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Section 1: DEF 14A (DEFINITIVE PROXY STATEMENT)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant Filed by a Party other than the Registrant      

CHECK THE APPROPRIATE BOX:
  Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
  Definitive Additional Materials
Soliciting Material Under Rule 14a-12

Hecla Mining Company

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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A MESSAGE FROM
YOUR BOARD OF DIRECTORS


Board of Directors

From left: Ted Crumley, George R. Johnson, Terry V. Rogers, Phillips S. Baker, Jr., George R. Nethercutt, Jr., Charles B. Stanley, Catherine “Cassie” J. Boggs, and Stephen F. Ralbovsky

   

Hecla’s commitment to responsible mining is to engrain innovation into our culture by adopting technology that will further protect our employees, increase production and improve our environmental performance.


Cover Photo:

Employee at our Casa
Berardi Mine in Quebec, Canada.

Dear Fellow Shareholders:

We, and Hecla, are committed to sustainable operations, the safety of our employees, and protecting the environment. These core values are made possible by the proactive engagement of our employees, and engaging with the communities in which we operate. We believe these core values protect and create long-term shareholder value. Most recently, our commitment to safety includes the public health impact of the Covid-19 outbreak. To protect the well-being of our shareholders, service providers and employees, this year’s Annual Meeting of Shareholders will be held in virtual meeting format only. We expect to resume in-person annual meetings in 2021.

Safety and Health

Hecla’s greatest resource is its people; their health and safety are the Company’s and the Board’s highest priority. Hecla’s goal is to continually improve our health and safety performance, so that at the end of each shift Hecla’s workers go home safely – every day. Hecla has continuously improved its safety performance over the years, implementing and conducting a safety management system based on the National Mining Association’s CORESafety program. Hecla has developed and sustained a culture of continuous improvement in safety performance that has led to a decrease in its all-injury frequency rate (“AIFR”) six years in a row. Company-wide, Hecla’s AIFR dropped 70% from 2014 to 2019.

Corporate Responsibility and Sustainability

Hecla is committed to sustainable operations founded on proactive engagement with our employees and the communities in which we operate. Corporate responsibility and sustainability are integral to Hecla’s business strategy, and we continually strive to reduce our environmental footprint. To ensure our sustainability efforts are consistent, measurable, and in accordance with recognizable industry standards, Hecla is benchmarking against the Sustainability Accounting Standards Board (“SASB”). The SASB is a not-for-profit, independent standards-setting organization that establishes and maintains industry-specific standards that assist companies in disclosing financially material and decision-useful sustainability information to investors. We have always focused on delivering strong financial results that respect communities and the environment, but now to improve accountability, we are reporting our performance against standards. In addition, we are doing our part to help achieve the United Nations Sustainable Development Goals, which align most closely with our business and social investments. Businesses have an important role to play and Hecla is doing its part to help achieve those goals by being responsible, safe, and innovative.


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A Message from Your Board of Directors

Diversity

As at December 2019, Hecla employed nearly 1,647 employees world-wide. Women comprise 9.29% of Hecla’s entire workforce. Creating greater gender diversity in a predominantly male industry is among the priorities of Hecla in the coming years. Management is working to increase the representation of women, local and indigenous people (where applicable) and other diverse people throughout Hecla’s workforce. As Hecla adopts more technology and automation (e.g., in the form of driverless trucks and equipment) it will need to recruit a more digitally savvy workforce.

Risk and Strategic Oversight

We are responsible for company-wide risk management oversight. Taking reasonable and responsible risks is an inherent part of Hecla’s business and is critical to our continued innovation, growth, and achievement of strategic objectives. The Board actively oversees and monitors the most significant risks that could impact Hecla’s operations. The Company identifies, assesses, and assigns responsibility for managing risks through an enterprise risk assessment process, our internal control environment and other internal processes. The Board and management coordinate the risk oversight role in a manner that serves the long-term interests of the Company and its shareholders through established periodic reporting and open lines of communication.

Governance and Ethics

The Board, directly and through the Corporate Governance and Directors Nominating Committee (“Governance Committee”), seeks to maintain corporate governance practices that are aligned with our strategic, financial and operational goals. We do this by conducting processes at least annually to evaluate, optimize and update governance guidelines. Our Code of Conduct demonstrates our commitment to seeking and delivering best practices in ethics and integrity in every aspect of our business. Our Corporate Governance Guidelines also provide shareholders with the best-practice principles of our corporate governance program and board framework.

Board Composition and Refreshment

Shareholders continue to express a genuine and legitimate interest in finding effective ways to ensure that boards of directors are comprised of the right people, with the right skills and qualifications, to effectively represent their interests. The issue of Board composition and refreshment is a priority of our shareholders, and we agree that refreshing the Board with new perspectives and new ideas is critical to a forward-looking and strategic Board. At the same time, it is also important to benefit from the valuable experience and familiarity that longer-serving directors bring to the boardroom. The Board is also conscious of the benefits of diversity on the Board. Ensuring diverse perspectives, including a mix of skills, experience and backgrounds, is key to effectively representing the long-term interests of shareholders. Doing so is a top priority of the Board. In the last four years, three new directors have been appointed to our Board. As a result, the average tenure for our directors has been reduced, and our Board now includes a female director.

We remain committed to ensuring the Board is composed of a highly capable and diverse group of directors, well-equipped to oversee the success of the business and effectively represent the interests of our shareholders. As some of our Board members move closer to the mandatory retirement age, we will continue to seek qualified candidates who will further enhance our Board’s diversity.

Your participation and your votes are important to the future of our Company. We encourage you to vote your shares in accordance with the Board’s recommendations. Details of the items to be voted upon are provided throughout this Proxy Statement.

         

Ted Crumley
Chairman

Phillips S. Baker, Jr.
Chief Executive Officer, President and Director

Catherine J. Boggs
Director

George R. Nethercutt, Jr.
Director

Stephen F. Ralbovsky
Director

Terry V. Rogers
Director

Charles B. Stanley
Director

George R. Johnson
Director

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PROXY STATEMENT
VIRTUAL ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 2020

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NOTICE OF 2020 VIRTUAL ANNUAL MEETING OF SHAREHOLDERS vi
 
PROXY STATEMENT SUMMARY 1
Performance Highlights 1
Compensation Actions Taken in 2019 1
CEO and Other NEO Pay 4
Corporate Governance Highlights 9
Class I Director Nominees to Serve Until the 2023 Annual Meeting 10
Shareholder Engagement 10
 
GENERAL INFORMATION ABOUT THE MEETING 11
Notice and Access 11
Record Date, Shares Outstanding and Quorum 11
Instructions for the Virtual Annual Meeting 11
Broker Non-Votes 12
Votes Required for the Proposals 12
Proxies 13
Proxies Submitted but not Voted 13
Methods of Voting 14
Revoking a Proxy 14
Costs of Solicitation 15
Results of the Annual Meeting 15
Householding of Proxy Materials 15
Electronic Delivery of Proxy Materials, Annual Reports, News Releases and Documents Filed with the Securities and Exchange Commission 16
Annual Report 16
 
CORPORATE RESPONSIBILITY 17
Hecla’s Commitment to Corporate Responsibility 17
 
CORPORATE GOVERNANCE AND RELATED MATTERS 19
Our Board’s Commitment to Shareholder Engagement 19
Shareholder Outreach in 2019 19
Prior Proxy Proposals to Amend our Certificate of Incorporation and Bylaws 21
The Board’s Role and Activities in 2019 22
Role of Board in Risk Oversight 23
Director Independence 24
Board Tenure, Age and Retirement 24
Board Leadership and Executive Sessions 24
Director Orientation and Continuing Education 25
Board and Committee Self-Evaluation Process 25
Evaluation Process 26
Committees of the Board and Committee Assignments 26
Diversity 27
Director Communications 28
Succession Planning 28

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Electronic Access to Corporate Governance Documents       28
Corporate Governance Guidelines and Code of Conduct 29
Majority Voting for Directors and Director Resignation Policy 29
Whistleblower Policy 29
Board of Directors Selection Process 30
PROPOSAL 1 – ELECTION OF CLASS I DIRECTORS 33
Biographical Information 33
Current Class I Nominees for Election to the Board – Term Ending at the 2020 Annual Meeting 34
Required Vote 34
Continuing Class II Members of the Board – Term Ending at the 2021 Annual Meeting 35
Continuing Class III Members of the Board – Term Ending at the 2022 Annual Meeting 36
COMPENSATION OF NON-MANAGEMENT DIRECTORS 38
Compensation Consultant and Peer Group Benchmarking 38
Components of Non-Management Director Compensation 38
Equity Compensation 38
Non-Management Director Compensation for 2019 39
Other 39
Non-Management Director Stock Ownership 40
PROPOSAL 2 – RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020 41
Required Vote 41
Pre-Approval Process 42
Audit and Non-Audit Fees 42
Report of the Audit Committee 42
PROPOSAL 3 – APPROVAL, ON AN ADVISORY BASIS, OF OUR EXECUTIVE COMPENSATION 44
Required Vote 45
COMPENSATION DISCUSSION AND ANALYSIS 46
Executive Summary 46
Key Operating and Financial Results 47
Benchmarking and Competitive Analyses 48
The Compensation Committee Process and the Role of Management and Compensation Consultants 49
Compensation Philosophy and Objectives 51
Elements of Total Compensation 52
Overview of our Compensation Decisions and Results for 2019 55
Other 65
Clawback Policy 66
Insider Trading Policy 66
Stock Ownership Guidelines 66
Change in Control Agreements 67
Tax and Accounting Considerations 68
FUTURE COMPENSATION ACTIONS 69
2020 Short-term Incentive Plan 69
Outstanding Long-term Incentive Plan Periods 70

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION       74
COMPENSATION COMMITTEE REPORT 74
COMPENSATION OF NAMED EXECUTIVE OFFICERS 75
Summary Compensation Table for 2019 75
Grants of Plan-Based Awards for 2019 77
Outstanding Equity Awards at Fiscal Year-End for 2019 79
Stock Vested for 2019 80
Stock Ownership for NEOs 81
Pension Benefits 81
Nonqualified Deferred Compensation for 2019 82
Potential Payments Upon Termination or Change in Control 83
Summary of Potential Payments Upon Termination or Change in Control 84
CEO Pay Ratio 88
OTHER BENEFITS 89
Retirement Plan 89
OTHER MATTERS 91
Certain Relationships and Related Transactions 91
Political Contributions and Engagement 92
Delinquent Section 16(a) Reports 92
Shareholder proposals at the 2021 Annual Meeting of Shareholders 92
Shareholder proposals to be included in next year’s Proxy Statement 93
Security Ownership of Certain Beneficial Owners and Management 93
Other Business 96
APPENDIX A – RECONCILIATION OF NON-GAAP MEASURES TO GAAP A-1

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NOTICE OF 2020 VIRTUAL ANNUAL MEETING OF SHAREHOLDERS

  Date and Time

Thursday, May 21, 2020,
at 10:00 a.m., PDT

     Virtual Annual Meeting

Shareholders may only
participate online by logging in at:
www.virtualshareholdermeeting.com/HL2020

     Who Can Vote

The Board of Directors (“Board”) has fixed the close of business on March 24, 2020, as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment or postponement thereof (“Record Date”). A list of the shareholders of record entitled to vote at the Annual Meeting will be available for review by any shareholder, for any purpose related to the meeting, between 7:00 a.m. and 4:30 p.m. PDT at Hecla Mining Company, 6500 N. Mineral Dr., Suite 200, Coeur d’Alene, Idaho 83815, for ten days prior to the meeting and on the day of the meeting. The list will also be available to shareholders at www.virtualshareholdermeeting.com/ HL2020 during the Annual Meeting.

Voting Deadline

Proxies voted by mail, telephone, or Internet must be received by 11:59 p.m., Eastern Daylight Time, on May 20, 2020.

Due to the ongoing public health impact of the Covid-19 outbreak and to support the health and well-being of our employees, service providers and shareholders, NOTICE IS HEREBY GIVEN that this year’s Annual Meeting of Shareholders (“Annual Meeting”) of Hecla Mining Company (“we,” “our,” “us,” “Hecla,” or the “Company”) will be held on Thursday, May 21, 2020, at 10:00 a.m., Pacific Daylight Time (“PDT”), in virtual meeting format only. If you plan to participate in the virtual meeting, please see the instructions on page 11 of the Proxy Statement under Instructions for the Virtual Annual Meeting. Shareholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity. There will be no physical location for shareholders to attend. We expect to return to an in-person Annual Meeting in 2021.

Proposals       Board Vote
Recommendation
      Page Reference For
More Information
Proposal 1 –  Election of Class I Directors FOR each
Director Nominee
33
Proposal 2 – Ratification of the Appointment of BDO USA, LLP as our Independent Registered Public Accounting Firm for 2020 FOR 41
Proposal 3 – Approval, on an Advisory Basis, of our Executive Compensation FOR 44

Shareholders will also transact such other business as may be brought properly before the meeting and any and all adjournments or postponements thereof.

Please read these materials so that you will know which items of business we intend to cover during the meeting. Also, please either sign and return the accompanying proxy card in the postage-paid envelope or instruct us by telephone or online as to how you would like your shares voted. This will allow your shares to be voted as you instruct even if you cannot participate in the meeting. Instructions on how to vote your shares by telephone or online are on the proxy card enclosed with the Proxy Statement.

Please see General Information About the Meeting, starting on page 11 for important information about the proxy materials, voting, and our procedures for our virtual annual meeting, among other topics.

We are mailing our “Notice of Internet Availability of Proxy Materials” to shareholders on or about April 9, 2020, containing instructions on how to access our Proxy Statement and 2019 Annual Report (“Proxy Materials”) online. We are also mailing a full set of our Proxy Materials to shareholders who previously requested paper copies of the materials. Our Proxy Materials can also be viewed on our website at www.hecla-mining.com under “Investors – Annual Meeting,” or at www.proxyvote.com.

By Order of the Board of Directors

Michael B. White
Corporate Secretary
April 9, 2020



NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Virtual Annual Meeting to be held on May 21, 2020. This Proxy Statement and our 2019 Annual Report are available at www.hecla-mining.com

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PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. It does not contain all of the information you should consider. You should read the entire Proxy Statement carefully before voting. For more complete information regarding the Company’s 2019 performance, please review our Annual Report on Form 10-K.

Performance Highlights

Reserves

Increased overall proven and probable reserves at December 31, 2019, with reserves for silver, lead and zinc increasing by 11%, 5% and 8%, respectively, compared to their levels in 2018.
The reserves for silver, lead and zinc represent the highest levels in our 129-year history.
    

Financial Flexibility

Achieved net debt reduction at December 31, 2019, of approximately $136 million, or more than 23% from the peak net debt mid-year.
Recorded 2019 sales of $673.3 million (the highest in the Company’s history).
Refinanced, in February 2020, our $6.875% Senior Notes due 2021.
 

Production

Achieved 2019 silver production of 12.6 million ounces, up 22% and record gold production of 272,873 ounces, up 4% over 2018.

Safety

Achieved in 2019, the lowest AIFR in Company history; 20% reduction from 2018 to 2019, and 70% reduction from 2014 to 2019.
 

Other

Resolved, in January 2020, the labor strike at our Lucky Friday Mine.

Compensation Actions Taken in 2019

Below is a brief summary of actions taken by the Compensation Committee (“committee”) in 2019. The compensation of our named executive officers for 2019 is more fully described in the Compensation Discussion and Analysis section of this Proxy Statement, starting on page 46 and in the compensation tables starting on page 75.

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Proxy Statement Summary

Amendments to Incentive Plans. In 2019, we revised our two primary incentive plans as follows:

Short-term Incentive
Plan (“STIP”)
     

In February 2019, we renamed the Annual Incentive Plan to “Short-term Incentive Plan”. The changed name more accurately reflects the way the plan works, as the qualitative and discretionary factors are measured over a time period that extends beyond the calendar year. Our committee approves the STIP in February each year, and the metrics for the STIP run from January of that year to February of the following year. Furthermore, eligibility for payment under the plan requires employees be on the payroll roster at the time the bonus is paid. A change in the name of the plan helps reinforce to our employees that both eligibility under the plan and the goal measurement timeframe under the plan extend beyond the calendar year.

Long-term Incentive
Plan (“LTIP”)

For the 2019-2021 plan period, we reduced the number of factors from four to three with target LTIP unit values of $90 each and made Total Shareholder Return (“TSR”) performance a 10% to 250% multiplier depending on relative share performance with a cap of target if absolute return is negative. This TSR multiplier is more fully described in the Future Compensation Actions section under 2019-2021 LTIP on page 71.

Changes in Chief Executive Officer (“CEO”) Compensation. In June 2019, the committee reviewed the Company’s peer and survey data on CEO compensation. As further described in the Compensation Discussion and Analysis section of this Proxy Statement, the committee did not adjust Mr. Baker’s base salary, but reduced: (i) the number of long-term incentive units granted to Mr. Baker from 11,400 units to 10,000 units; (ii) the value of restricted stock units granted to Mr. Baker from $500,000 to $400,000; and (iii) the value of performance-based shares granted to Mr. Baker from $600,000 to $500,000, for a total reduction in compensation of approximately 13%, compared to 2018 and a 26% reduction compared to 2017.

Changes in Other Named Executive Officer (“NEO”) Compensation. As further described in the Compensation Discussion and Analysis section of this Proxy Statement, in June 2019, the committee reviewed all other NEO compensation and determined to not adjust base salaries, but instead reduced the LTIP unit awards for Messrs. Radford and Hall, and reduced values of performance-based shares and restricted stock units for all the NEOs, as follows:

NEO       Prior Performance-
based Shares(1)
($)
      Current
Performance-
based Shares(2)
($)
      Prior Restricted
Stock Units
($)
      Current Restricted
Stock Units
($)
      Prior
LTIP Units
(#)
      Current
LTIP Units
(#)
Phillips S. Baker, Jr. 600,000 500,000 500,000 400,000 11,400 10,000
Lindsay A. Hall 165,000 150,000 300,000 225,000 5,000 4,000
Lauren M. Roberts(3) 0 150,000 0 225,000 0 4,000
Robert D. Brown 130,000 115,000 200,000 150,000 3,000 3,000
David C. Sienko 105,000 100,000 175,000 150,000 3,000 3,000
Lawrence P. Radford(4) 300,000 150,000 450,000 225,000 5,000 4,000
Dean W.A. McDonald(4) 130,000 125,000 250,000 200,000 3,600 3,600
(1)

Based on 3-year TSR from January 1, 2018 through December 31, 2020.

(2)

Based on a 3-year TSR from January 1, 2019 through December 31, 2021. See further disclosure on Performance-based Shares on page 63, and in the Grants of Plan-Based Awards for 2019 table on page 77.

(3)

Mr. Roberts was appointed Senior Vice President – Chief Operating Officer on August 5, 2019. The amounts listed were approved by the Committee on August 5, 2019.

(4)

Messrs. Radford and McDonald retired from the Company in December 2019 and September 2019, respectively. All performance-based shares, restricted stock units, and outstanding LTIP awards were forfeited, thus they did not receive any value for these awards.

2017 - 2019 Performance-based Shares. In January 2020, the performance-based shares granted in June 2017 for the TSR performance period of January 1, 2017 through December 31, 2019 vested with a value of $0.

2019 STIP. In summary, 2019 was a year of two different halves. In the first half, metals prices were weak, and our investment in the Nevada operations did not generate the return that was expected, leading to a weakening share price. We imposed fiscal and operational discipline, in the form of reduced capital and exploration and general and administrative spending, principally in Nevada, in order to allow the cash flow to accumulate and improve our financial condition. The second half of the year had higher production, higher metals prices, better earnings, more cash flow and stronger share price performance. In January 2020, the labor strike at our Lucky Friday Mine was resolved, and in February 2020, our 6.875% Senior Notes due 2021 were refinanced. We also reported record silver, lead and zinc reserves with increases of 11%, 5% and 8%, respectively. Most importantly, we achieved these results with a 20% reduction in our AIFR.

