usually the methodology is a Safe Harbor that the SEC has adopted, of three-year trailing prices plus looking at forward curve prices and when we do all of that at this time, we do not see an impairment. However, if metals prices were to deteriorate significantly, we would indicate that there is fundamental shift in the market we would have to evaluate it again. But, based on the history of metals prices, and what we expect, we do not see an impairment at this time.

Okay. Thank you very much and good luck.

Thank you, Anthony

Your next question comes from the line of Borden Putnam of Eastbourne Capital. Please proceed.

Good morning.

Hi, Borden.

Please indulge me; my computer is giving me fits today. There are spread sheets I need to access to be able to put a question together; if I fail in the middle of this, I apologize ahead of time. Ron, first question to you. I was looking for some increase in mining cost at Greens Creek. However, I was hoping that some of that might be offset by materials increases. Some of that might be offset with the benefit of the longhole stoping and I didn't see a lot of that come down. I did see a decline in grade as I might have expected. Can you flush that out a little bit for us and explain how that's going, and also what proportion of ore that comes from the mine comes from the longhole stoping.

Okay. In terms of the longhole stoping, Borden, it's not come up quite as fast as we had been hoping for. But, I think you're going to see a little bit of a difference in the fourth quarter, and then little more in the first quarter and I know you're going to see it, because I am already seeing it up here; that's part of what's impacting it. In terms of the percentage, I think we're looking at about 60% right now, coming from longhole stoping; it may even be a tad higher than that. It's going to go up a little bit more, particularly if we can get up and consistently stay at the 2,100 tons a day, the goal we are shooting for. In terms of the cost, the third quarter probably saw the highest diesel fuel cost that we've seen.

Okay.

That's a huge impact upwards. It's tremendous. On the other hand, we were on line power for the better part of September and we're still on it in October or all the way through October and actually I think we are still on line right now, which was than we were expecting. So I am hoping that that has a pretty good impact. And as I mentioned, we're seeing diesel fuel prices that already coming off about 30%. So I think we're going to see some improvements in the fourth quarter.

Okay, I appreciate that. You may not be able to answer this with any certainty or fall into guidance you don’t want to give. What do you expect the head grade to look like when you are at 60% of material to the mill from the mine? So, I mean we are at silver grade of what, 13.32 right now.

With the mix that we're planning, I am not expecting much of a change in head grade from what you're seeing right now.

But the benefit is cost savings, right?

Yes. Again, a lot of that is going to be driven by three things. One is the price of diesel, hopefully some declining consumable costs and how much power we can get. We are not planning on getting any power from line power until late in the fourth quarter of 2009. If we get more than that, it’ll be a huge difference. Our fixed diesel cost price could be as much as $1 million a month.

Okay. While I still got you Ron, maybe an unfair question, since the feasibility study has been deferred for the present time. At Lucky Friday are you looking at redirecting the attentions to facilitating or removal from the mine? Some of the things you had not talked about in the past. So you remove exhaust to get electric trains, is there any of that work that can be done in this period that’s inexpensive and might advantage the cost structure at Lucky Friday?

When I was talking about some of the engineering programs that we're going to continue to do in-house, I pointed at some of those kinds of things.

Okay.

Unfortunately, we’re still not seeing anybody out there that’s doing anything with small underground gear in the electric range, but we’re looking at a bunch of different ways to try to get the heat and exhaust issues dealt with. Any little thing we can do as well as a way to try to figure out how to do some very big things in a more efficient way.

Okay.

I have some people who are focused on that, but we’re going to be doing exactly what you’re talking about.

Okay, great. I appreciate that and I look forward to the reports of that. If I can go to Dean: are you still on the call Dean?

I am.

Thanks very much. Those were interesting results you talked about, at Lucky Friday in particular. The wording of the press release confused me a little. These isolator intercepts not isolated, the ones that you’ve broken out of a bullet points. Those are down to the 7,100 level; is it possible as I understand you? Can you give us a better understanding where these occur with respect to? Also, I have lost the present tag, with the GAAP. I guess these are not in the GAAP area. These are below the area of present mining?

Yes. That’s right. The GAAP area is above 40, 50, which is the upper extent of our resource. The intersections that are described in the press release are at 7,100 level they are in the central to eastern part of the resource in that area. So, a lot of this represents still fairly wide space to infill drilling in that part of the deposit.

So, all of these placements are at the 7,100 level?

In and around the 7,100, yes.

Can I add a little bit to that, Dean?

Yes.

Basically, these intercepts range from 6,200 all the way down to 7, or even about 7,800. To put it all in perspective to what Dean said, they are fairly wide spaced drillings, there is more drilling in that zone in terms of a density of drill piercements then there was when we had at 59.

Okay.

But, this is a pretty positive thing. I can't give you the numbers, but to put it in perspective, if you take out blocks, 62 to 65, 65 to 68, and 68 to say 71, each of those zones is seeing some pretty significant increases in silver ounces per vertical foot, lead and zinc pounds per vertical foot, with the 65 to 68 being significantly higher. All three of those zones are significantly higher in those statistics. So, it's a combination of width and grade that’s improving. The only reason I stop at 71, is that the data diminishes a little bit down there.

Okay. This is for either one of you. Are the veins coalescing in these zones or are there additional veins, or are they just higher grade? Help us understand what their character is.

Yes.

Oh really.

The veins tend to be, particularly 20, 30, and 40 tend to be coalescing along longer strike length than we're seeing them right now, and there maybe, we're not sure yet, there maybe overall less total veins down there, but more metal in the veins.

Okay, interesting implications for mining methods.

Yes.

The net explains why there was the intercept that was at the 7,500 level. I wasn’t clear why that depth was being probed at this time, but that’s reason to leave that question off my list. A question for Jim. Phil talked about a little bit but the maturity date on the bridge loan has been extended to when, and what is the cost of the cost of capital on it?

Well, the bridge loan has been extended to approximately mid February with the requirement that I indicated in my comments that we provide a revised business plan to the banks, and then by roughly mid December, they'll evaluate that business plan and we'll work towards doing any restructuring necessary on the credit agreement. The bridge itself has an interest rate of LIBOR plus 600 basis points.

Okay. What would they be looking for in the business plan, Jim? Are they going to look for cash flow coverage, the normal metrics, or is there anything that you can…

It would be the normal metrics, Borden.

Okay. The last point: incidentally, I apologize for not bringing this up last quarter. Looking through the financials this time, I was reminded of this and it is on the cash flow statement. It was a new line item about inventory on the cash flow statement. Let me use your wording to describe it. It's called inventory purchase price allocation adjustment. What is this?

Sure, Borden, what that describes was in connection with the acquisition of Greens Creek. We had to apply a purchase price accounting to all categories of the balance sheet to allocate the purchase price. And that $18 million in particular was the write up of the inventory from its historical cost basis to a fair market value on the data purchase.

Okay.

So we had the pleasure of taking silver that cost us sub $3 and writing it up to at that time probably $14. That was a one shot deal. It's described more fully both in our MD&A and our10-Q for the last quarter and also in our press release but you won't be seeing that again.

Okay, I appreciate your referring me to the Q, I did not see that before and I'll look at it. Now is there a risk that it would go against us, I guess that’s not because it's allocated with the one.

It's gone, it’s a value that existed at the end of the second quarter, and it has been flushed through the P&L now.

So it's not a mark-to-market sort of a thing.

No, not at all. It's just that one shot purchase price allocation. It's gone forever.

Very good Excellent. Thanks you.

Thanks, Borden.

Your next question comes from the line of [John Tomaso of John Tomaso Independent]. Please proceed.

Hi, John.

Borden asked a few of my questions, better than I could have. The volatility in the markets is a rough break after making the big and good purchase that you made and one of the terrible ironies of the business is that if you right size to one environment, the next thing you know the business climate is different, maybe for the better. Are there any tactics like ore grade which you discussed adequately with Borden, that might provide a six months or 12 months fix or short-term tactics that might pay down a few extra tens of million of dollars and hopefully, the crisis will be over by the time you've made a change. You are not only Hecla exploration projects that are really good projects with a good staff.

Well, let me say that with respect to exploration, we’re fortunate that we have all of the ground that we’re exploring on and with the change that we made in the San Juan silver joint venture, we’ve brought ourselves I guess basically three or four years to do the earning there. We have a quite a bit of ability to hold on to the land that we have without making expenditures. Unlike other situations that companies like us are in. But the fundamental question you’re asking is do we see some easy fix, where we can generate a significant amounts of new cash flow; the answer is no. I mean we think we just have to work hard and grind down our cost. We’re fortunate in that, we’re seeing the cost of energy decline dramatically and that is the given that we are diesel powered at Greens Creek, that is critical and we’re aggressively going after all of our suppliers, because while we going after those suppliers and trying to get them to accelerate their cost reductions, I see their energy cost declined in the products that they produce. So, I can’t tell you that there is some easy fix that we have, we just have to grind the cost down and that’s what we’re doing.

Good luck and I hope this is a panic and not anything long-term in that markets, and that your actions solve the problems for you.

Okay. Thanks a lot, John. Operator: (Operator Instructions). Your next question comes from the line of David Christie of Scotia Capital. Please proceed.

Hi guys. A couple of questions on cost at Greens Creek. I was wondering, are you buying diesel fuel for that mine of course? Are you buying it far an advance or are you buying at month-to-month?

We buy it really week-to-week, month-to-month. We don’t have a storage capacity to hold a lot of diesel.

That’s good in this case. And as far as steel, what's your, doing the sinker I think are you buying year supply at the time?

I'll let Ron specifically answer that question.

No. We buy all of our ground support and those kinds of things are bought just as we need them, so every month, two months of supplies.

Even at Greens Creek?

Yes. Greens Creek and Lucky Friday, both of them, frankly most of that material comes from the same supplier.

And with the power coming from the grid right now, can it supply 100% of the power or do you need supplier?

No. Actually we can run without, running the generators other than the, you got to tune them up every couple of days to make sure that they're working and that kind of thing, but we can cover 100% of it.

And what's the rate they're charging right now?

I think it's about $0.105 kilowatt hour. I have to look at that. It's not very different in that, that's close.

Okay. That’s great guys. Thank you.

There are no further questions at this time. I would now like to turn the call over to Ms. Vicki Veltkam for closing remarks.

Phil, do you have any further comments?

Yes, let me just say, I thought John asked this question really brought to mind that. Yes, we are in market condition is quite tough, but the good news is we've got in Greens Creeks and the Lucky Friday, two mines that have seen these sorts of conditions before. They are quality assets and we think we'll have the ability to grind cost down and where we can find that little bit of extra production just as we've done in the past. So we think we're well positioned to see our way through this difficult market conditions. And we have a good relationship with the bank group. We think the sort of the extensions that we've done on the bridge facility is an indication of that. They've worked well with us and so we look forward to further resolution of those sorts of issues. And with that we thank you for attending our conference call.

We appreciate you all joining us today on the Hecla Mining Company's third quarter 2008 conference call. So feel free to give me a call, Vicki Veltkamp, if you have additional questions. My number is 208-769-4144 and that concludes our call for today. And have a good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.