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Proxy Statement Summary

For 2019, Company performance for STIP purposes was determined by the Committee to be 87% of target. This result was comprised of 34% for quantitative measures (listed below); 30% for qualitative factors; and 23% for discretionary.

2019 STIP Quantitative
Measure Results
      Target       Actual       Target
Performance Value
      Actual
Performance Value
Production (Silver
equivalent ounces)
48.0 mm ozs. 47.2 mm ozs. 20% 4%
Adjusted EBITDA Less Capital1 $60.0 mm $49.6 mm 20% 10%
AIFR 1.93 (10% reduction
from 2018 rate)
1.84 (20% reduction
from 2018 rate)
10% 20%
Total Quantitative 50% 34%

The Committee exercised negative discretion and reduced the NEOs payouts to between 50% and 80% of target compared to the Company performance of 87%, except for Mr. Roberts who received 100%. See NEO Year-end 2019 Performance on page 58. All payouts of the STIP awards were paid in cash. The STIP is more fully described in the Compensation Discussion and Analysis section of this Proxy Statement, starting on page 56.

2017-2019 LTIP. The 2017-2019 LTIP had a maximum potential unit value of $375. The Committee assessed performance under the 2017-2019 LTIP as follows:

Performance Measure       Target       Actual Performance       % of Target       Value Earned
Per Unit
Silver Reserve Growth 30.0 silver oz. added (millions) 89.1 silver oz. added (millions) 297% $74.25
Production Growth 90.0 silver equivalent oz. (millions) 90.0 silver equivalent oz. (millions) 100% $25.00
Cash Flow $300.0 Cash Flow (millions) $234.3 Cash Flow (millions) 66% $0
Total Shareholder Return (“TSR”) 50% Hecla ranking vs. peers 20.0% Hecla ranking vs. peers 40% $0
Total Earned Per Unit $99.25

As further described in the Compensation Discussion and Analysis section of this Proxy Statement, during this three-year period, performance in reserve growth and production growth exceeded target levels. Performance in cash flow generation and TSR were below the minimum threshold level. As a result, with a range in potential value per unit of $0 to $375, in February 2020, the Committee determined the total 2017-2019 LTIP payout was $99.25 per unit. The Committee further approved payout of the LTIP awards to be 100% in Hecla common stock issued under the 2010 Stock Incentive Plan in April 2020. The 2017-2019 LTIP is more fully described in the Compensation Discussion and Analysis section of this Proxy Statement, starting on page 60.

1

The non-GAAP measurement of Adjusted EBITDA less capital is calculated as the GAAP measure of net income/loss plus/less the following items: interest expense, income tax benefit, depreciation, depletion and amortization expense, interest and other income/expense, acquisition costs, loss on investments, unrealized loss (gain) on derivatives contracts, provision for environmental matters, provisional price (gains) losses, foreign exchange losss (gain), stock-based compensation, suspension costs, loss (gain) on disposition of properties, plants, equipment and mineral interests, and capital expenditures at our operating mines. A reconciliation of EBITDA less capital to the most comparable GAAP measure of net loss for the year ended December 31, 2019, is included in Appendix A of this Proxy Statement.

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Proxy Statement Summary

CEO and Other NEO Pay

Phillips S. Baker, Jr., President and Chief Executive Officer

Mr. Baker works with, and is accountable to the Board in designing and executing the Company’s strategic plan. He bears chief responsibility for ensuring the Company achieves its short- and long-term operational and strategic objectives. Mr. Baker’s 2019 STIP was attributable to 100% corporate objectives. The Company had a downward first half in 2019; however, Mr. Baker was instrumental in executing an upward second half in 2019.

2019 Achievements

Achieved record ounces of silver, lead and zinc
Resolved the Lucky Friday Mine labor strike
Refinanced the 6.875% Senior Notes
Achieved a 20% reduction in AIFR

Compensation

      Base
Salary(1)
      Short-term
Incentive(2)
      Long-term
Incentive(3)
      Restricted
Stock Units(4)
      Performance-
Based Shares(5)
      Year-over-Year
Change
      Total Direct
Compensation(6)
2019 $635,000 $444,500 $1,131,450 $399,999     ▼22.0%     $2,610,949
 
2018 $635,000 $317,500 $1,527,125 $499,999 $370,860 ▼14.9% $3,350,484
 
2017 $618,750 $476,250 $1,997,375 $500,001 $342,801 ▼6.4% $3,935,177

2019 Pay Mix

Share Ownership – Mr. Baker exceeds the equity ownership requirement

Level Required       Share/Equity Holdings       Average Share Price
for calendar year 2019
      Total Value       Multiple
6 x Base Salary (=$3,810,000) 4,657,744 $2.1421 $9,977,353 15.7

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Proxy Statement Summary

Lindsay A. Hall, Senior Vice President and Chief Financial Officer

Mr. Hall has over 40 years’ experience in finance in the mining and energy industries. He manages the Company’s financial reporting, internal control, treasury, and information technology. He is also responsible for monitoring and maintaining the Company’s financial strength, ensuring adequate liquidity, achieving return on investment targets, and overall risk management. Mr. Hall’s 2019 compensation was based in part on specific objectives and his STIP in 2019 was based in part on his contribution towards the refinancing of the 6.875% Senior Notes.

2019 Achievements

Refinanced the 6.875% Senior Notes
Renegotiated the Company’s revolving line of credit
Pursued and successfully implemented a new budget model to enhance future growth
Determined purchase price accounting related to the Klondex acquisition
Facilitated the $30 million debt for equity swap with Ressources Québec

Compensation

      Base
Salary(1)
      Short-term
Incentive(2)
      Long-term
Incentive(3)
      Restricted
Stock Units(4)
      Performance-
Based Shares(5)
      Year-over-Year
Change
      Total Direct
Compensation(6)
2019 $380,000 $228,000 $496,250 $225,000     ▼12.3%     $1,329,250
 
2018 $380,000 $190,000 $543,817 $300,000 $101,987 1.3% $1,515,804
 
2017 $380,000 $285,000 $416,926 $344,988 $68,560 NA* $1,495,484

* Mr. Hall joined the Company in July 2016.

2019 Pay Mix

Share Ownership – Mr. Hall exceeds the equity ownership requirement

Level Required       Share/Equity Holdings       Average Share Price
for calendar year 2019
      Total Value       Multiple
2x Base Salary (=$760,000) 629,579 $2.1421 1,348,621 3.5

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Proxy Statement Summary

Lauren M. Roberts, Senior Vice President and Chief Operating Officer

Mr. Roberts has over 30 years’ experience in the mining industry. He contributes to the establishment of the Company’s operational, financial, and sustainability objectives. Mr. Robert’s STIP in 2019 was prorated from the time of his hire, August 5, 2019, and was based in part on performance against the corporate metrics and his 2019 achievements.

2019 Achievements

Delivered strong safety performance across the Company
Instrumental in advancing technological improvements at our mining operations
Oversaw improved equipment availability at our Greens Creek Mine
Led the process of operating the Lucky Friday Mine with salaried employees and replacement workers

Compensation

      Base
Salary(1)
      Short-term
Incentive(2)
      Long-term
Incentive(3)
      Restricted
Stock Units(4)
      Performance-
Based Shares(5)
      Year-over-Year
Change
      Total Direct
Compensation(6)
2019 $380,000 $159,600 $55,183 $225,000 NA* $819,783

* Mr. Roberts joined the Company in August 2019.

2019 Pay Mix

Share Ownership – Mr. Roberts has until August 2024 to satisfy his equity ownership requirement

Level Required       Share/Equity Holdings       Average Share Price
for calendar year 2019
      Total Value       Multiple
2x Base Salary (=$760,000) 159,506 $2.1421 341,678 .90

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Proxy Statement Summary

Robert D. Brown, Vice President – Corporate Development

Mr. Brown has over 25 years’ experience in the mining industry. As Heda’s Vice President of Corporate Development, he is primarily responsible for the business matters of the Company with respect to mergers, acquisitions, divestitures, strategic transactions and other business matters. Mr. Brown’s compensation was based in part on specific objectives, and his STIP in 2019 was based in part on his contribution to the Company through these matters.

2019 Achievements

Negotiated third party toll milling agreements
Facilitated the acquisition of the Dieppe property (a group of claims adjacent to our Casa Berardi Mine)
Instrumental in divestitures in our equity investment portfolio
Facilitated the sale of interests in a junior exploration company for $2 million
Worked with the exploration group to develop geological criteria and project ranking in key strategic areas in Nevada and Abitibi

Compensation

      Base
Salary(1)
     

Short-term
Incentive(2)

      Long-term
Incentive(3)
      Restricted
Stock Units(4)
      Performance-
Based Shares(5)
      Year-over-Year
Change
      Total Direct
Compensation(6)
2019 $264,000 $92,400 $297,750 $150,000      ▼23.3%         $804,150   
 
2018 $264,000 $118,800 $385,800 $199,999 $80,534 ▼0.2% $1,048,953
 
2017 $264,000 $171,600 $287,412 $299,998 $28,567 ▲29.6% $1,051,577

2019 Pay Mix

Share Ownership – Mr. Brown exceeds the equity ownership requirement

Level Required       Share/Equity Holdings       Average Share Price
for calendar year 2019
      Total Value       Multiple
2x Base Salary (=$528,000) 371,812 $2.1421 $796,458 3.0

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Proxy Statement Summary

David C. Sienko, Vice President – General Counsel

Mr. Sienko has over 25 years’ experience in practicing law. As Hecla’s General Counsel, he is primarily responsible for all legal and compliance matters faced by the Company, including with respect to securities, mergers, acquisitions and divestitures and other strategic transactions, corporate governance, disclosure and litigation matters. Mr. Sienko’s 2019 compensation was based in part on specific objectives and his STIP in 2019 was based in part on his contribution in leading the Company through legal and regulatory matters.

2019 Achievements

Led the Company’s efforts in successfully resolving multiple litigation and regulatory matters including a Montana supreme court appeal related to the Montanore Project
Successfully renewed the Company’s at-the-market equity offering program which was instrumental in supporting the Company’s liquidity in 2019 and into 2020
Supported the Board and managed or supported the Company’s corporate governance, regulatory compliance and disclosure programs
Supported multiple business units across a wide array of commercial agreements, including amendments to the Company’s revolving credit agreement
Managed the $30 million debt for equity swap with Ressources Quebec, helping to decrease the Company’s debt

Compensation

      Base
Salary(1)
      Short-term
Incentive(2)
      Long-term
Incentive(3)
      Restricted
Stock Units(4)
      Performance-
Based Shares(5)
      Year-over-Year
Change
      Total Direct
Compensation(6)
2019 $250,000 $140,000 $297,750 $150,000     ▼18.3%        $837,750   
 
2018 $250,000 $150,000 $385,800 $175,000 $64,901 ▲1.9% $1,025,701
 
2017 $250,000 $175,000 $399,475 $153,999 $28,567 ▼22.6% $1,007,041

2019 Pay Mix

Share Ownership – Mr. Sienko exceeds the equity ownership requirement

Level Required       Share/Equity Holdings       Average Share Price
for calendar year 2019
      Total Value       Multiple
2x Base Salary (=$500,000) 676,364 $2.1421 $1,448,839 5.8

(1) See Base Salary on page 55 for further information.
(2) See Short-term Incentive Plan on page 56 for further information.
(3) See Long-term Incentive Plan on page 60 for further information.
(4) See Restricted Stock Units on page 63 for further information.
(5) See Grants of Plan-Based Awards for 2019 (footnote 1) on page 77 for further information.
(6) Change in pension value and all other compensation are not included in this table. See Summary Compensation Table for 2019 on page 75 for further information.

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Proxy Statement Summary

Corporate Governance Highlights

We are committed to corporate governance standards and executive compensation practices that create long-term value for our shareholders and positive influences on the governance of the Company, which includes the following highlights:

Executive Compensation

Stock Ownership Guidelines         We have stock ownership guidelines for our executive officers and our directors.
Annual Say-on-Pay Vote Our shareholders have the opportunity annually to cast an advisory vote on our executive compensation.
At-Risk, Performance-Based Compensation 80.8% of the CEO’s and 74.8% of the other NEO’s pay is at-risk. Over 68.7% of total compensation for the CEO is performance-based and 60% of total compensation for the other NEOs is performance-based.
Stock Awards We grant restricted stock units to retain our senior executives and align their interests with the long-term interests of our shareholders. The restricted stock units vest annually in equal amounts over a three-year period. Our 2010 Stock Incentive Plan provides for a double-trigger on equity awards.
Performance-based Shares We grant performance-based shares that have value based on how our TSR ranks within our selected peer group and have no value if the share performance does not exceed the 50th percentile in the peer group.
Change in Control Agreements Our change in control agreements are double-trigger and contain no excise tax gross-up provision.
Insider Trading Policy Our Insider Trading Policy prohibits all directors, executive officers and certain other employees from purchasing or selling any Company securities three weeks before through two days after the public release of any of our periodic results, or at any other time during the year while in possession of material non-public information about the Company.
Anti-hedging and Anti-pledging policies Our Insider Trading Policy provides that directors and officers are prohibited from hedging or pledging any securities of the Company.
Clawback Policy Each of the Company’s incentive plans (Short-term Incentive Plan, Long-term Incentive Plan, Key Employee Deferred Compensation Plan, and 2010 Stock Incentive Plan) have clawback provisions.

Shareholder Rights

Director Resignation Policy         Directors who receive more “Against” votes than “For” votes must tender their resignation to the Board for consideration.
No Poison Pill We do not have a shareholder rights plan (commonly referred to as a “poison pill”).
Majority Voting for Director Elections Directors are elected by a majority of votes cast, which increases Board accountability to shareholders.

Board Structure

Governance Policies         Our Corporate Governance Guidelines provide shareholders with information regarding the best practice principles of our corporate governance program and Board framework.
Board Refreshment and Tenure We added two new directors in 2016, and one new director in 2017, thereby reducing the average tenure of the Board.
Independence Seven of eight directors are independent, including all Audit, Compensation, and Governance Committee members.
Independent Chairman of the Board The positions of CEO and Chairman of the Board are held by separate persons.
Regular Executive Sessions of Independent Directors Executive sessions of non-management directors are included on the agenda for every regularly scheduled Board meeting.

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Proxy Statement Summary

Committee
Governance
     

With the exception of our Executive Committee, our Board committees have written charters that clearly establish their respective roles and responsibilities and are comprised exclusively of independent directors. Committee composition and charters are reviewed annually by our Board. The charters for our Audit and Compensation Committees were recently amended in February 2020.

Director Retirement

Directors will not be nominated for re-election after their 75th birthday.

Annual Performance
Evaluations

The Governance Committee oversees an annual performance evaluation of our Board, while the committees perform their own self-evaluations on an annual basis and discuss the evaluations with the Board.

Access to
Management and
Experts

Our Board and committees have complete access to all levels of management and can engage advisors at our expense, giving them access to employees with direct responsibility for managing our Company and experts to help them fulfill their oversight responsibilities on behalf of our shareholders.

Succession Planning

The Compensation Committee and our full Board reviews potential CEO and other senior executive successors annually to develop our future leaders and ensure we can sustain business continuity, if any of these key employees were to leave our Company.

Class I Director Nominees to Serve Until the 2023 Annual Meeting

Our Board is currently composed of eight members divided into three classes, with each class serving a term of three years. The following table summarizes important information about each director nominee standing for re-election to the Board for a three-year term expiring in 2023. See page 34 for more information on the director nominees.

Class I Director Nominees Experience and Qualifications

Phillips S. Baker, Jr. (age 60)
Director since 2001
President and Chief Executive Officer of Hecla
Mining Company

Committees served on: Executive

     
Board service on public companies
CEO and company administration
Corporate Governance
Finance
Industry experience
International business
     
Senior leadership
Legal and compliance
Reputation in the industry
Risk management
Strategic planning, business development, and business operations

George R. Johnson (age 71)
Director since 2016
Former Senior Vice President of Operations with
B2Gold Corporation

Committees served on:
Audit
Health, Safety, Environmental and Technical

Board service on public companies
CEO and company Administration
Corporate Governance
Finance
Geology, Mining and Engineering
Industry experience
International business
Senior leadership
Legal and compliance
Reputation in the industry
Risk management
Strategic planning, business development, and business operations

Shareholder Engagement

We view our relationship with our shareholders as a critical part of our corporate governance profile. Among other things, proactive engagement with our shareholders helps us to understand expectations for our performance, maintain transparency, and shape corporate governance and compensation policies. In October 2019, we contacted 30 of our top shareholders, representing approximately 44% of our aggregate outstanding shares of common stock, and engaged with all who responded to our invitation to discuss executive compensation and corporate governance matters. This led to focused discussions between senior executives (excluding our CEO) and, in some cases, directors, and the shareholders who accepted our invitation, which gave us valuable feedback on key issues and specific elements of our programs. Shareholder feedback is reported to and discussed with our Board and relevant committees. In 2019, we increased our focus and efforts on incorporating environmental, social and governance (“ESG”) factors into our long-term business strategy and incentive compensation programs and communicated our ESG practices and performance with investors and other stakeholders.

Also, in 2019, we conducted meetings and conference calls with investors and analysts, participated in invitation-only investment conferences, and held the 2019 Annual Shareholders’ Meeting. In 2019, management conducted 35 presentations, held 225 one-on-one and group meetings with investors, and hosted four conference calls with investors and analysts allowing for questions and answers with management. In addition, the Company responded to questions from investors and analysts by telephone and email throughout the year.

We believe this combined approach has resulted in constructive feedback and input from shareholders and we intend to continue these efforts. See Shareholder Outreach in 2019 on page 19 for further discussion of our shareholder outreach.

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GENERAL INFORMATION ABOUT THE MEETING

Notice and Access

This year we are furnishing our Proxy Materials to our shareholders primarily via “Notice and Access” delivery pursuant to Securities and Exchange Commission (“SEC”) rules. On April 9, 2020, we mailed to our shareholders (other than those who previously requested a printed set) a “Notice Regarding the Availability of Proxy Materials” (the “Notice”) containing instructions on how to access the Proxy Materials via the Internet. Utilizing this method of proxy delivery expedites receipt of Proxy Materials by our shareholders, reduces the cost of producing and mailing the full set of Proxy Materials and helps us contribute to sustainable practices.

If you receive a Notice by mail, you will not receive a printed copy of the Proxy Materials in the mail. Instead, the Notice instructs you on how to access the Proxy Materials and vote over the Internet. If you received a Notice by mail and would like to receive paper copies of our proxy Materials in the mail, you may follow the instructions in the Notice for making this request. The Notice also contains instructions on how you may request to receive an electronic copy of our Proxy Materials by email.

Our Proxy Materials can be viewed online on our website at www.hecla-mining.com by selecting “Investors” and then “Annual Meeting”, or under our profile on the SEC EDGAR website at www.sec.gov/edgar.shtml.

Record Date, Shares Outstanding and Quorum

If you were a holder of Hecla common stock either as a “shareholder of record” or as the “beneficial owner” of shares held in street name as of the Record Date, you may vote your shares at the Annual Meeting by following the instructions on page 14 under Methods of Voting. As of the Record Date, 523,247,297 shares of common stock were outstanding and entitled to vote at the Annual Meeting. Shares of our common stock that are held by us in our treasury are not counted as shares outstanding and will not be voted. Each shareholder has one vote for each share of common stock held as of the Record Date.

A quorum must be present in order for business to be conducted at the Annual Meeting. A quorum consists of the presence at the Annual Meeting, in person or represented by proxy, of a majority of the outstanding shares of our common stock as of the Record Date. Shares represented by proxies marked “Abstain” and “broker non-votes” are counted in determining whether a quorum is present for the transaction of business at the Annual Meeting.

Instructions for the Virtual Annual Meeting

For health and safety reasons due to the Covid-19 outbreak, this year our Annual Meeting will be a completely virtual meeting. There will be no physical meeting location. The meeting will only be conducted via live webcast. We expect to return to an in-person Annual Meeting in 2021.

To participate in the virtual meeting, visit www.virtualshareholdermeeting.com/HL2020 and enter the 16-digit control number included on your Notice of the Proxy Materials, on your proxy card, or on the instructions that accompanied your Proxy Materials. You may log into the meeting platform beginning at 9:45 a.m. PDT on May 21, 2020. The meeting will begin promptly at 10:00 a.m. PDT on May 21, 2020.

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General Information About the Meeting

The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong Internet connection wherever they intend to participate in the meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting.

If you wish to submit a question, you may do so in two ways. If you want to ask a question before the meeting, then beginning at 8:30 a.m. PDT on May 19, 2020 and until 11:59 p.m. PDT on May 20, 2020, you may log into www.proxyvote.com and enter your 16-digit control number. Once past the login screen, click on “Question for Management,” type in your question, and click “Submit.” Alternatively, if you want to submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/HL2020, type your question into the “Ask a Question” field, and click “Submit.”

Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Questions regarding personal matters, including those related to other matters that are not pertinent to the meeting may not be answered. Any questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints can be sent to our Company email address at [email protected] We will answer your questions as soon as practical after the meeting.

If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log in page.

Broker Non-Votes

A “broker non-vote” occurs when a broker or other nominee who holds shares in street name for a client returns a proxy but provides no instruction as to how shares should be voted on a particular “non-routine” matter. The Dodd-Frank Act and stock exchange rules prevent brokers from casting votes on “non-routine” matters.

Votes Required for the Proposals

Under New York Stock Exchange (“NYSE”) rules, if your shares are held in street name and you do not indicate how you wish to vote, your broker is only permitted to exercise its discretion to vote your shares on certain “routine” matters. Proposal 2 (Ratification of Appointment of BDO USA, LLP) is a “routine” matter. Proposal 1 (Election of Directors) and Proposal 3 (Approval of our Named Executive Officer Compensation) are “non-routine” matters. Accordingly, if you do not direct your broker how to vote for Proposals 1 or 3, your broker is not permitted to exercise discretion and is not permitted to vote your shares on such matters. This is called a “broker non-vote.”

Proposal 1 – Election of Class I Directors. Pursuant to our Bylaws, each director will be elected by the affirmative vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Under a majority of votes cast standard, the shares voted “for” a nominee must exceed the number voted “against” that nominee. Shareholders may vote “for,” “against” or “abstain” with respect to this proposal. Abstentions and broker non-votes are not counted as votes cast, and thus will have no effect on the outcome of the vote. A properly executed proxy card marked “AGAINST” with respect to the election of directors will have an effect on the outcome of the vote. If the votes cast “against” an incumbent director exceed the number of votes cast “for” the director, the director will not be elected, will remain on the board as a holdover director and must stand for election at the next annual meeting of shareholders, absent his or her earlier resignation or removal. See Majority Voting for Directors and Director Resignation Policy on page 29 for a description of our director resignation policy.

You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the nominees for election as directors.

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General Information About the Meeting

Proposal 2 – Ratification of the Appointment of BDO USA, LLP as our Independent Registered Public Accounting Firm for 2020. Under the Sarbanes-Oxley Act of 2002, the Audit Committee has the sole authority to appoint the independent registered public accounting firm for the Company. However, the Board feels that it is important for the shareholders to approve the selection of BDO USA, LLP. This proposal requires the affirmative vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Abstentions and broker non-votes are not counted as votes cast, and thus will have no effect on the outcome of the vote. Votes marked “against” will have an effect on the outcome of the vote. The appointment of our independent registered public accounting firm for calendar year 2020 is considered a “routine” matter and brokers that are not directed how to vote are permitted to vote shares held in street name for their customers on this proposal.

You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for 2020.

Proposal 3 – Approval, on an Advisory Basis, of our Executive Compensation. For more information on approval of our executive compensation see “Proposal 3 – Approval, on an Advisory Basis, of our Executive Compensation” beginning on page 44. The advisory vote on executive compensation will require the affirmative vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Under a majority of votes cast standard, the shares voted “for” Proposal 3 must exceed the number voted “against” Proposal 3 for the proposal to be approved. Abstentions and broker non-votes are not counted as votes cast for this purpose and will have no effect on the outcome of the vote. Votes marked “against” will have an effect on the outcome of the vote. Even though your vote is advisory and therefore will not be binding on the Company, the Board’s Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation.

You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to approve the compensation of our NEOs.

Discretionary voting by proxies on other matters. Aside from the: (i) election of two directors; (ii) ratification of the appointment of BDO USA, LLP; and (iii) approval of executive compensation, we do not know of any other proposal that may be presented at the Annual Meeting. However, if any other business is properly presented at the Annual Meeting, your proxy gives authority to Phillips S. Baker, Jr. and Michael B. White to vote on such matters at their discretion. No other proposals have been timely submitted in accordance with our Bylaws, and we are not aware of any matters other than those described in this Proxy Statement that will be acted upon at the Annual Meeting.

Proxies

A “proxy” is your legal appointment in a written document of another person to vote the shares that you own in accordance with your instructions. The persons you appoint to vote your shares are also called proxies. We have designated Phillips S. Baker, Jr., our President and CEO, and Michael B. White, our Corporate Secretary, as proxies for the Annual Meeting. When you sign the proxy card, you appoint Phillips S. Baker, Jr. and Michael B. White as your representatives at the Annual Meeting. As your representatives, they will vote your shares at the Annual Meeting (including any adjournment or postponement) as you have instructed them on your proxy card.

Proxies Submitted but not Voted

If you properly sign and return your proxy card or complete your proxy via the telephone or Internet, your shares will be voted as you direct. If you sign and return your proxy but do not specify how you want your shares voted they will be voted FOR (i) the election of all nominees for Director as set forth under Election of Class I Directors; (ii) ratification of the appointment of the independent registered public accountants; and (iii) approval, on an advisory basis, of our executive compensation.

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General Information About the Meeting

Methods of Voting

If your shares are held in your name, you have the right to vote your shares at the virtual Annual Meeting by following the instructions listed below. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name. Since a beneficial owner is not the shareholder of record, you may not vote your shares at the virtual Annual Meeting unless you obtain a “legal proxy” from your broker or nominee that holds your shares, giving you the right to vote the shares at the virtual Annual Meeting.

Whether you hold shares directly as a shareholder of record or beneficially in street name, you may vote without participating in the Annual Meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker or nominee. In most cases, you will be able to do this by using the Internet, by telephone, or by mail if you received a printed set of the Proxy Materials.

To vote by mail:

Mark, sign and date your proxy card; and
Return your proxy card in the enclosed postage-paid envelope.

To vote by proxy over the Internet:

Have your proxy card or Notice available;
Log on to the Internet and visit the website noted on your proxy card or Notice (www.proxyvote.com);
Follow the instructions provided; and
Do not mail your proxy card.

To vote by proxy by telephone:

Have your proxy card available;
Call the toll-free number listed on your proxy card (1-800-690-6903);
Follow the recorded instructions; and
Do not mail your proxy card.

To vote during the Annual Meeting:

Shares may be voted at the meeting by completing a ballot online during the meeting at www.virtualshareholdermeeting.com/HL2020.

To vote your 401(k) Plan shares:

If you participate in the Hecla Mining Company Capital Accumulation Plan (“401(k) Plan”) and hold shares of our common stock in your 401(k) Plan account as of the Record Date, you will receive a request for voting instructions from the plan trustee (“Vanguard”) with respect to your 401(k) Plan shares. You are entitled to direct Vanguard how to vote your 401(k) Plan shares. If you do not provide voting instructions to Vanguard by 11:59 p.m., Eastern Daylight Time, on May 18, 2020, the Hecla shares in your 401(k) Plan account will be voted by Vanguard in the same proportion as the shares held by Vanguard for which voting instructions have been received from other participants in the 401(k) Plan.

Revoking a Proxy

If you are a shareholder of record, you may revoke your proxy and change your vote at any time before your proxy is voted at the Annual Meeting, in any of the following ways:

By sending a written notice of revocation to our Corporate Secretary, if such notice is received prior to the vote at the Annual Meeting, at our principal executive offices:

Hecla Mining Company Attn:
Corporate Secretary
6500 N. Mineral Drive, Suite
200 Coeur d’Alene, ID 83815-9408

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General Information About the Meeting

By submitting a later-dated proxy to our Corporate Secretary prior to the vote at the Annual Meeting; or
Voting online during the meeting if you are a “shareholder of record” or a “beneficial owner.”

If you hold your shares in street name, you should contact your broker for information on how to revoke your voting instructions and provide new voting instructions.

If you hold your shares in the 401(k) Plan, you may revoke your previously provided voting instructions by filing with Vanguard either a written notice of revocation or a properly executed proxy bearing a later date prior to the deadline for voting your 401(k) Plan shares. If you hold your Hecla shares outside of the 401(k) Plan, you may vote those shares separately.

Costs of Solicitation

We will bear all costs and expenses relating to the solicitation of proxies, including the costs of preparing, assembling, printing, mailing and distributing these Proxy Materials. We have hired Broadridge to assist us in mailing these Proxy Materials. Additionally, we have retained Morrow Sodali LLC, 470 West Ave., Stamford, Connecticut to assist in the solicitation of votes for an estimated fee of $9,000, plus reimbursement of certain out-of-pocket expenses. Solicitations may be made personally or by mail, facsimile, telephone, or via the Internet. However, if you choose to access the Proxy Materials over the Internet, you are responsible for any Internet access charges you may incur. Arrangements will be made with brokerage firms and other custodians, nominees and fiduciaries for forwarding solicitation materials to the beneficial owners of the shares of common stock held by such persons, and we will reimburse such brokerage firms, custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them in connection with such activities.

Results of the Annual Meeting

Preliminary voting results will be announced at the Annual Meeting. We will publish final results in a Current Report on Form 8-K that we expect to file with the SEC within four business days of the Annual Meeting. After the Form 8-K is filed, you may obtain a copy by visiting the SEC’s website at www.sec.gov, visiting our website at www.hecla-mining.com under “Investors,” and then selecting “Financial Reports & Filings,” or contacting our Investor Relations Department by writing to Investor Relations Department, Hecla Mining Company, 6500 N. Mineral Dr., Suite 200, Coeur d’Alene, ID 83815-9408 or by sending an email to [email protected]

Householding of Proxy Materials

Many brokerage firms, financial institutions and transfer agents have instituted “householding” procedures for beneficial owners and shareholders of record. Householding is when a single copy of our Proxy Materials is sent to a household in which two or more shareholders reside if they appear to be members of the same family. This practice is designed to reduce duplicate mailings and save significant printing and postage costs, as well as natural resources.

If you are a beneficial owner, you may have received householding information from your broker, financial institution or other nominee shareholder in the past. Please contact the shareholder of record directly if you have questions, require additional copies of our Proxy Materials, or wish to revoke your decision to household and thereby receive multiple copies. You should also contact the shareholder of record if you wish to institute householding. These options are available to you at any time.

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General Information About the Meeting

Shareholders of record who share an address and would like to receive a separate copy of our Proxy Materials for future annual meetings, or have questions regarding the householding process, may contact our transfer agent, American Stock Transfer & Trust Company, either by written request or by telephone at the address and telephone number listed below. By contacting American Stock Transfer & Trust Company, shareholders of record sharing an address can also request delivery of multiple copies of our Proxy Materials in the future.

American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Telephone: 1-800-937-5449

Electronic Delivery of Proxy Materials, Annual Reports, News Releases and Documents Filed with the Securities and Exchange Commission

We want to communicate with you in the way that is most convenient for you. Our Proxy Materials are available on our website at www.hecla-mining.com. Instead of receiving paper copies of next year’s Proxy Materials by mail, you can elect to receive an email message that will provide a link to those documents online. By opting to access your Proxy Materials online, you will

Gain faster access to your Proxy Materials;
Save us the cost of producing and mailing documents to you; and
Help preserve environmental resources.

If you are a shareholder of record, you may request and consent to electronic delivery of future Proxy Materials by following the instructions on your proxy card or by visiting our website at www.hecla-mining.com under “Investors,” and then selecting “Electronic Proxy Request.” If your shares are held in street name, please contact your broker and ask about the availability of electronic delivery. If you select electronic delivery, we will discontinue mailing the Proxy Materials to you beginning next year and you will be sent an email message notifying you of the Internet address or addresses where you may access the Proxy Materials. Your consent to electronic delivery will remain in effect until you revoke it. If you selected electronic delivery last year, we will not mail the Proxy Materials to you this year and you will receive an email message with the Internet address where you may access the Proxy Materials for the current year.

Shareholders may also elect to receive notice of our filings with the SEC, annual reports and news releases by email. You may sign up for this service by visiting our website at www.hecla-mining.com under “Investors” and selecting “Receive Email Alerts.”

Annual Report

Our Annual Report to Shareholders, consisting of our Form 10-K for the year ended December 31, 2019, and other information, is being made available to shareholders with this Proxy Statement. Shareholders may obtain a copy of our Annual Report for the calendar year ended December 31, 2019, without cost, by written or oral request to:

Hecla Mining Company Attention:
Investor Relations
6500 N. Mineral Drive, Suite 200
Coeur d’Alene, Idaho 83815-9408
Telephone: 208-769-4100

You can also access our SEC filings, including our Annual Reports on Form 10-K, and all amendments thereto, on the SEC website at www.sec.gov/edgar.shtml or on our website at www.hecla-mining.com under “Investors,” and then selecting “Financial Reports & Filings.”

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CORPORATE RESPONSIBILITY

Hecla’s Commitment to Corporate Responsibility

Our Approach to Responsible Mining

Responsible mining means producing minerals essential for our modern world and at the same time protecting the people, the environment, and the communities in which we operate. In 2019, we continued to update and strengthen our ESG reporting and metrics, including benchmarking against the SASB metals and mining protocol. Beyond the corporate responsibility highlights below, we invite you to explore the wide range of ESG reporting and data available on our website and to view our SASB-compliant 2018 Sustainability Report, which includes the SASB tables.

Elsewhere in this Proxy Statement we discuss corporate governance extensively, so in this section we primarily focus on our efforts on environmental and social issues. Our 2019 Sustainability Report will be available on our website in June 2020.

Environmental Highlights

     
In 2019, we nearly doubled the hours of environmental training for site employees and reduced the number of significant spills by 50%.
Refreshed our corporate environmental policy to refocus on minimizing our long-term environmental impacts while meeting the needs of the present, all without compromising the ability of future generations to meet their own needs.
 
Our Lucky Friday Mine received the State of Idaho’s Pollution Prevention award for its environmental stewardship practices.
 
Our Lucky Friday Mine implemented a water recycling program that reduced the average freshwater use in process by 95%.
More than 90% of the water is recycled at our Casa Berardi Mine in Quebec.
 
Exceeded performance targets for energy consumption and greenhouse gas (GHG) emissions at our Casa Berardi Mine in Québec. We installed timers on the mine ventilation systems and reduced electricity consumption for underground ventilation by 23%. In addition, we reduced propane consumption for heating ventilation underground by 7%.
 
Accomplished our goal of achieving or exceeding a Level A rating for elements of the Mining Association of Canada’s Towards Sustainable Mining (TSM) program which includes energy and GHG emissions management, safety and health, indigenous and community relationships and crisis management and communications planning.
We are on track to reach a TSM level A rating for tailings management and biodiversity conservation management in the first half of 2020.
 
Completed final reclamation in accordance with agency standards on 97% of the 303-acre Troy tailings storage facility in Montana and have planted more than 200,000 locally grown trees and shrubs.
In 2019, placed more than 1,764,000 tons of waste rock material in backfilling the Middle Vein open pit at our San Sebastian Mine in Mexico. Approximately 2.4 million tons of material have been backfilled to date. Once reclamation of the pits is completed, the area will be returned to productive agricultural land use.
More than 30% of the tailings produced at our mines was returned underground as structural fill thereby reducing surface storage requirements.

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Safety Highlights

   
Reduced our 2019 All-Injury Frequency Rate (AIFR) by 20% to the lowest level in the Company’s history of 1.61— 33% below the national average.
     
Our Lucky Friday Mine earned the 2018 Sentinels of Safety Award, the industry’s most prestigious safety award.
     
Our top priority is the health and safety of our employees and contractors. In 2019, we conducted more than 58,000 hours of health and safety training, conducted over 14,000 safety observations and employee interactions and corrected in advance of a possible incident over 7,000 site conditions.
Continued our Take 5 Safety Focus continuous improvement initiative which improves job site awareness and decreases exposures to high and critical risks at each site. We had zero fatalities and our AIFR was 70% lower than it was in 2014.
Continued Courageous Safety leadership training for the supervisory and hourly workforce at each site.

Community Highlights

   
Created value in the communities in which we operate through direct and indirect employment, wages and benefits, purchase of goods and services, and payment of license fees and taxes. 80% of our workers are local to our operations.
     
Since 2011, donated more than $1 million toward supporting sustainable career development programs for the University of Alaska Southeast Mine Training Center and Pathways to Mining Careers program in Alaska.
Since 2009, we have donated more than $1.7 million to the UQAT Foundation which provides annual scholarships to students in support of work-life balance, returning to school, perseverance and success-training programs.
Each year, Hecla Québec welcomes two cohorts of students from the Mineral Extraction program at the James Bay Vocational Training Center who perform the practical part of their training at the Casa Berardi Mine. In 2019, we hired twelve graduates of the 20th cohort.
     
Hecla Charitable Foundation pillars include youth, education, health and community. We provided more than $353,000 to local causes in 2019 and have contributed more than $3.3 million over the past ten years.

Please note that certain statistics and/or metrics contained in this section are estimates and may be based on assumptions or developing standards.

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CORPORATE GOVERNANCE AND RELATED MATTERS

We believe that good corporate governance practices reflect our values and support our strategic and financial objectives and performance. Our corporate governance practices are generally reflected in our Bylaws, Corporate Governance Guidelines, Code of Conduct, Whistleblower Policy and committee charters, which can all be found at www.hecla-mining.com under “Investors” and then selecting “Corporate Governance.”

Our Board’s Commitment to Shareholder Engagement

Why and how we engage. Our Board and management team recognize the benefits of regular engagement with our shareholders in order to remain attuned to their different perspectives on matters affecting Hecla. Dialogue and engagement efforts allow our Board and management the opportunity to:

discuss developments in our business and provide transparency and insight about our strategy and performance; and
assess issues that may affect our business, corporate responsibility and governance practices.

1 Investor Relations and Senior Management 2 Shareholder Engagement
We provide institutional investors, proxy advisors and equity analysts with opportunities and events to engage with and provide feedback to our senior management.
Our senior management participates in formal industry conferences, analyst conferences and non-deal roadshows.
To learn more about our engagement with institutional investors, please visit our website at ir.hecla-mining.com/presentations.
During November and December 2019, our management team (excluding the CEO) engaged with investors representing 21% of our shareholder base, and with two proxy advisory firms. Our Chair of the Compensation Committee participated in some of the shareholder meetings.
4 Outcome from Investor Feedback 3 Board Involvement
Some tangible examples of the results of our 2019 shareholder outreach activities include:
Disclosure on eliminating prior proxy proposals on Certificate of Incorporation and Bylaw amendments;
Enhanced disclosure on our pay-for-performance; and
Enhanced disclosure on our ESG endeavors.
Because of this outreach, including direct participation by the Chair of the Compensation Committee, shareholders’ views and specific feedback are delivered to the Board.

Shareholder Outreach in 2019

General

Over the last several years we have undertaken significant shareholder outreach efforts in order to elicit and understand the concerns of our shareholders. In advance of the Annual Meeting, we sought engagement with 30 of our largest shareholders, collectively owning 44% of our outstanding shares of common stock. Ultimately, we engaged with 3 of our largest shareholders, representing 21% of our outstanding shares, and with two proxy advisory firms. Also, in 2019, we conducted meetings and conference calls with investors and analysts and participated in invitation only investment conferences. In 2019, management conducted approximately 35 presentations, held approximately 225 one-on-one and

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group meetings with investors, and hosted 4 quarterly conference calls with investors and analysts allowing for questions and answers with management. In addition, we responded to questions from investors and analysts by telephone and email throughout the year.

Say-on-Pay

In 2017, our Say-on-Pay proposal received 96% support. In 2018, our Say-on-Pay proposal received 68% support, and in 2019, our Say-on-Pay proposal received 59% support, even though our compensation practices have not changed from 2017. We are not satisfied with these recent results. Partly due to the declining support of our Say-on-Pay proposal and, in a change from past years, in 2019, Terry V. Rogers, chair of our Compensation Committee, participated in several of the shareholder outreach calls. We thought this was an important step because it allowed our shareholders to talk freely with Mr. Rogers, outside the presence of the 2018 NEOs, about the Company’s executive compensation practices.

During these conferences, it was determined there was a lack of clarity in the operation of our LTIP. Our LTIP is based on corporate goals achieved over a three-year performance period. Although we may have two years of underperformance, the Company may still outperform during the third year to such a level that it results in calculated outperformance over the three-year plan performance period. This was the case with our 2016-2018 LTIP. We performed extremely well in 2016, but in 2017 and 2018, we missed certain targets. For the 2016-2018 LTIP period, our reserve growth and production growth exceeded target levels due to a excellent performance in 2016; however, performance in cash flow generation was below target and TSR was below the minimum threshold. As a result, with a range in potential value per unit of $0 to $375, the payout was $160.75 per unit. This payout would have been significantly lower had the stellar 2016 reserve growth and production performance not impacted the three-year LTIP through the end of 2018.

Starting with the 2019-2021 LTIP, we reduced the number of performance factors from four to three and reduced the target unit values from $100 to $90 each, and made TSR performance a 10% to 250% multiplier depending on relative share performance. Further, when absolute returns are negative, the TSR multiplier is capped at 100% regardless of the Company’s TSR performance relative to the peer group. The operation of the TSR multiplier is more fully described in the Future Compensation Actions section under the 2019-2021 LTIP on page 71. These changes were the direct result of feedback we received from our shareholder outreach efforts in 2018. The shareholder feedback we received in 2019 on these changes was favorable, reaffirming to us the value in continuing to engage with shareholders and advisory firms on our executive compensation policies, and making adjustments in response to the feedback we receive.

Another compensation topic raised during shareholder outreach was our policy of targeting total direct compensation (base salary, short- and long-term incentives) for our NEOs between the median and the 75th percentile of both the peer group and survey data. Our pay-for-performance philosophy is to incentivize performance and increase the percentage of total compensation at-risk by targeting base salaries between the 25th and 50th percentiles. Combined with the short-and long-term incentive plans, we target NEO total direct compensation at approximately the 75th percentile. The process of setting target compensation includes consideration of each NEO’s skills, experience, knowledge and reputation in the industry, as well as Company needs. This pay-for-performance philosophy and the compensation program are designed to attract and retain experienced and skilled executives through the opportunity to earn above average total direct compensation. Because base salaries are targeted below the median level, NEOs must accomplish strategic goals in order to achieve median or above median total direct compensation.

Corporate Governance

In addition to seeking input on our compensation practices, our shareholder outreach program seeks to identify not only corporate governance matters that are of concern primarily to our shareholders, but also to the major proxy advisory firms.

Between 2014 and 2018, three of our corporate governance features that may have an anti-takeover effect on the Company, were topics of discussion with the shareholders we met with: (i) the ability of shareholders to call special meetings; (ii) the 80% supermajority voting requirement to amend provisions in our Certificate of Incorporation and Bylaws (collectively, “charter”) impacting special meetings; and (iii) declassification of the Board. As a result, at the last several annual meetings, we submitted proposals for shareholder votes to approve amendments to the related charter provisions. Each time, these proposals have fallen well short of the vote required to pass (80% of the outstanding

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shares of common stock). In our 2019 shareholder outreach, we discussed these results with the shareholders and proxy advisory firms with whom we met. The shareholders and proxy advisory firms unanimously told us that due to the repeated failure of these proposals, and the desire to improve the format and readability of our proxy statement and the resources involved in printing and mailing a lengthier proxy statement, they would not object if we did not include these proposals at our 2020 Annual Meeting. See Prior Proxy Proposals to Amend our Certificate of Incorporation and Bylaws below for further discussion.

Other corporate governance topics discussed in our outreach program included board diversity and refreshment. In response, we added two new directors in 2016, and one new director in 2017, thereby reducing the average tenure of the Board. We also have several directors who are within one to two years of retirement age, and will not be standing for reelection at the end of their respective terms, thus allowing us to refresh the Board further within the next few years.

Finally, we proactively sought the feedback of our shareholders regarding a proposed modification to our Bylaws to clarify that the exclusive forum for certain types of litigation concerning the Company’s internal affairs be brought only in Delaware Chancery Court. We explained that the Company had faced multiple lawsuit dealing with the Company’s internal affairs for which the Chancery Court was uniquely established and qualified to hear. Instead of filing the cases in Chancery Court, the plaintiffs had filed these claims in federal court by making contrived claims under federal law and then asking the federal court to also hear the Delaware state law issues. These disingenuous claims to avoid the proper court have caused the Company to incur unnecessary expenses and have diverted management’s attention. The shareholders with which we spoke unanimously agreed with us and supported our subsequent decision to amend our Bylaws to change the exclusive forum for litigation concerning the Company’s internal affairs from “a state or federal court located within the state of Delaware” to “the Court of Chancery of the State of Delaware.”

Prior Proxy Proposals to Amend our Certificate of Incorporation and Bylaws

At several of our most recent annual meetings, we have submitted proposals for shareholder votes to approve amendments to certain of our charter provisions that may have an anti-takeover effect on the Company. Specifically, in each of 2014, 2016, 2017, 2018 and 2019, we included a proposal in our proxy statement to approve amendments that would allow, in certain circumstances, shareholders to call special meetings of shareholders. In each of 2016, 2017, 2018 and 2019, we included a proposal in our proxy statement to approve amendments to certain provisions contained in our Certificate of Incorporation and Bylaws in order to lower the supermajority voting provisions contained in those documents. Finally, in 2018, we included an advisory proposal to our shareholders to declassify our Board, which was approved favorably; and, in 2019, we included a proposal to approve amendments relating to the declassification of the Board.

With one exception, we placed each of these proposals on the annual meeting agenda in the years listed above, and the Board recommended that our shareholders approve the proposals. The one exception was the non-binding advisory proposal recommending the Board take action to declassify the Board, presented in 2018, which a shareholder submitted under SEC Rule 14a-8. We included that shareholder proposal in the proxy statement for the 2018 annual meeting, and the Board expressly did not oppose that proposal. The Board, acting on its own, submitted a similar declassification proposal at the 2019 annual meeting and recommended that our shareholders approve the proposal.

The proposals described above (with the exception of the 2018 advisory proposal submitted by a shareholder) fell well short of the required vote for approval by our shareholders each time we submitted them for votes at our annual meetings, notwithstanding the recommendations of the Board and the fact that we retained a proxy solicitor to assist in the solicitation of votes in each of the years when these proposals were submitted. Below is a table that shows the actual voting results, the votes that were required for each proposal to be approved, and the shortfall in votes of each proposal in each year it was submitted. In each case, the proposal needed the approval of 80% of our outstanding shares of common stock.

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Proposal to Approve Amendments to our Certificate of Incorporation and Bylaws to Remove Certain 80% Supermajority Voting Provisions

Year Shares
Outstanding
Required
“FOR” Votes
Actual “FOR”
Votes Received
Against Votes
Received
Shortfall % of Outstanding
Shares Voted
“FOR”
2016         380,842,223         304,673,778         177,200,861         5,764,548         76,168,445         47
2017 395,826,290 316,661,032 214,732,478 8,976,539 79,165,258 54
2018 400,301,617 320,241,294 223,400,328 5,405,453 80,060,323 55
2019 482,987,752 386,390,202 257,063,199 11,886,930 96,597,550 53

Proposal to Approve Amendments to our Certificate of Incorporation and Bylaws to Permit Shareholders to Call for Special Meetings

Year Shares
Outstanding
Required
“FOR” Votes
Actual “FOR”
Votes Received
Against Votes
Received
Shortfall % of Outstanding
Shares Voted
“FOR”
2014         342,834,942         274,267,954         140,753,754         4,946,591         68,566,988         41
2016 380,842,223 304,673,778 179,810,956 4,235,483 76,168,445 47
2017 395,826,290 316,661,032 219,201,950 4,713,205 79,165,258 55
2018 400,301,617 320,241,294 225,919,629 3,316,503 80,060,323 56
2019 482,987,752 386,390,202 260,305,285 8,984,083 96,597,550 54

Proposal to Approve Amendments to our Certificate of Incorporation and Bylaws to Declassify our Board of Directors

Year Shares
Outstanding
Required
“FOR” Votes
Actual “FOR”
Votes Received
Against Votes
Received
Shortfall % of Outstanding
Shares Voted
“FOR”
2019         482,987,752         386,390,202         260,593,846         8,654,293         96,597,550         54

After consulting with several large shareholders and two proxy advisory firms, the Board determined not to submit any of those proposals for shareholder votes at the Annual Meeting for the first time in several years. In making its decision, the Board considered the repeated failure of our shareholders to approve these proposals and the specific voting results set forth above, as well as our efforts to improve the format and readability of our proxy statement and the resources involved in printing and mailing a lengthier proxy statement. The Board will continue to assess evolving best practices in corporate governance matters, including the subjects of these prior proposals. In future years, we may again include one or more of these proposals on the agenda for an annual meeting.

In addition to continually assessing evolving best practices, the Board will continue to give appropriate consideration to any formal shareholder proposals and other feedback that we receive from shareholders. Furthermore, we intend to continue our shareholder outreach efforts so that we can understand and appropriately react to the viewpoints of our shareholders on corporate governance and other matters.

The Board’s Role and Activities in 2019

Our Board acts as the ultimate decision-making body of the Company on certain fundamental matters and advises and oversees senior management. In carrying out its responsibilities, the Board reviews and assesses Hecla’s long-term strategy. During 2019, there were four meetings of the Board. Directors are expected to make every effort to attend the Annual Meeting, all Board meetings and the meetings of the committees on which they serve. All members of the Board attended last year’s Annual Meeting of Shareholders, which was held in May 2019. In 2019, each director attended 100% of the meetings of the Board and the committees of which they are a member.

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Role of Board in Risk Oversight

Our Board is responsible for ensuring that the risk management processes designed and implemented by management are functioning appropriately, and that necessary steps are taken to foster a culture of risk-adjusted decision-making within Hecla. Throughout the year, our Board receives reports on strategic plans and risks facing each of our operations and the Company as a whole. Our management is accountable for day-to-day risk management efforts. Employees who lead various risk areas report periodically to Board committees and occasionally to our full Board.

The following are the key risk oversight and management responsibilities of our Board, its committees and management:

Board of Directors

Monitors (including through committee reports) and assesses risk exposure:

Operational
     
Legal and regulatory
     
Financing, including borrowing, liquidity, capital allocation and hedging
Strategic
     
Reputational
     

  

  

Management

Business units identify and manage business risks
Risk management updates provided through business reports from management are presented at meetings of the Board and its committees throughout the year

Audit Committee

Financial statement integrity and reporting
Monitors internal controls
Oversees audit work
Monitors compliance with securities and financial regulations
Major financing and other business risk exposures
Information security, technology, and privacy and data protection

Corporate Governance and Directors Nominating Committee (“Governance Committee”)

Monitors governance structure, policies and processes
Legal and policy matters with potential significant reputational impact
Shareholder concerns

Compensation Committee

Oversees executive compensation policies and practices
Independent compensation consultant assesses the Company’s compensation arrangements to determine if their provisions and operations create undesired or unintentional risks of a material nature
Approve compensation levels and programs for the executive officers, including the CEO

Health, Safety, Environmental and Technical Committee

Oversees operational, reserves, and other technical risks, environmental, health and safety compliance, as well as risks relating to public policy initiatives
 

Following consideration of the information presented by management, the Board provides feedback and makes recommendations, as needed, which is designed to help minimize the Company’s risk exposure. To the extent any risks identified by each standing committee of the Board are material or otherwise merit discussion by the whole Board, the respective committee chair will raise such risks at the next scheduled meeting of the Board, or sooner if merited.

For the foregoing reasons, we have determined that our risk oversight is appropriate in the context of our specific circumstances, risk management efforts, and the Board’s administration of its oversight function.

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Director Independence

Our Corporate Governance Guidelines provide, among other things, that the Board will have a majority of directors who meet the criteria for independence as defined in the NYSE rules. In determining independence each year, the Governance Committee affirmatively determines whether directors have any “material relationship” with the Company. When assessing the “materiality” of a director’s relationship with the Company, the Governance Committee considers all relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an affiliation. The Governance Committee also reviews the frequency or regularity of services or transactions between the Company and directors, whether the services or transactions are being carried out at arm’s length in the ordinary course of business and whether the services or transactions are being provided substantially on the same terms to the Company as those prevailing at the time from unrelated parties for comparable services or transactions. Material relationships can include commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships.

Pursuant to our Corporate Governance Guidelines, the Governance Committee undertook its annual review of director independence in February 2020. During this review, the Governance Committee considered transactions and relationships between each director or any member of his or her immediate family and Hecla, our subsidiaries and affiliates, including relationships, if any, reported on page 91 under Certain Relationships and Related Transactions. The Governance Committee also examined transactions and relationships between directors or their affiliates and members of our senior management or their affiliates. As provided in the Corporate Governance Guidelines, the purpose of this review was to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent.

Based upon this assessment, the Board affirmatively determined that the following directors are independent of the Company and its management under the standards set forth by the NYSE:

Ted Crumley       Stephen F. Ralbovsky
Catherine J. Boggs Terry V. Rogers
George R. Johnson Charles B. Stanley
George R. Nethercutt, Jr.

Directors are expected to immediately inform the Board of any material change in their circumstances or relationships that may impact their independence.

Board Tenure, Age and Retirement

The average tenure of our directors is approximately 12 years, which reflects a balance of company experience and new perspectives. The average age of our directors is 68. The Company has no current retirement plan for non-management directors. Our Bylaws and Corporate Governance Guidelines provide that directors will not be nominated for re-election after their 75th birthday.

Directors

55 – 60

61 – 65

66 – 70

71 – 75

Average Age: 68

Board Leadership and Executive Sessions

Currently, the positions of CEO and Chairman of the Board (“Chairman”) are held by separate persons. The Board believes this structure is optimal for the Company at this time because it allows the CEO to focus on leading the Company’s business and operations, and the Chairman to serve as a sounding board and advisor to the CEO, and to lead the activities of the Board. The Board has also determined that having a non-management director serve as Chairman is in the best interest of shareholders. This structure ensures a greater role for the independent directors in the oversight of the Company and it enhances the Board’s independence and, we believe, senior management’s accountability to the Board.

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If the individual elected as Chairman is the CEO, the independent directors will elect an Independent Lead Director for a one-year term. This would help ensure continued robust independent leadership of the Board.

Currently, our Chairman, Mr. Ted Crumley, chairs meetings of the Board, as well as the executive sessions with independent members of the Board. His duties include:

chairing annual meetings of shareholders;
overseeing the preparation of agendas for Board meetings;
preparing for executive sessions of the Board and providing feedback to the CEO;
staying current on developments to determine when it may be appropriate to alert the Board to significant pending developments; and
serving as a liaison between independent directors and the CEO with respect to sensitive issues.

Executive sessions of independent directors are included on the agenda for every regularly scheduled Board meeting, and during 2019 executive sessions were held at each regularly scheduled Board meeting. The executive sessions are chaired by the Chairman. Our independent directors meet in executive sessions without management present, unless the independent directors request their attendance. For the foregoing reasons, we have determined that our leadership structure is appropriate in the context of our specific circumstances.

Director Orientation and Continuing Education

New directors undergo a comprehensive orientation program that introduces them to the Company, including our business operations, strategy, financial position, key members of management and corporate governance. Directors also are encouraged to enroll in director education programs. Directors have contact with leaders throughout the organization and visit our mine sites, where they tour the facilities and interact directly with the personnel responsible for our day-to-day operations. These activities collectively help to ensure that new directors become, and existing directors remain, knowledgeable about the most important issues affecting our Company and our business.

Board and Committee Self-Evaluation Process

Our Board recognizes that a thorough, constructive evaluation process enhances our Board’s effectiveness and is an essential element of good corporate governance. Accordingly, every year, our Board and each committee of the Board conducts a self-evaluation of its performance and effectiveness. The Governance Committee oversees the annual self-evaluation process on behalf of the Board. Our Board and committee evaluations cover the following topics:

Board and committee composition, including skills, background and experience;
Review of key areas of focus for the Board and committees, and effectiveness in overseeing those responsibilities;
Satisfaction of director performance, including that of the Board chair;
Board and committee information needs, and quality of materials presented;
Areas where the Board should increase its focus;
Satisfaction with the Board and committee schedules, agendas, time allocated for topics and encouragement of open communication and discussion;
Access to management, experts and internal and external resources;
Oversight of financial reporting process and internal control procedures;
Ethics and compliance;
Company’s strategic direction and annual operating plan;
Succession planning;
Selection and evaluation process of Board candidates; and
Understanding risks.

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Evaluation Process

1 Corporate
Governance
Review
2 Annual Board
and Committee
Evaluations
3 Summary of
Evaluations
4 Board and
Committee Review

Our self-evaluation process is conducted on an anonymous basis, using our board portal. We have found by using an anonymous evaluation process, the Board and committee members have a level of comfort in being able to critique the Board and/or the committees.

The Board and each committee conduct annual self-evaluations through the use of electronic questionnaires that cover the topics discussed above.

Hecla’s Corporate Secretary uses our board portal to generate a summarized report of our directors’ anonymous responses to the electronic questionnaires, and submits the report to the appropriate chair of each Committee of the Board for review before the next quarterly Board and/or Committee meeting.

Using the summaries of the self-evaluations as guides, our chair of the Governance Committee reviews the results of the Board evaluation and each committee chair reviews the results of each committee evaluation. The self-evaluations and summaries are shared and discussed with the full Board and each committee. The objective is to allow the Board and each committee to share their perspectives and consider any necessary adjustments in response to the collective feedback from the self-evaluations.

Committees of the Board and Committee Assignments

The Board has five standing committees: Audit; Compensation; Corporate Governance; Health, Safety, Environmental and Technical; and Executive. Information regarding these committees is provided below. Except for the Executive Committee, all committees are composed entirely of independent directors. The members of each committee are identified below, along with the number of meetings held in 2019. All committee members attended 100% of all meetings of the committees on which they were a member.

Executive Committee Members      Functions of the Committee      Meetings
in 2019

Phillips S. Baker, Jr., Chair
Ted Crumley
Terry V. Rogers

empowered with the same authority as the Board in the management of our business, except for certain matters enumerated in our Bylaws and Delaware law, which are specifically reserved to the whole Board

1

 

Audit Committee Members(1),(2),(3)

Functions of the Committee

Meetings
in 2019

Stephen F. Ralbovsky, Chair
George R. Johnson
Charles B. Stanley
Catherine J. Boggs

assist the Board in fulfilling its oversight responsibilities
review the integrity of our financial statements
review the independent auditor’s qualifications and independence
review the performance of our internal auditor and the independent auditor
review our compliance with laws and regulations, including disclosure controls and procedures
review financial risks
please refer to Report of the Audit Committee on page 42

6

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Compensation Committee
Members(2)
     Functions of the Committee      Meetings
in 2019

Terry V. Rogers, Chair
Ted Crumley
George R. Nethercutt, Jr.
Catherine J. Boggs

approve the design of our compensation program
approve compensation levels and programs for the executive officers, including the CEO
administer our stock-based plans
please refer to the Compensation Discussion and Analysis section on page 46

4

 
Corporate Governance
and Directors Nominating
Committee Members(2)
Functions of the Committee Meetings
in 2019

Catherine J. Boggs, Chair
George R. Nethercutt, Jr.
Stephen F. Ralbovsky
George R. Johnson

consider matters of corporate governance
periodically review our Corporate Governance Guidelines, Code of Conduct, and other corporate procedures to ensure compliance with laws and regulations
review any director candidates, including those nominated or recommended by shareholders
identify individuals qualified to become directors consistent with criteria approved by the Board
recommend to the Board the director nominees for the next annual meeting of shareholders, any special meeting of shareholders, or to fill any vacancy on the Board
review the appropriateness of the size of the Board relative to its various responsibilities
recommend committee assignments and committee chairpersons for the standing committees for consideration by the Board

3

 
Health, Safety,
Environmental and Technical
Committee Members
Functions of the Committee Meetings
in 2019

George R. Johnson, Chair
Terry V. Rogers
Charles B. Stanley
George R. Nethercutt, Jr.

review operational and exploration performance
review operational, reserve and other technical risks
review and monitor health, safety and environmental policies
review the implementation and effectiveness of compliance systems
review the effectiveness of health, safety and environmental policies, systems and monitoring processes
review audit results and updates from management with respect to health, safety and environmental performance
review emerging health, safety and environmental trends in legislation and proposed regulations affecting the Company
review the technical activities of the Company
make recommendations to the Board concerning the advisability of proceeding with the exploration, development, acquisition or divestiture of mineral properties and/or operations

4

(1) The Board has determined that each of the members of the Audit Committee is financially literate and Messrs. Ralbovsky and Stanley each qualify as an audit committee “financial expert” as defined by SEC rules.
(2) Each member of the Audit, Compensation, and Governance Committee satisfies the definition of “independent director” as established in the NYSE listing standards and SEC rules.
(3) No members on the Audit Committee serve on the audit committee of any other public companies.

Diversity

The Company’s Corporate Governance Guidelines provide that, as a whole, the Board should include individuals with a diverse range of experience to give the Board depth and breadth in the mix of skills represented. The Board seeks to include diversity in professional experience, skills, industry background, race, national origin and gender, as well as the ability of members (and candidates for membership on the Board) to devote sufficient time to performing their duties in an effective manner.

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Director Communications

Shareholders or other interested parties wishing to communicate with the Chairman or with the independent directors as a group may do so by delivering or mailing the communication in writing to: Chairman of the Board, c/o Corporate Secretary, Hecla Mining Company, 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of our internal auditor and handled in accordance with procedures established by the Audit Committee with respect to such matters. From time to time, the Board may change the process by which shareholders may communicate with the Board or its members. Please refer to our website at www.hecla-mining.com under the tab entitled “Investors” and then select the tab entitled “Corporate Governance” for any changes in this process.

Succession Planning

The Compensation Committee is charged with the responsibility of developing a process for identifying and evaluating candidates to succeed our CEO and to report annually to the Board on the status of the succession plan. The committee also addresses issues related to the preparedness for the possibility of an emergency situation involving senior management and an assessment of the long-term growth and development of the senior management team.

The CEO and Vice President of Human Resources communicate with the committee regularly regarding succession planning. The committee reviews recommended candidates for senior management positions as part of the process to identify and gauge the availability of qualified candidates for those positions and receives reports concerning development plans that are utilized to strengthen the skills and qualifications of the candidates. The criteria used when assessing the qualifications of potential CEO successors include, among others, strategic vision and leadership, operational excellence, financial management, executive officer leadership development, ability to motivate employees, and an ability to develop an effective working relationship with the Board.

In conjunction with our succession reviews, management also reviews potential successors for the top management roles across Hecla.

Our Corporate Governance Guidelines provide that in the event of the death, resignation, removal or incapacitation of the President and CEO, the Chairman will act as the President and CEO until a successor is duly elected. In addition, our Corporate Governance Guidelines and Bylaws provide that in the event of the death, resignation, removal or incapacitation of our current Chairman, the President and CEO will act as Chairman until his successor is duly elected.

Electronic Access to Corporate Governance Documents

Our corporate governance documents are available on our website at www.hecla-mining.com under the tab entitled “Investors” and then selecting the tab entitled “Corporate Governance.” These include:

Corporate Governance Guidelines;
Whistleblower Policy;
Charters of the Audit, Compensation, Corporate Governance, and Health, Safety, Environmental and Technical Committees of the Board;
Code of Ethics for our Chief Executive Officer and Senior Financial Officers;
Code of Conduct;
Certificate of Incorporation; and
Bylaws.

The information on our website is not incorporated by reference into this Proxy Statement.

Shareholders may also request a free copy of these documents from: Investor Relations, Hecla Mining Company, 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408; (208) 769-4100.

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Corporate Governance and Related Matters

Corporate Governance Guidelines and Code of Conduct

The Board has adopted Corporate Governance Guidelines and a Code of Conduct in accordance with NYSE corporate governance standards. The Corporate Governance Guidelines were adopted by the Board to ensure that the board is independent from management, that the Board adequately performs its function as the overseer of management, and to help ensure that the interests of the Board and management align with the interests of our shareholders.

We believe that operating with honesty and integrity has earned trust from our shareholders, credibility within our communities and dedication from our employees. Our directors, officers and employees are required to abide by our Code of Conduct to promote the conduct of our business in a consistently legal and ethical manner. Our Code of Conduct covers many topics, including conflicts of interest, confidentiality, fair dealing, proper use of the Company’s assets, and compliance with laws, rules and regulations. In addition to the Code of Conduct for directors, officers and employees, our CEO, Chief Financial Officer and Controller are also bound by a Code of Ethics for the Chief Executive Officer and Senior Financial Officers.

The Governance Committee has adopted procedures to receive, retain, and react to complaints received regarding possible violations of the Code of Conduct, and to allow for the confidential and anonymous submission by employees of concerns regarding possible violations of the Code of Conduct. Our employees may submit any concerns regarding apparent violations of the Code of Conduct to their supervisor, our General Counsel, the Chair of the Governance Committee, or through an anonymous telephone hotline.

Majority Voting for Directors and Director Resignation Policy

In February 2017, the Governance Committee recommended and the Board approved amendments to the Corporate Governance Guidelines to include a director resignation policy. The policy provides that any director who is not elected by a majority of votes cast shall tender his or her resignation to the committee. The committee will recommend to the Board whether to accept or reject the resignation offer, or whether another action should be taken. In determining whether to recommend that the Board accept any resignation offer, the committee will consider all factors believed relevant by it. The Board will act on the committee’s recommendation within 90 days following certification of the election results. In deciding whether to accept the resignation offer, the Board will consider the factors considered by the committee and any additional information and factors that the Board finds relevant. If the Board accepts a director’s resignation offer pursuant to this process, the committee will recommend to the Board and the Board will thereafter determine whether to fill such vacancy or reduce the size of the Board. Any director who tenders his or her resignation pursuant to this provision will not participate in the proceedings of either the committee or the Board with respect to his or her own resignation offer. If a director’s resignation is not accepted by the Board, the director shall continue to serve until the next annual meeting of shareholders or until his or her successor is duly elected and qualified, or his or her earlier resignation or removal.

Whistleblower Policy

We have a Whistleblower Policy adopted by our Audit Committee that encourages our employees to report to appropriate Company representatives, without fear of retaliation, certain accounting information relating to possible fraud. Our employees may submit any concerns regarding financial statement disclosures, accounting, internal accounting controls or auditing matters to the Audit Committee, our General Counsel, or through an anonymous telephone hotline or website. The goal of this policy is to discourage illegal activity and business conduct that damages Hecla’s reputation, business interests, and our relationship with shareholders.

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Corporate Governance and Related Matters

Board of Directors Selection Process

Our Bylaws require the Board to have not less than five nor more than nine members. The size of the Board may be increased or decreased within that range from time-to-time by resolution approved by the affirmative vote of a majority of the Board. On May 25, 2017, the Board decreased the size of the Board from nine members to eight members due to the retirement of one of our directors.

Identifying and Evaluating Nominees for Director

Director Selection Process

1 Candidate
Recommendations
2 Governance
Committee
3 Board of
Directors
4 Shareholders
From shareholders, management, directors and search firms
Evaluates the Board’s needs and screens and interviews candidates
Reviews qualifications and expertise, tenure, regulatory requirements and diversity
Recommends nominees
Discusses, analyzes independence and selects nominees for election Vote on nominees at annual meeting

The Governance Committee uses a variety of methods for identifying and evaluating nominees for director. The committee is responsible for ensuring that the composition of the Board accurately addresses the needs of our business. In the event vacancies are anticipated, or arise, the committee considers various potential candidates for director. Candidates may come to the attention of the committee through current Board members, professional search firms, shareholders or other persons. Consideration of new director nominee candidates typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. The committee then determines the best qualified candidates based on the established criteria and recommends those candidates to the Board for election.

While the committee and our Board prioritize maintaining a board that is comprised of directors with a diverse set of skills, experiences, and perspectives, they also recognize the importance of balancing these qualifications with the overall tenure of directors in their long-term approach to board refreshment. The fresh viewpoints and philosophies newer directors bring, coupled with the valuable experience and institutional knowledge the longer-tenured directors possess, benefits the Board and its overall contribution to the Company.

The Board has appointed three highly qualified directors since 2016 who bring insight to areas such as mining, international business, acquisitions, operations, legal, risk management, geology, engineering, finance and tax. To supplement our newer directors, our longer-tenured directors have extensive knowledge of our operations and have the perspective of overseeing our business activities through economic cycles and across differing competitive environments.

We hold the view that the continuing service of qualified incumbents promotes stability and continuity in the boardroom, contributing to the Board’s ability to work as a collective body, while giving us the benefit of familiarity and insight into our affairs that our directors have accumulated during their tenure. Recent additions to the Board provide new perspectives, while directors who have served for a number of years bring experience, continuity, institutional knowledge, and insight into the Company’s business and industry. Directors with relevant business and leadership experience provide the Board a useful perspective on business strategy and significant risks and an understanding of the challenges facing the business. Accordingly, the process for identifying nominees reflects our practice of re-nominating incumbent directors who (i) continue to satisfy the committee’s criteria for membership on the Board, (ii) the committee believes continue to make important contributions to the Board, and (iii) consent to continue their service on the Board. Directors should also be able to commit the requisite time for preparation and attendance at regularly scheduled Board and committee meetings, as well as be able to participate in other matters necessary to ensure good corporate governance is practiced.

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Corporate Governance and Related Matters

The committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required for the Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations. Board members should possess such attributes and experience as are necessary for the Board as a whole and contain a broad range of personal characteristics, including diversity of backgrounds, management skills, mining, accounting, finance and business experience. Summarized below is a description of why each core competency is important for service on Hecla’s Board.

Description of Skills, Core Competencies and Attributes
Senior Leadership Experience
Experience serving as CEO or a senior business executive, as well as hands-on leadership experience in core management areas, such as strategic and operational planning, financial reporting, compliance, risk management and leadership development, provides a practical understanding of how organizations like Hecla function. Seven of our directors have senior business leadership experience.
Industry Experience
Having experience in our industry or a similar industry contributes to a deeper understanding of our business strategy, operations, key performance indicators and competitive environment. All our directors have experience in mining or a similar industry.
Risk Management
In light of the Board’s role in risk oversight, we seek directors who can contribute to the identification, assessment and prioritization of risks facing the Company. All our directors have experience with our business to understand key areas of risk.
Finance
We believe that an understanding of finance and financial reporting processes is important for our directors to monitor and assess the Company’s operating and strategic performance and to ensure accurate financial reporting and robust controls. It is important to have experience in capital markets, corporate finance, accounting and financial reporting and several of our director’s satisfy the “accounting or related financial management experience” criteria set forth in the NYSE listing standards. Three of our directors satisfy the “audit committee financial expert” criteria set forth in regulations of the SEC. Seven of our directors have financial knowledge.
Legal and Compliance
Hecla is subject to a broad array of government regulations. Mining is impacted by changes in law or regulation in areas such as safety, environmental and disclosure. Several of our directors have experience in regulated industries, providing them with insight and perspective in working constructively and proactively with governments and agencies. Four of our directors have formal legal education and understand the legal risks and obligations of the Company.
Geology, Mining and Engineering
It is important that some of our directors have experience in open-pit and underground mines, as well as knowing the science and technology of extracting minerals, exploration, geology, metallurgy, and geotechnical engineering experience. Two of our directors have experience managing mining operations. One of our directors has experience in geology.
CEO and Company Administration
These skills are important to gain a practical understanding of organizations and drivers of individual growth and development. Seven of our directors have had some experience in the administration of a multijurisdictional company. Two of our directors have experience as a chief executive officer.
Corporate Governance and Responsibility
Experience with governance principals or corporate responsibility initiatives, including sustainability, diversity and inclusion. All our directors have had experience in governance and corporate responsibility.
Board Service on Public Companies
We value individuals who understand public company reporting responsibilities and have experience with the issues commonly faced by public companies. Five of our directors have served on boards of other public companies.
International Business
With operations in Mexico and Canada and prospects for further expansion, international experience helps us understand opportunities and challenges. All our directors have had international business experience.
Industry Association Participation/Reputation in the Industry
Experience in organizations that support companies and employers in the mining industry and protects their rights. Three of our directors have chaired an industry organization. Six of our directors have a long and highly regarded reputation in the industry.
Strategic Planning, Business Development, Business Operations
Experience defining and driving strategic direction and growth and managing the operations of a business or large organization. All our directors have experience in setting and managing the strategic direction of a business.

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Corporate Governance and Related Matters

Summary of Director Qualifications and Experience

Director Qualifications
and Experience
Baker Boggs Crumley Johnson Nethercutt Ralbovsky Rogers Stanley
Audit Committee Financial Expert
Board Service on Public Companies
CEO and Company Administration
Corporate Governance and Responsibility
Finance
Geology, Mining and Engineering
Industry Experience
Industry Association Participation
International Business
Senior Leadership
Legal and Compliance
Reputation in the Industry
Risk Management
Strategic Planning, Business Development, Business Operations

In general, and as more fully outlined in our Bylaws and Corporate Governance Guidelines, in evaluating director candidates for election to our Board, the Governance Committee will: (i) consider if the candidate satisfies the minimum qualifications for director candidates as set forth in the Corporate Governance Guidelines; (ii) consider factors that are in the best interests of the Company and its shareholders, including the knowledge, experience, integrity and judgment of each candidate; (iii) consider the contribution of each candidate to the diversity of backgrounds, experience and competencies which the Board desires to have represented, with such diversity being considered among the other desirable attributes of the Board; (iv) assess the performance of an incumbent director during the preceding term; (v) consider each candidate’s ability to devote sufficient time and effort to his or her duties as a director; (vi) consider a candidate’s independence and willingness to consider all strategic proposals; (vii) consider any other criteria established by the Board and any core competencies or technical expertise necessary to manage and direct the affairs and business of the Company, including, when applicable, to enhance the ability of committees of the Board to fulfill their duties; and (viii) determine whether there exists any special, countervailing considerations against nomination of the candidate.

Shareholder Nominees
The Governance Committee will consider persons recommended by shareholders as nominees for election as directors. Our Bylaws provide any shareholder who is entitled to vote for the election of directors at a meeting called for such purpose may nominate persons for election to the Board by following the procedures set forth on page 92. Shareholders who wish to submit a proposed nominee to the committee should send written notice to the Governance Committee Chairman, c/o Corporate Secretary, Hecla Mining Company, 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408, within the time period set forth on page 92. The notification should set forth all information relating to the nominee that is required to be disclosed in solicitations of proxies for elections of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (“Exchange Act”), including the nominee’s written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected; the name and address of the shareholder or beneficial owner making the nomination or on whose behalf the nomination is being made; and the class and number of shares of stock of the Company owned beneficially and of record by such shareholder or beneficial owner. The committee will consider shareholder nominees on the same terms as nominees selected by the committee.

Regardless of how a candidate is brought to the committee, qualified candidates are subjected to one or more interviews with appropriate members of the Board. Chosen candidates are extended invitations to join the Board. If a candidate accepts, he or she is formally nominated.

Director Qualifications, Evaluation, and Nomination
The Governance Committee believes nominees for election to the Board should also possess certain minimum qualifications and attributes. The nominee must: (i) exhibit strong personal integrity, character and ethics, and a commitment to ethical business and accounting practices; (ii) not be involved in ongoing litigation with the Company or be employed by an entity engaged in such litigation; and (iii) not be the subject of any ongoing criminal investigations in the jurisdiction of the United States or any state thereof, including investigations for fraud or financial misconduct.

In connection with the director nominees who are up for re-election at the Annual Meeting, the committee also considered the nominees’ roles in: (i) overseeing the Company’s efforts in complying with its SEC disclosure requirements; (ii) assisting in improving the Company’s internal controls and disclosure controls; (iii) assisting with the development of the strategic plan of the Company; and (iv) working with management to implement the Company’s strategic goals and plans. Directors are expected to exemplify high standards of personal and professional integrity and to constructively challenge management through their active participation and questioning. Our Bylaws and Corporate Governance Guidelines provide that directors will not be nominated for re-election after their 75th birthday.

In addition to fulfilling the above criteria, each nominee for election to the Board at the upcoming Annual Meeting brings a strong and unique background and set of skills to the Board, giving the Board competence and experience in a wide variety of areas, including corporate governance, executive management, legal, accounting, finance, mining, exploration and board service. The committee has reviewed the nominees’ overall service to the Company during their terms, including the number of meetings attended, level of participation and quality of performance.

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PROPOSAL 1
   

Election of Class I Directors


 
 
 
   
 

In accordance with our Certificate of Incorporation, the Board is divided into three classes. The terms of office of the directors in each class expire at different times. There are two Class I directors whose terms will expire at the 2020 Annual Meeting: Phillips S. Baker, Jr. and George R. Johnson.

At a meeting held by the Governance Committee in February 2020, the committee determined the directors whose terms are expiring – Messrs. Baker and Johnson - were qualified candidates to stand for re-election at the Annual Meeting, and the Board designated each as nominees for re-election as directors of the Company, each for a three-year term expiring in 2023.

It is intended that the proxies solicited hereby from our shareholders that do not provide voting instructions will be voted FOR the election of Phillips S. Baker, Jr. and George R. Johnson. If any nominee becomes unable or is unwilling to accept election, the Board will either reduce the number of directors to be elected or select substitute nominees submitted by the committee. If substitute nominees are selected, proxies that do not provide voting instructions will be voted in favor of such nominees.

Biographical Information
Set forth below is biographical information for each of the director nominees, including the key qualifications, experience, attributes, and skills that led our Board to the conclusion that each of the director nominees should serve as a director. There are no family relationships among any of our directors or executive officers.

Our Board includes individuals with strong backgrounds in executive leadership and management, legal, accounting and finance, and Company and industry knowledge, and we believe that, as a group, they work effectively together in overseeing our business.

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PROPOSAL 1 – Election of Class I Directors

Current Class I Nominees for Election to the Board – Term Ending at the 2020 Annual Meeting

If elected, the nominees will each serve for a three-year term ending in 2023. The nominees are as follows:

Phillips S. Baker, Jr.
President and Chief
Executive Officer
Age: 60
Director since: 2001
Other Directorships:
QEP Resources, Inc.
Hecla Committees:
Executive (Chair)
  

Mr. Baker has been our Chief Executive Officer since May 2003 and has served as our President since November 2001. He has served as a Director of QEP Resources, Inc. since May 2010. Mr. Baker has served as Chairman of the Board for the National Mining Association since October 2017, and has been a Board member since September 2010. He also served as Vice Chairman of the Board for the National Mining Association from October 2015 to October 2017. He has also served as a Board member of the National Mining Hall of Fame and Museum since February 2012.

Board Qualification and Skills:

Mr. Baker has substantial financial experience gained in his roles of President, Chief Executive Officer, and previously as Chief Financial Officer of the Company. He has served as Hecla’s President for 19 years and as Chief Executive Officer for 17 years, and has 25 years of executive and management experience in the mining industry. In addition to serving on the Board of Hecla, he has served on the Board of QEP Resources, Inc. for 10 years, as well as serving as the chair of the audit committee and as a member of the governance committee for QEP Resources, Inc.

George R. Johnson
Former Senior Vice President of
Operations with B2Gold Corporation
Age: 71
Director since: 2016
Other Directorships:
B2Gold Corporation
Hecla Committees:
Health, Safety, Environmental and Technical (Chair)
Audit
  

Mr. Johnson served as Senior Vice President of Operations of B2Gold Corporation from August 2009 until his retirement in April 2015. He has served on the Board of Directors of B2Gold Corporation since March 2016.

Board Qualification and Skills:

Mr. Johnson has over 45 years of foreign and domestic experience in underground and open-pit mine construction and operations management as a mining engineer.

Required Vote

Pursuant to our Bylaws, each director will be elected by the affirmative vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Under a majority of votes cast standard, the shares voted “for” a nominee must exceed the number voted “against” that nominee. Shareholders may vote “for,” “against” or “abstain” with respect to this proposal. Abstentions and broker non-votes are not counted as votes cast, and thus will have no effect on the outcome of the vote. If the votes cast “against” an incumbent director exceeds the number of votes cast “for” the director, the director will not be elected, will remain on the board as a holdover director and must stand for election at the next annual meeting of shareholders, absent his or her earlier resignation or removal. See Majority Voting for Directors and Director Resignation Policy on page 29 for a description of our director resignation policy.

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PROPOSAL 1 – Election of Class I Directors

You may vote “FOR,” “AGAINST,” OR “ABSTAIN” on the nominees for election as directors.

 
      The Board recommends that shareholders vote “FOR” the election of Phillips S. Baker, Jr. and George R. Johnson.   
 

Our directors whose terms are not expiring this year follow. They will continue to serve as directors for the remainder of their terms or until their respective successors are appointed or elected.

Continuing Class II Members of the Board – Term Ending at the 2021 Annual Meeting

George R. Nethercutt, Jr.
Chairman of The George
Nethercutt Foundation
Age: 75
Director since: 2005
Other Directorships:
Washington Policy Center
Juvenile Diabetes Research Foundation International (Board of Chancellors)
Hecla Committees:
Corporate Governance and Directors Nominating
Health, Safety, Environmental and Technical
Compensation
  

Mr. Nethercutt has served as Chairman of The George Nethercutt Foundation since 2005, and was Of Counsel at Lee & Hayes PLLC from September 2010 to June 2018. He has been a board member of Washington Policy Center since January 2005; and a member of the Board of Chancellors, Juvenile Diabetes Research Foundation International since June 2011. He was a board member of ARCADIS Corporation from May 2005 to April 2017; a Principal of Nethercutt Consulting LLC from January 2007 to January 2012, and a member of the board of IP Street from May 2011 to January 2015.

Board Qualification and Skills:

Mr. Nethercutt served as a U.S. Congressman where he focused on natural resource policies, mining legislation and environmental policies on public lands. He has an extensive political background, including working as a staff member in the U.S. Senate in Washington, D.C., where he focused on issues relating to oil and gas, natural resources, mining and commerce. He had his own consulting business which consisted of representing clients with mining and natural resource issues. He also has significant public company board experience.

Stephen F. Ralbovsky
Founder and Principal of Wolf Sky
Consulting LLC
Age: 66
Director since: 2016
Other Directorships:
None
Hecla Committees:
Audit (Chair)
Corporate Governance and Directors Nominating
  

Mr. Ralbovsky has been the Founder and Principal of Wolf Sky Consulting LLC since June 2014. Prior to that, he was a partner with PricewaterhouseCoopers LLP from February 1987 until his retirement in June 2014, where he concentrated his practice on public companies operating in the mining industry. He is a part-time Professor of Practice at the University of Arizona’s James E. Rogers College of Law. Mr. Ralbovsky is also a member of several organizations, including AICPA, Arizona Society of CPAs, National Mining Association, and Society for Mining, Metallurgy and Exploration.

Board Qualification and Skills:

Mr. Ralbovsky has over 39 years’ experience in taxation, auditing and accounting, where he was specifically heavily involved in the mining industry with an emphasis in global mining tax and royalty policy. He has held leadership positions, including U.S. Mining Leader, U.S. Mining Tax Leader, Global Mining Tax Leader and Tax Partner while employed with PricewaterhouseCoopers LLP.

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PROPOSAL 1 – Election of Class I Directors

Catherine “Cassie” J. Boggs
Former General Counsel at
Resource Capital Funds
Age: 65
Director since: 2017
Other Directorships:
Funzeleo
Hecla Committees:
Corporate Governance and Directors Nominating (Chair)
Audit
Compensation
  

Ms. Boggs served as the General Counsel at Resource Capital Funds from January 2011 until her retirement in February 2019. Since November 2019, she has been serving as an Intermittent Expert in mining with the US Department of Commerce’s Commercial Law Development Program. She has been a board member of Funzeleo since January 2016, as well as serving as President of the Rocky Mountain Mineral Law Foundation from July 2012 to July 2013, and a board member of the Rocky Mountain Mineral Law Foundation from July 2011 to July 2015.

Board Qualification and Skills:

Ms. Boggs has over 38 years’ experience as an attorney in the mining and natural resources sectors, in both domestic and international mining. She has extensive experience in leadership in the mining industry, having worked for Barrick Gold Company, serving in a variety of leadership roles, including serving as the CEO of Tethyan Copper Company, interim President of the African Business Unit, and as interim General Counsel of African Barrick Gold. She also has experience in due diligence, country and political risk assessments, and the structuring and implementation of risk mitigation strategies.

Continuing Class III Members of the Board – Term Ending at the 2022 Annual Meeting

Ted Crumley
Former Executive Vice President
and Chief Financial Officer
OfficeMax Incorporated
Age: 75
Director since: 1995
Board Chairman since: 2006
Other Directorships:
None
Hecla Committees:
Executive
Compensation
  

Mr. Crumley served as the Executive Vice President and Chief Financial Officer of OfficeMax Incorporated from January 2005 until his retirement in December 2005. He was also Senior Vice President of OfficeMax Incorporated from November 2004 to January 2005; and Senior Vice President and Chief Financial Officer of Boise Cascade Corporation from 1994 to 2004.

Board Qualification and Skills:

Mr. Crumley has substantial financial experience gained from a long career with OfficeMax Incorporated and Boise Cascade Corporation, where he served as Executive Vice President and Chief Financial Officer. He has over 30 years’ experience in management, finance and accounting in the natural resources industry. He served in numerous senior leadership positions, including Executive Vice President and Chief Financial Officer of OfficeMax Incorporated and Senior Vice President and Chief Financial Officer of Boise Cascade Corporation. With over 24 years of service on Hecla’s Board, Mr. Crumley understands all aspects of our business.

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PROPOSAL 1 – Election of Class I Directors

Terry V. Rogers, C. Dir., H.R.C.C.C.
Former Senior Vice President and
Chief Operating Officer
Cameco Corporation
Age: 73
Director since: 2007
Other Directorships:
None
Hecla Committees:
Compensation (Chair)
Health, Safety, Environmental and Technical
Executive
  

Mr. Rogers served as Senior Vice President and Chief Operating Officer of Cameco Corporation from February 2003 until his retirement in June 2007. He was the former President of Kumtor Operating Company from 1999 to 2003 and served on the Board of Directors of Centerra Gold Inc., and its predecessor company, Cameco Gold, from February 2003 to May 2018.

Board Qualification and Skills:

Mr. Rogers has over 30 years’ experience in the mining industry, including open-cast, open-pit and underground operations in coal, gold, and uranium mines around the world. He acquired his financial experience from his senior leadership/executive officer experience with Cameco Corporation and prior companies. He served in numerous senior leadership positions, including Senior Vice President and Chief Operating Officer of Cameco Corporation, and former President of Kumtor Operating Company. He also served over 15 years on the board of Centerra Gold Inc., where he served as chairman of the human resources and compensation committee, and as a member of the audit committee. He obtained a Chartered Director (C. Dir.) designation from The Directors College in 2011, as well as a Human Resources and Compensation Committee Certified (H.R.C.C.C.) designation from the Directors College in 2013.

Charles B. Stanley
Former Chief Executive Officer,
President and Chairman of
the Board
QEP Resources, Inc.
Age: 61
Director since: 2007
Other Directorships:
None
Hecla Committees:
Health, Safety, Environmental and Technical
Audit
  

Mr. Stanley served as Chief Executive Officer and President of QEP Resources, Inc. from May 2010 until his retirement in January 2019. He was also Chairman of the Board of QEP Resources, Inc. from May 2012 until his retirement in January 2019. He also served as Chairman, Chief Executive Officer, President and Director of QEP Midstream Partners LP from May 2013 to December 2014.

Board Qualification and Skills:

Mr. Stanley has over 35 years’ experience in the international and domestic upstream and midstream oil and gas industry. He is a geologist with an extensive background in natural resources. He gained his extensive financial experience from a long career with QEP Resources, Inc. and prior companies. In addition to his former position at QEP Resources, Inc., Mr. Stanley served in numerous other senior leadership positions, including Chief Executive Officer and President of QEP Midstream Partners, LP, and Chief Operating Officer of Questar Corporation. He served on the board of QEP Resources, Inc. for 8 years and as Chairman of the board, from May 2012 until his retirement in January 2019. Prior to serving on QEP’s board, Mr. Stanley served on the board of Questar Corporation for eight years, and has served on the boards of various oil and gas industry trade organizations.

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COMPENSATION OF NON-MANAGEMENT DIRECTORS

The Compensation Committee of the Board is responsible for recommending to the independent members of the Board the form and amount of compensation for our non-management directors. The independent members of the Board consider the committee’s recommendation and make the final determination of non-management director compensation.

Compensation for non-management directors is designed to reflect current market trends and developments with respect to compensation of board members. It consists of a combination of cash retainers and equity awards.

Compensation Consultant and Peer Group Benchmarking

The Compensation Committee periodically engages its independent compensation consultant to benchmark director compensation against a peer group, which is the same group of companies the committee uses to benchmark executive compensation (see page 48 for a list of these companies). In 2019, the committee did not retain an independent compensation consultant to review director compensation. The committee reviewed our non-management director compensation, but no changes were made in 2019.

Components of Non-Management Director Compensation

Compensation Element       Current
Value
Annual Board Retainer $ 98,000
Annual Board Chairman Retainer $ 120,000
Annual Committee Retainer for:
Health, Safety, Environmental & Technical Committee
$ 0
Audit Committee
$ 0
Compensation Committee
$ 0
Governance Committee
$ 0
Executive Committee
$ 0
Annual Committee Chairman Retainer for:
Health, Safety, Environmental & Technical Committee
$ 12,000
Audit Committee
$ 12,000
Compensation Committee
$ 12,000
Governance Committee
$ 8,000
Executive Committee
$ 0
Annual Equity $ 120,000

Annual cash retainers are paid in quarterly installments. Other than annual cash retainers and equity, no other attendance fees are paid to the non-management directors.

Equity Compensation

We maintain the Hecla Mining Company Stock Plan for Nonemployee Directors (“Director Stock Plan”). The plan is currently scheduled to terminate on May 15, 2027 and is subject to termination by the Board at any time. Pursuant to the plan, before September 30 of each year, each non-management director is credited with a number of shares determined by dividing the annual equity retainer payable to each non-management director for service on the Board for the following year by the average closing price for Hecla’s common stock on the NYSE for the prior calendar year (the “Stock Retainer”). A minimum of 25% of the annual Stock Retainer under the Director Stock Plan is contributed to a grantor

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Compensation of Non-Management Directors

trust established by the Company. Each director may elect, prior to the first day of the applicable year, to have a greater percentage contributed to the grantor trust for that year. The remaining portion of the Stock Retainer will be transferred to the non-management director as soon as practicable.

Non-management directors joining the Board after September 30 of any year will be credited with a pro rata grant of shares when they join the Board. A minimum of 25% of their Stock Retainer for that year will be contributed to the trust. Each director may elect, within 30 days after becoming a participant in the Director Stock Plan, to have a greater percentage contributed to the grantor trust for that year. The remaining portion will be transferred to these directors as soon as practicable after they become members of the Board.

The shares held in the grantor trust are subject to the claims of our creditors until delivered under the terms of the Director Stock Plan. Delivery of the shares from the trust occurs upon the earliest of: (i) death or disability; (ii) retirement from the Board; (iii) a cessation of the director’s service for any other reason; (iv) a change in control of the Company (as defined in the Director Stock Plan); or (v) a time elected by the director, except that shares must be held in the trust for at least two years prior to delivery. As of December 31, 2019, there were 2,867,888 shares remaining available for issuance under the Director Stock Plan.

The following chart summarizes the annual cash and equity compensation for our non-management directors during 2019.

Non-Management Director Compensation for 2019

Director       Fees Earned or
Paid in Cash
($)
      Stock
Awards(1)
($)
      All Other
Compensation(2)
($)
      Total
($)
Catherine J. Boggs 102,000 65,011 0 167,011
Ted Crumley, Chairman 218,000 65,011 0 283,011
George R. Johnson 104,000 65,011 5,000 174,011
George R. Nethercutt, Jr. 102,000 65,011 0 167,011
Stephen F. Ralbovsky 110,000 65,011 0 175,011
Terry V. Rogers 110,000 65,011 2,500 177,511
Charles B. Stanley 104,000 65,011 0 169,011
(1) The amounts shown in this column represent the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board ASC Topic 718. For a description of the assumptions used in valuing the awards please see Note 10 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The stock awards column represents the aggregate grant date fair value of the stock granted to each non-management director under the Director Stock Plan in 2019 as computed in accordance with ASC Topic 718. For each director, the number of common shares granted was determined by dividing $120,000 by the average closing price for Hecla’s common stock on the NYSE for the prior calendar year ($3.3225) ($120,000 ÷ 3.3225 = 36,117). On June 28, 2019, each non-management director received 36,117 shares of our common stock under the terms of the Director Stock Plan. Based on our closing stock price on the NYSE on the date of grant of June 28, 2019 ($1.80), the grant date fair value for each grant of 36,117 shares was $65,011. (This amount does not reflect the actual amount that may be realized by each director).
(2) Amounts in this column reflect matching contributions under the Company’s charitable matching gift program. See Political Contributions and Engagement on page 92.

Other

The Company covers directors under its overall director and officer liability insurance policies, as well as reimbursing them for travel, lodging, and meal expenses incurred in connection with their attendance at Board and committee meetings, meetings of shareholders, and for traveling to visit our operations. Directors are eligible, on the same basis as Company employees, to participate in the Company’s matching gift program, pursuant to which the Hecla Charitable Foundation matches contributions made to qualifying nonprofit organizations. Beyond these items, no other cash compensation was paid to any non-management director.

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Compensation of Non-Management Directors

Non-Management Director Stock Ownership

The following table summarizes the non-management directors stock ownership as of December 31, 2019. See Stock Ownership Guidelines on page 66 for further discussion. As of December 31, 2019, with the exception of Ms. Boggs and Messrs. Crumley, Johnson and Ralbovsky, all other non-management directors met the guidelines.

Non-Management Director Stock Ownership as of December 31, 2019

Director       Annual
Retainer
($)
      X
Annual
Retainer
      Total
Value
of Shares
to be
Held
($)
      Shares
Held
Directly
(#)
      Shares
Held in
Grantor
Trust(1)
(#)
      Total
Shares
(#)
      Total Value of
Shares Held
by Director
($2.1421)(2)
($)
      Meets
Guidelines
Boggs(3) 98,000 3x 294,000 40,540 84,667 125,207 268,206 No
Crumley(4) 218,000 3x 654,000 126,536 164,539 291,075 623,512 No
Johnson(5) 98,000 3x 294,000 17,273 92,200 109,473 234,502 No
Nethercutt 98,000 3x 294,000 31,686 106,188 137,874 295,340 Yes
Ralbovsky(5) 98,000 3x 294,000 17,273 92,200 109,473 234,502 No
Rogers 98,000 3x 294,000 122,313 111,809 234,122 501,513 Yes
Stanley 98,000 3x 294,000 100,536 133,586 234,122 501,513 Yes
(1) As of December 31, 2019, the total amount of shares held in trust pursuant to the terms of the Stock Plan for Nonemployee Directors by each of the above-named directors.
(2) The value of shares held is determined by using the average closing price of the Company’s common stock for the calendar year on the NYSE, which for 2019 was $2.1421.
(3) Ms. Boggs joined the Board in January 2017 and has until January 2022 to comply with the guidelines.
(4) Under the Company’s Stock Ownership Guidelines, Mr. Crumley may not sell or transfer any shares until the threshold has been achieved.
(5) Messrs. Johnson and Ralbovsky joined the Board in March 2016 and have until January 2021 to comply with the guidelines.

Additional information regarding shares held by the non-management directors is included in the Security Ownership of Certain Beneficial Owners and Management table on page 93.

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PROPOSAL 2
   

Ratification of the Appointment of BDO USA, LLP as Our Independent Registered Public Accounting Firm for 2020

   
 

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our financial statements. The committee appointed BDO USA, LLP (“BDO”) as the independent registered public accounting firm for Hecla for the calendar year ending December 31, 2020. BDO has been retained in that capacity since 2001. The committee is aware that a long-tenured auditor may be believed by some to pose an independence risk. To address these concerns, the committee:

reviews all non-audit services and engagements provided by BDO, specifically with regard to the impact on the firm’s independence;
conducts a quarterly assessment of BDO’s service quality, and its working relationship with our management;
conducts regular private meetings separately with each of BDO and our management;
interviews and approves the selection of BDO’s new lead engagement partner with each rotation; and
at least annually obtains and reviews a report from BDO describing all relationships between the independent auditor and Hecla.

The members of the committee believe that the continued retention of BDO to serve as our independent registered public accounting firm is in the best interests of Hecla and our shareholders.

Although ratification is not required, the Board is submitting the appointment of BDO to our shareholders for ratification because we value our shareholders’ views on our independent registered public accounting firm, and as a matter of good governance practice. In the event our shareholders fail to ratify the appointment, it will be considered as a direction to the Board and to the committee to consider the appointment of a different firm. Even if the appointment is ratified, the committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interest of the Company and our shareholders.

Representatives of BDO will be present at the Annual Meeting with the opportunity to make statements and respond to appropriate questions from shareholders present at the meeting.

Required Vote

Under the Sarbanes-Oxley Act of 2002, the Audit Committee has the sole authority to appoint the independent registered public accounting firm for the Company. However, the Board feels that it is important for the shareholders to ratify the selection of BDO USA, LLP. This proposal requires the affirmative vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Abstentions and broker non-votes are not counted as votes cast, and thus will have no effect on the outcome of the vote. Votes marked “against” will have an effect on the outcome of the vote. The appointment of our independent registered public accounting firm for calendar year 2020 is considered a “routine” matter and brokers that are not directed how to vote are permitted to vote shares held in street name for their customers on this proposal.

You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for 2020.

 
        The Audit Committee and Board recommend shareholders vote “FOR” the ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for 2020.    
 

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Proposal 2 — Ratification of the Appointment of BDO USA, LLP as Our
Independent Registered Public Accounting Firm for 2020

Pre-Approval Process

The committee is responsible for reviewing and, if appropriate, pre-approving all audit, audit-related and non-audit services to be performed by our independent registered public accounting firm. The committee charter authorizes the committee to establish a policy and related procedures regarding the pre-approval of audit, audit-related and non-audit services to be performed by our independent registered public accounting firm.

The committee has delegated its pre-approval authority to the Chair of the committee, who is authorized to pre-approve services to be performed by our independent registered public accounting firm and the compensation to be paid for such services until the next regularly-scheduled meeting of the committee, provided that in such case the Chair shall provide a report to the committee at its next regularly-scheduled meeting of any services and compensation approved by the Chair pursuant to the delegated authority. On a periodic basis, management reports to the committee the actual spending for projects and services compared to the approved amounts.

Audit and Non-Audit Fees

The following table presents fees for professional audit services rendered by BDO for the audit of our annual financial statements for the years ended December 31, 2018 and December 31, 2019, and fees for other services rendered by BDO during those periods.

      2019       2018
Audit Fees(1) $ 960,160 $ 979,640
Audit Related Fees(2) 88,000 91,000
Tax Fees(3) 48,000 23,000
All Other Fees
Total $ 1,096,160 $ 1,093,640
(1) Relates to services rendered in connection with the annual audit of our consolidated financial statements, quarterly reviews of financial statements included in our quarterly reports on Form 10-Q, and fees related to the registration of securities with the SEC.
(2) Consisted principally of fees for audits of financial statements of employee benefit plans.
(3) For 2019, consisted of fees for tax assistance in preparation of the Scientific Research & Experimental Development Tax Credits Application of Hecla Quebec (one of our subsidiaries) for its 2017 and 2018 fiscal years, submitted to Revenue Canada.

Report of the Audit Committee

The committee acts under a written charter. You may obtain a copy of the charter in the “Investors” section of www.hecla-mining.com under “Corporate Governance.”

In the performance of its oversight responsibilities, the committee (1) reviewed and discussed with management and the independent registered public accounting firm the Company’s audited financial statements for the fiscal year ended December 31, 2019; (2) discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) Audit Standard No. 1301, Communications with Audit Committees; (3) received the written disclosures and the letter from the Company’s independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the committee regarding independence; and (4) discussed with the Company’s independent registered public accounting firm any relationships that may impact its objectivity and independence and satisfied itself as to the firm’s independence. During 2019, the committee worked with management, our internal auditor and our independent auditor to address Sarbanes-Oxley Section 404 internal control requirements. The committee met six times in 2019.

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Proposal 2 — Ratification of the Appointment of BDO USA, LLP as Our
Independent Registered Public Accounting Firm for 2020

Company management is responsible for the assessment and determination of risks associated with the Company’s business, financial reporting, operations and contractual obligations. The committee, together with the Board of Directors, is responsible for oversight of the Company’s management of risks. As part of its responsibilities for oversight of the Company’s management of risks, the committee has reviewed and discussed the Company’s enterprise-wide risk assessment, and the Company’s policies with respect to risk assessment and risk management, including discussions of individual risk areas as well as an annual summary of the overall process.

The committee has discussed with both Hecla’s internal auditor and independent registered public accounting firm the overall scope of the plans for their respective audits. The committee regularly meets with a representative of the firm hired to serve as Hecla’s internal auditor and representatives of the independent registered public accounting firm, in regular and executive sessions, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of Hecla’s financial reporting and compliance programs.

Management is responsible for the Company’s financial reporting process, including establishing and maintaining adequate internal control over financial reporting and the preparation of the Company’s financial statements. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing an opinion on the conformity of the Company’s audited financial statements with U.S. generally accepted accounting principles. The Company’s independent registered public accounting firm also is responsible for performing an independent audit of the effectiveness of the Company’s internal controls over financial reporting and issuing a report thereon. The committee relies, without independent verification, on the information provided to it and on the representations made by management and the Company’s independent registered public accounting firm. Based on the review and discussion and the representations made by management and the Company’s independent registered public accounting firm, the committee recommended to the Board that the audited consolidated financial statements for the fiscal year ended December 31, 2019, be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and filed with the SEC.

The material contained in this Audit Committee Report does not constitute soliciting material, is not deemed filed with the SEC, and is not incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made on, before, or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing, except to the extent that the Company specifically incorporates this Audit Committee Report by reference therein.

Respectfully submitted by
The Audit Committee of the
Board of Directors

Stephen F. Ralbovsky, Chair
Catherine J. Boggs
George R. Johnson
Charles B. Stanley

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PROPOSAL 3
   

Approval, on an Advisory Basis, of Our Executive Compensation



   
 

Our Board seeks your vote to approve, on an advisory basis, the compensation paid to our NEOs for 2019 as set forth under the heading Compensation Discussion and Analysis on page 46 and in the accompanying compensation tables starting on page 75, and related material. The Board believes that the Company’s current executive compensation program is right for the Company and our shareholders. The Company’s executive compensation program is designed to attract, retain, and motivate talented individuals who possess the executive experience and the leadership skills needed by the Company in order to maintain and increase shareholder value. The Company seeks to provide executive compensation that is competitive with that provided by companies in our peer group within the mining industry. The Company also seeks to provide both short-term and long-term financial incentives to our executives that reward them for good performance and achieving financial results and strategic objectives that are expected to contribute to increased long-term shareholder value.

Underlying these incentives is a strong philosophy of “pay-for-performance” that forms the foundation of decisions regarding the compensation of our NEOs. This compensation philosophy, which has been consistent over many years, is designed to align the interests of our NEOs with the interests of our shareholders and is central to our ability to attract, retain and motivate executive leaders to guide the Company through market challenges over the long-term.

The primary methods we use to align the interests of our NEOs with our shareholders and to achieve “pay-for-performance” include:

Placing a vast majority (80.8%) of the CEO’s total compensation at-risk;
Striking the right balance between short- and long-term results; and
Selecting appropriate performance metrics, including market-based measures such as TSR, annual financial and operational goals such as production and EBITDA, and individual performance goals that drive our long-term business strategy.

In 2019, we continued our shareholder outreach program. We reached out to the holders of 44% of our common stock, and had engagement with shareholders holding 21% of our shares, as well as with the two major proxy advisory firms. Our Compensation Committee chairman participated in some of these meetings. Feedback from our shareholders is carefully considered by the Compensation Committee in making compensation decisions. See Shareholder Outreach in 2019 on page 19 for further discussion.

Some highlights of our executive compensation program and recent Compensation Committee actions include the following:

Our CEO’s compensation has been lower year-over-year since 2017, and our NEOs compensation, on average, has been lower year-over-year since 2017;
exercised discretion to reduce the payout of our CEO under the STIP (70%) below the Company performance rating (87% of target);
the performance-based shares awarded to our CEO and NEOs in 2017 vested on December 31, 2019 with a value of $0, due to the failure of the Company’s TSR to be above the 50th percentile of its peer group; and
changed the LTIP to more closely align payout with share performance by making TSR a positive or negative multiplier of performance depending on relative share performance, while capping payouts at target if absolute return is negative.

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PROPOSAL 3 — Approval, on an Advisory Basis, of Our Executive Compensation

In considering how to vote on this proposal, we urge you to review the relevant disclosures in this Proxy Statement, particularly the section titled Compensation Discussion and Analysis, which contains detailed information about our executive compensation program. We currently hold our “Say-on-Pay” advisory vote every year.

The Board and the Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement, the Compensation Committee will carefully review and consider the voting results when evaluating our executive compensation program.

We are asking shareholders to approve the following resolution at the 2020 Annual Meeting:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, described in the Compensation Discussion and Analysis, Summary Compensation Table for 2019, and the related compensation tables and narrative in the Proxy Statement for the Company’s 2020 Annual Shareholders’ Meeting, is hereby APPROVED.”

Required Vote

The advisory vote on executive compensation will require the affirmative vote of a majority of votes cast at the Annual Meeting, whether in person or by proxy. Under a majority of votes cast standard, the shares voted “for” Proposal 3 must exceed the number voted “against” Proposal 3 for the proposal to be approved. Abstentions and broker non-votes are not counted as votes cast for this purpose and will have no effect on the outcome of the vote. Votes marked “against” will have an effect on the outcome of the vote. Even though your vote is advisory and therefore will not be binding on the Company, the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation.

You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to approve the compensation of our NEOs.

 
        The Board recommends that you vote “FOR” approval of the compensation of our NEOs.    
 

2020 Proxy Statement       45


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COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Committee strives to design a fair and competitive compensation program for executive officers that will attract, motivate and retain highly qualified and experienced executives, reward performance and provide incentives based on our performance, with an overall emphasis on maximizing our long-term shareholder value. Our executive compensation program consists of several components, including base salary, short- and long-term performance awards (paid in cash or equity), equity awards, a deferred compensation plan and retirement benefits. This Compensation Discussion and Analysis (“CD&A”) provides information regarding our compensation objectives, the relationship between the components of our compensation program and our objectives and factors considered by the committee in establishing compensation levels for our NEOs. The NEOs who are discussed throughout this CD&A and in the compensation tables are:

Name       Age       Principal Position
Phillips S. Baker, Jr. 60 President and CEO
Lindsay A. Hall 64 Senior Vice President and Chief Financial Officer
Lauren M. Roberts 54 Senior Vice President and Chief Operating Officer
Robert D. Brown 51 Vice President – Corporate Development
David C. Sienko 51 Vice President and General Counsel
Lawrence P. Radford 59 Former Senior Vice President and Chief Technical Officer
Dr. Dean W.A. McDonald 63 Former Senior Vice President – Exploration

Executive Summary

Hecla is a leading primary low-cost silver producer with operating silver mines in Alaska (Greens Creek), Idaho (Lucky Friday), and Mexico (San Sebastian) and is a growing gold producer with operating mines in Quebec, Canada (Casa Berardi) and Nevada (Fire Creek). We also produce lead and zinc. In addition to our diversified silver and gold operating and cash-flow generating assets, we have a number of exploration properties and pre-development projects in eight world-class silver and gold mining districts in North America. With an active exploration and development program, we have consistently grown our reserve base for future production, with 2020 reserves totaling 212 million ounces of silver and 2.7 million ounces of gold reserves.

Our philosophy is to achieve excellent mine safety and health performance by promoting a deeply-rooted value-based culture, leveraging mining skills developed over the Company’s long history and by innovating new practices. We implement this goal by training employees in safe work practices; establishing, following and improving safety standards; investigating accidents, incidents and losses to avoid recurrence; involving employees in the establishment of safety standards; and participating in the National Mining Association’s CORESafety program. In 2016, we were proud to be the first hardrock mining company to be certified under the National Mining Association’s CORESafety system. In 2018, the Casa Berardi Mine was the first international mine to receive certification under the CORESafety system. Our Lucky Friday Mine was named a 2018 Sentinels of Safety award winner by the National Mining Association for its stellar safety record. Because of our implementation of these safety standards, in 2019, we achieved an overall 20% reduction in the AIFR across all our operating mines, and from 2014 to 2019, we achieved a total AIFR reduction of 70%.

We believe very strongly that the future of mining lies in productivity increases, and one of the best ways to increase productivity and safety is by automating certain mining tasks. This automation allows the miners to move away from the mining face, and, in some cases, operate the machinery from surface, or have machinery that operates by itself, allowing the mine to remain productive even during the shift change. We have begun introducing automated drilling, tele-remote mucking, automated hauling trucks and battery powered equipment at some of our operations. Although mostly on a trial basis, we can see the benefits this innovation brings and are excited for the potential transformation they will enable in the future. In addition, we invested in mill improvements and other innovations that we expect will yield significant returns over the long-term for relatively modest investments.

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Compensation Discussion and Analysis

Key Operating and Financial Results

The mining business requires long-term planning and implementation of operating strategies over several years to deliver successful operating and financial results. Accordingly, in the table below and summary that follows, we set forth our key operating and financial results for years 2019, 2018 and 2017.

As of and for the Year Ended December 31,
Key Results       2019       2018       2017
Silver (ounces) produced 12,605,234 10,369,503 12,484,844
Gold (ounces) produced 272,873 262,103 232,684
Lead (tons) produced 24,210 20,091 22,733
Zinc (tons) produced 58,857 56,023 55,107
Silver-equivalent ounces produced2 47,203,721 43,638,249 40,907,867
Gold-equivalent ounces produced2 549,287 540,174 554,876
Sales of products (in thousands) $ 673,266 $ 567,137 $ 577,775
Net income (loss) (in thousands) $ (99,557 ) $ (26,563 ) $ (28,520 )
Basic income (loss) per common share $ (0.20 ) $ (0.06 ) $ (0.07 )
EBITDA3 (in thousands) $ 129,264 $ 148,585 $ 156,922
Cash from operating activities (in millions) $ 120.9 $ 94.2 $ 115.9
Cash, cash equivalents and short-term investments (in millions) $ 62.5 $ 27.4 $ 219.9

Two of our most important achievements during our 2019 STIP period (January 2019 to February 2020) were:

resolving the labor strike at our Lucky Friday Mine; and

refinancing our 6.875% senior notes.

Our overall operating and financial results are more fully described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K filed with the SEC on February 10, 2020. During the STIP period described above, we achieved the following:

achieved a 20% reduction in our AIFR as well as achieving the lowest AIFR in Company history;
our Lucky Friday Mine was awarded the Sentinels of Safety Award;
increased overall proven and probable reserves at December 31, 2019, with reserves for silver, lead and zinc increasing by 11%, 5% and 8%, respectively, compared to their levels in 2018. The reserves for silver, lead and zinc represent the highest levels in our 129-year history;
achieved a net debt reduction of approximately $136 million, or more than 23% from the peak net debt mid-year;
2019 Adjusted EBITDA4 was $6.4 million higher than 2018, primarily due to lower spending in Nevada, higher sales, and lower exploration spending;
recorded sales of $673.3 million (the highest in the Company’s history);
had silver production of 12.6 million ounces, up 22% and record gold production of 272,873 ounces, up 4% over 2018.
cash and cash equivalents of $62 million at year-end, an increase of $35 million from year-end 2018, with no borrowings on the revolving line of credit facility;
cash flows from operations of $120.9 million; and
began the process of bringing the Lucky Friday Mine back into full production.
 
2 Silver and gold equivalent production includes silver, gold, lead and zinc production converted to silver and gold ounces using average prices for each year.
3 Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is a measurement that is not in accordance with GAAP. EBITDA is used by management, and we believe is useful to investors, for evaluating our operational performance. A reconciliation of this non-GAAP measure to net (loss), the most comparable GAAP measure, can be found in Appendix A under Reconciliation of Net (Loss) (GAAP) to Earnings Before Interest, Taxes, Depreciation, and Amortization (non-GAAP).
4

Adjusted EBITDA is a measurement that is not in accordance with GAAP. Adjusted EBITDA is used by management, and we believe is useful to investors, to evaluating our operational performance. A reconciliation of this non-GAAP measure to net loss, the most comparable GAAP measure, can be found in Appendix A under Reconciliation of Net Loss (GAAP) to Adjusted EBITDA Less Capital.

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Compensation Discussion and Analysis

Benchmarking and Competitive Analyses

To attract, motivate and retain key executives, our goal is to provide competitive compensation. We have adopted a pay-for-performance philosophy that incentivizes performance by targeting base salaries below the median of our peer group, but targeting incentives above the peer median. Our NEO base salaries are targeted between the 25th and 50th percentiles. When including the short- and long-term incentives, we target the NEOs’ total direct compensation at approximately the 75th percentile. The process of setting targeted compensation includes consideration of an NEO’s skills, experience, knowledge and reputation in the industry, as well as Company needs.

Central to the pay review process is the selection of a relevant peer group. Because we operate in a global business that is dominated by Canadian companies, our peer group reflects this with only two U.S. companies among our peer group. In addition, our co-headquarters is in Vancouver, British Columbia, where some of our NEOs work. The committee reviews and determines the composition of our peer group on an annual basis. In May 2019, the committee removed from the peer group Tahoe Resources due to their merger with Pan American, and Yamana Gold due to the size of the company compared to Hecla.

In 2019, our peer group was made up of the following 13 companies, whose aggregate profile was comparable to Hecla in terms of size, industry and competition for executive talent.

Company       Annual Revenue(1)
($millions US)
      Market Cap(1)
($millions US)
      Total Assets(1)
($millions US)
      Corporate
Location
IAMGOLD Corporation 1,111 1,717 2,827 Canada
Centerra Gold Inc. 1,129 1,254 2,827 Canada
Pan American Silver Corporation 784 2,239 1,937 Canada
Kirkland Lake Gold 916 5,470 1,710 Canada
Coeur Mining Inc. 626 909 1,713 United States
Detour Gold Corporation 776 1,481 2,468 Canada
B2Gold Corp. 1,225 2,896 2,548 Canada
Alamos Gold Inc. 652 1,408 3,265 Canada
SSR Mining 421 1,454 1,521 Canada
Royal Gold, Inc. 426 5,611 2,675 United States
Eldorado Gold 459 464 4,629 Canada
New Gold Inc. 605 445 2,170 Canada
First Majestic Silver Corp. 301 1,139 926 Canada
Median 714 1,468 2,508
Hecla Mining Company 567 1,133 2,704 United States
(1) In $US millions for and as of year-end 2018.

The peer group is composed entirely of publicly held companies, most of which are engaged in the business of mining precious metals, with revenue, market capitalization and total assets within a reasonable range of Hecla’s. We believe these peer companies are appropriate because they are in the same industry, compete with us for executive talent, have executives in positions similar to ours, and are considered by the committee to be in an acceptable range of revenue, market capitalization and/or total assets compared to Hecla.

During our shareholder outreach, many of our largest shareholders have informed us that, compared to peer groups selected by proxy advisory firms, they consider the peer group chosen by us to be the most relevant and appropriate for compensation and performance benchmarking purposes. The peer group selected last year by Glass-Lewis included 13 of our 15 selected peers. The peer group selected by Institutional Shareholder Services (“ISS”) included only two of our 15 selected peers. The rest of the peer group selected by ISS contained U.S.-based companies in the industrial and specialty chemicals, plastics, coatings, nickel and cobalt-based alloys, steel products and other industries – companies and industries whose market fundamentals are materially different from that of the precious metals mining industry. We understand that ISS’s internal policies prohibit its selection of Canadian companies (which account for 12 of our peers) and require that Hecla be compared to companies having only similar revenue instead of similar market capitalization or total assets. We believe that a fair compensation peer group, in terms of both industry profile and size, should not be selected for Hecla without including Canadian companies.

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Compensation Discussion and Analysis

In making compensation decisions, the committee also reviews survey data provided by Mercer LLC (“Mercer”) from the following mining and general industry survey sources:

Mercer U.S. Mining Industry Compensation Survey
Mercer Canadian Mining Industry Compensation Survey
Mercer U.S. Premium Executive Remuneration Suite (general industry)

The committee reviewed an analysis of executive compensation levels at the 25th, 50th and 75th percentiles of the peer group and the survey data for positions comparable to those held by each of our NEOs. The committee also compared the target total cash compensation (base salary plus target annual incentive) and target total direct compensation (base salary plus target short-term incentive plus the value of long-term target incentives) for each of the NEOs against these benchmarks. For retention and competitive considerations, in comparison to the peer group data or survey data applicable to each NEO’s position, we generally target each NEO’s total cash compensation at approximately the median level and the total target direct compensation at or above the median level and deliver compensation above or below these levels when warranted by performance.

In 2019, target total direct compensation (base salary, short- and long-term incentives) for our NEOs was between the median and the 75th percentile of both the peer group and survey data.

In 2019, the committee also approved a separate peer group to be used specifically with regard to TSR, which consisted of the following companies:

IAMGOLD Corporation Alamos Gold Detour Gold
Pan American Silver Corporation Kirkland Lake Gold Ltd. SSR Mining
B2Gold Corp. Centerra Gold New Gold Inc.
Coeur Mining Eldorado Gold First Majestic

The Compensation Committee Process and the Role of Management and Compensation Consultants

Role of the Committee. The committee, consisting entirely of independent members (Rogers, Crumley, Nethercutt and Boggs), has primary responsibility for executive compensation decisions. The committee carries out its responsibilities under a charter approved by the Board. The committee has the authority to approve all executive compensation, including our CEO’s (but not that of our independent directors, which remains decided by the full Board). In 2019, the committee received assistance from its independent executive compensation consultant, Mercer, and used the information in making decisions and conducting its annual review of the Company’s executive compensation program. In 2019, the committee assessed the Company’s compensation arrangements to determine if their provisions and operation created undesired or unintentional risks of a material nature. The committee found that our compensation policies and practices do not create inappropriate or unintended material risk to the Company as a whole.

Role of Independent Compensation Consultant. Mercer performs executive compensation services solely on behalf of the committee, is engaged by and reports directly to the committee, meets separately with the committee with no members of management present, and consults with the committee chair between meetings.

The committee has assessed Mercer’s independence in light of SEC rules and NYSE listing standards and has determined that Mercer’s work does not raise any conflicts of interest or independence concerns. The Mercer consultants who worked with the committee were Tracy Bean, project manager, who was assisted by Raphael Katsman, a principal of Mercer.

Pursuant to a written agreement dated January 30, 2019, between Mercer and the committee, below are the material aspects of the services the committee asked Mercer to perform with respect to executive compensation and related matters in 2019:

evaluate the competitiveness of the total direct compensation package provided to Hecla’s executive officers; and specifically, to compare Hecla’s current executive officer compensation with compensation provided to executives in similar roles in comparable organizations;

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review updated information regarding Hecla’s executive compensation program and the positions to be benchmarked, including organization charts, position descriptions, current total compensation and other relevant data;
review last year’s peer group to determine if the included companies continue to be appropriate and if any additional companies should be considered for inclusion;
collect and analyze compensation data from the most recent proxy filings of the peer group and from survey sources and summarize the market pay data by the 25th, 50th and 75th percentile levels and compare Hecla’s executive compensation levels to the proxy and survey data separately;
analyze the year-over-year change in compensation levels for Hecla compared to each market data source;
analyze Hecla’s long-term incentive and equity practices compared to peers;
prepare a report to the committee summarizing their methodology, findings and overall recommendations;
assist the committee in meeting its obligation to issue a Compensation Committee Report recommending inclusion of the CD&A in the Proxy Statement; and
provide ongoing advice and consultation throughout the year to assist the committee, including attendance at committee meetings, if needed.

In addition to providing technical support and input on market practices, the committee’s goal in using a compensation and benefits consultant is to provide external benchmark information for assessing compensation relative to our compensation philosophy. As described under Benchmarking and Competitive Analyses on page 48, Mercer assisted the committee in identifying the appropriate companies to be included in our peer group for executive and director compensation and pay practices, and in benchmarking our executive pay against the peer group.

In June 2019, Mercer performed a competitive analysis and presented its findings and recommendations to the committee. The competitive analysis provided detailed comparative data for each executive officer position and assessed each component of pay, including base salary, short- and long-term incentives and total target compensation, as well as the mix of compensation among these pay elements. We compared this information to our executives’ compensation by similarity of position. The committee also reviewed our performance and carefully evaluated each executive’s performance during the year against established goals, leadership qualities, operational performance, business responsibilities, career with Hecla, current compensation arrangements and long-term potential.

The committee has established procedures that it considers adequate to ensure that Mercer’s advice to the committee remains objective and is not influenced by Company management. These procedures include: a direct reporting relationship between the Mercer consultant and the committee; a provision in the committee’s engagement letter with Mercer specifying the information and recommendations that can and cannot be shared with management; an annual update to the committee on Mercer’s financial relationship with Hecla, including a summary of the work performed for Hecla during the preceding 12 months; and written assurances from Mercer that within the Mercer organization, the Mercer consultants who perform services for Hecla have a reporting relationship determined separately from Mercer’s other lines of business and from its other work for Hecla. The total amount of fees for executive compensation consulting services Mercer provided to the committee in 2019 was $60,355.

Role of Management. The committee considers input from the CEO in making determinations regarding our executive compensation program and the individual compensation of each NEO (other than the CEO). As part of our annual review process, the CEO reviews the performance of each NEO (other than the CEO), and their contribution to the overall performance of the Company. Approximately mid-year, the CEO presents recommendations to the committee regarding base salary adjustments, target short-term incentive awards, stock-based grants, and long-term performance unit grants, based on a thorough analysis of relevant market compensation data comparing Hecla with an applicable peer group within the mining industry. The CEO and senior management also make recommendations to the committee regarding our short-term quantitative and qualitative goals, and long-term goals for the NEOs (other than the CEO), as well as recommendations regarding the participation in our stock-based compensation plans and amendments to the plans, as necessary.

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Compensation Philosophy and Objectives

Management, the Board and the committee recognize that the mining industry is cyclical, influenced by market factors, and can include wide swings in the prices for precious metals, which are beyond our management’s control, which can significantly influence our profitability and share price. Further, we operate in a competitive and challenging industry, and the supply of mining executives is very limited, particularly in the United States. As a result, having a viable compensation strategy is critical to our success.

We expect top-level performance from our executive management team even during downturns in our industry and during periods of Company expansion. Accordingly, the criteria that the committee has established for our performance-based awards have sometimes been very challenging to achieve. Nevertheless, even in years for which we have incurred a net loss, we have often performed better than most of our industry peers in key respects (e.g., reserves and resources). The committee considers this and other factors in evaluating discretionary awards.

Our compensation philosophy is to pay our NEOs competitive levels of compensation that best reflect their individual responsibilities and contributions to the Company, while providing incentives to achieve our business and financial objectives. While comparisons to compensation levels at companies in our peer group are helpful in assessing the overall competitiveness of our compensation program, we believe that our executive compensation program also must be internally consistent and equitable in order for the Company to achieve our corporate objectives.

The pay-for-performance philosophy of our executive compensation programs described in this Proxy Statement plays a significant role in our ability to produce strong operating, exploration, strategic, and financial results. It enables us to attract and retain a highly experienced and successful team to manage our business. Our compensation programs strongly support our business objectives and are aligned with the value provided to our shareholders. Further, as an executive’s level of responsibility within our organization increases, so does the percentage of total compensation that we link to performance – through the short- and long-term incentive programs, as well as share performance.

In setting policies and practices regarding compensation, the guiding philosophy of the committee is to:

have compensation that is primarily at-risk and based on strategic objectives and tactical activities; and
acquire, retain and motivate talented executives.

The committee believes that a mix of both cash and equity incentives is appropriate, as cash incentives reward executives for achieving both short- and long-term quantitative and qualitative goals, while equity incentives align the interests of our executives with those of our shareholders. In determining the amount of the cash and equity incentives, the committee considers each officer’s total compensation on both a short- and long-term basis to assess the retention and incentive value of his or her overall compensation.

We also maintain (or avoid) the following pay practices that we believe enhance our pay-for-performance philosophy and further align our NEOs’ interests with those of shareholders:

We DO Have
these Practices
    We DO NOT Have
these Practices
Incentive award metrics that are generally objective and tied to Company performance
80.8% of CEO and 74.8% of NEO pay is at-risk
Over 68.7% of total compensation for the CEO is performance-based
60% of total compensation for NEOs other than the CEO is performance-based
100% of the CEO’s short-term incentive compensation is tied solely to Company performance
Rigorous stock ownership requirements for our NEOs and directors
Compensation recoupment “clawback” policy
Double-trigger change in control severance for NEOs
Double-trigger in 2010 Stock Incentive Plan
Time-based equity awards that vest over a three-year period to promote retention
Equity awards that are performance-based depend on relative share performance (as well as time based)
Anti-hedging and anti-pledging policies
Our NEOs, including our CEO, generally must remain employed with the Company through the payment date of their short- and long-term awards, or the awards are forfeited
×Repricing of stock options
×Perquisites
×Excise tax gross-ups

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Compensation Discussion and Analysis

Elements of Total Compensation

We have a multifaceted compensation program. For the year ended December 31, 2019, our executive compensation program consisted of the following elements:

BASE SALARY

Objective: Provide a fixed level of cash compensation for performing day-to-day responsibilities.

Key Feature: Designed to be at less than median so more pay is at-risk.

Terms: Paid semi-monthly.


INCENTIVE PAY

Short-term Incentive Plan

Objective: Focus executives on achieving the Company’s short-term goals, and the performance steps necessary to achieve longer-term objectives.

Key Features: The Company’s short-term incentive pool is targeted at a fixed percentage of all salaried employees’ targeted short-term incentive, but the actual bonus pool is based on achievement of Company goals. Some goals are quantitative, such as EBITDA, production, and AIFR, while others are qualitative and discretionary. Weighting of the corporate performance is 50% quantitative corporate performance goals, 25% qualitative/other goals, and a 25% discretionary factor as determined by the committee. Thus, executive incentive pay is based on a combination of corporate and individual performance.

Terms: Determined by the committee and paid in a single payment following the performance period. Awarded in the first half of each year. Designed to be awarded in cash but may be paid in equity (in full or part). Any NEO receiving an STIP award must be employed with the Company at the time of payment, except for a termination due to death or disability, or their award is forfeited.

Long-term Incentive Plan

Objective: Focus executives on longer-term value creation as determined by the specific targets of the plan.

Key Features: Based on corporate goals achieved over a three-year performance period. A new three-year performance period begins each calendar year and performance units are granted in the first half of each year. Each three-year plan identifies key long-term objectives that are expected to create long-term value for shareholders such as increasing reserves and production, generated cash flow and shareholder returns.

Terms: Determined by the committee and paid in a single payment following the three-year performance period. Awarded in the first half of each year. Designed to be awarded in cash but may be paid in equity (in full or part). Any NEO receiving a LTIP award must be employed with the Company at the time of payment, or their award is forfeited, except in the case of retirement, death or disability. At the time of an employee’s retirement, in order to receive any LTIP award that otherwise becomes payable, the employee must at least be age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have seven or more years of service with the Company; or (iii) 68. If the participant meets these age and years of service requirements, their prorated portion for outstanding plan periods will be paid after the completion of those plan periods.

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EQUITY

Restricted Stock Units

Objectives: Align management’s interests with those of shareholders and provide incentive for NEOs to remain with the Company for the long term.

Key Features: Restricted stock unit awards are denominated in shares and delivered in stock with a vesting schedule of three years for NEOs.

Terms: Restricted stock units are granted between May and August of each year. If a NEO leaves the Company for any reason, other than retirement, death or disability, before the vesting date, he or she will forfeit his or her restricted stock units. Also, if a NEO retires before their restricted stock units have vested, he or she must meet certain requirements in order for his or her restricted stock units to continue to vest based on the applicable vesting schedule. At the time of an employee’s retirement, in order to receive any unvested restricted stock units, the employee must at least be age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have seven or more years of service with the Company; or (iii) 68.

Performance-based Shares

Objectives: Provide incentive for NEOs to remain with the Company for the long term and to align the NEO’s interests with those of shareholders.

Key Features: Performance-based shares realize more value the higher the TSR ranks within the selected peer group and have no value if the share performance falls below the 50th percentile among the peer group.

Terms: Performance-based shares are granted to the NEOs in the second quarter of each year and are based on a three-year TSR. If a NEO leaves the Company for any reason, other than retirement, death or disability, before the vesting date, he or she will forfeit his or her performance-based shares. Also, if a NEO retires before their performance-based shares have vested, he or she must meet certain requirements in order for his or her performance-based shares to continue to vest based on the applicable vesting schedule. At the time of an employee’s retirement, in order to receive any unvested performance-based shares, the employee must at least be age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have seven or more years of service with the Company; or (iii) 68.


KEY EMPLOYEE DEFERRED COMPENSATION PLAN

Objective: Increased exposure to the Company to the extent deferred compensation is tied to the value of Hecla stock, while also providing a tax deferral opportunity and encouraging financial planning.

Key Features: Allows for the voluntary deferral of base salary, short-term incentive pay, long-term incentive pay and restricted stock unit payouts.

Terms: Generally, employee must make election in the previous year to defer in the coming year.


BENEFITS

Objectives: Attract and retain highly qualified executives.

Key Features: Participation in retirement plans, partial company-paid health, dental and vision insurance, life insurance, and accidental death and dismemberment insurance.

Terms: Same terms for all U.S. based executives. Non-U.S. executives receive similar benefits.

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Total Compensation Mix

Our executive compensation program – composed primarily of base salary, short- and long-term incentives, and equity awards – is intended to align the interests of our NEOs with the long-term interests of our shareholders. The program is designed to accomplish this by rewarding performance that results in an increase in the value of our shareholders’ investment in Hecla. We believe the proportion of at-risk, performance-based compensation should comprise a significant portion of executive pay.

The mix of compensation for our CEO and other NEOs, which we believe is similar to our peer group, is shown below.

CEO Mix of Target Pay

 

Other NEO Mix of Target Pay

2019 Target Compensation Structure. The following table lists total 2019 target compensation for the NEOs.

NEO       Base Salary(1)
($)
      Short-term
Incentive
Target Award
($)
      Long-term
Incentive Plan
Target Award
($)
      Equity(3)
($)
      Total
($)
Baker 635,000 635,000 1,140,000 900,000 3,310,000
Hall 380,000 380,000 400,000 375,000 1,535,000
Roberts 380,000 380,000 400,000 375,000 1,535,000
Brown 264,000 184,800 300,000 265,000 1,013,800
Sienko 250,000 175,000 300,000 250,000 975,000
Radford(2) 416,000 416,000 400,000 375,000 1,607,000
McDonald(2) 275,000 275,000 360,000 325,000 1,235,000
(1) Base salaries for calendar year 2019.
(2) Mr. Radford retired on December 11, 2019, and Dr. McDonald retired on September 30, 2019. Neither met the required age and years of service to receive their STIP, LTIP or equity, thus all such incentives were forfeited. See Summary Compensation Table for 2019 on page 75, and Grants of Plan-Based Awards for 2019 (footnote on page 77).
(3) Consists of the target values for restricted stock units and performance-based shares as follows:

NEO       Restricted
Stock Units
($)
      Performance-
based Shares
($)
      Total Equity
Award
Value
($)
Baker 400,000 500,000 900,000
Hall 225,000 150,000 375,000
Roberts 225,000 150,000 375,000
Brown 150,000 115,000 265,000
Sienko 150,000 100,000 250,000
Radford 225,000 150,000 375,000
McDonald 200,000 125,000 325,000

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Compensation Discussion and Analysis

Individual base salaries and short-term incentive targets for the NEOs are based on the scope of each NEO’s responsibilities, individual performance and market data. At the beginning of each year, we also define the key strategic objectives each NEO is expected to achieve during that year, which are evaluated and approved by the committee.

Overview of our Compensation Decisions and Results for 2019

Summary

Compensation of the NEOs is primarily comprised of base salaries, short-term incentive, long-term incentive, restricted stock units and performance-based shares. In 2019:

Base salaries of our NEOs were unchanged in 2019;
The assessment of short-term corporate performance was 87% of target with quantitative factors contributing 34% (target of 50%), qualitative factors contributing 30% (target of 25%) and discretionary factors contributing 23% (target of 25%). The Board exercised negative discretion, and determined each NEO’s performance under the STIP to be between 50% and 80% of target, except for Mr. Roberts, who was determined to have achieved 100% of target;
The 2017-2019 LTIP payout is $99.25 per unit resulting from the performance of the long-term value drivers: reserve growth (297% of target) and production growth (100% of target); the other two metrics, cash flow and TSR, resulted in no payout; and
Because share performance against the peer group did not meet the threshold for the three-year period 2017-2019, the shares of stock underlying performance-based shares were not issued to our NEOs, (i.e. there was zero payout).

Hecla’s compensation program is designed to compensate NEOs for providing shareholders long-term value. The 2019 compensation results were less than 2018 targeted compensation for the NEOs, and the CEO’s 2019 compensation was less than his 2018 and 2017 compensation.

Base Salary

Design. Pursuant to our market positioning policy, the committee targets base salaries between the 25th percentile and median of Hecla’s peer group for our NEOs. An individual NEO’s base salary may be set above or below this market range for that particular position, depending on the committee’s subjective assessment of the individual NEO’s experience, recent performance and expected future contribution, retention concerns, and the recommendation of our CEO (other than for himself). The committee does not use any type of quantitative formula to determine the base salary level of any of the NEOs. The committee reviews NEO salaries at least annually as part of its overall competitive market assessment, as previously described. Typically, the committee makes annual salary adjustments in the middle of each year for the 12-month period from July 1 to June 30.

Analysis and Decision. In June 2019, the committee reviewed a market analysis prepared by Mercer. The CEO and other NEO base salaries were not adjusted in 2019.

The following table shows annual base salaries for all NEOs from January 1, 2019 through December 31, 2019:

Base Salary for NEOs January 1, 2019 through December 31, 2019

NEO       Salary
($)
Baker 635,000
Hall 380,000
Roberts 380,000
Brown 264,000
Sienko 250,000
Radford 416,000
McDonald 275,000

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Incentive Plans

Short-term Incentive Plan (“STIP”)

Consistent with Hecla’s pay-for-performance philosophy, substantially all salaried employees, including our NEOs, are eligible to participate in the STIP. Early in the current year, the committee approves a company-wide, short-term incentive pool that is available for payment to salaried employees, including the NEOs, the amount of which is based in part on Company performance during the prior year.

Target Opportunities. Each NEO has a target STIP award expressed as a percentage of base salary. The target award is determined based on the following: market assessments and the committee’s market positioning policy; the individual NEO’s organization level, scope of responsibility and ability to impact Hecla’s overall performance; and internal equity among the NEOs. Actual awards are paid after the end of each short-term performance period (usually end of March or beginning of April) and can range from 0% to 200% of the target awards, based on the committee’s assessment of our actual performance and the achievement of an individual NEO’s goals. Having a limit on our STIP awards reduces the likelihood of windfalls to executives and encourages financial discipline. It is also competitive with typical peer group practice.

For 2019, target STIP award opportunities for the NEOs were as follows:

NEO       Target Short-term
Incentive
(% of base salary)
Phillips S. Baker, Jr. 100 %
Lindsay A. Hall 100 %
Lauren M. Roberts 100 %
Robert D. Brown 70 %
David C. Sienko 70 %
Lawrence P. Radford 100 %
Dr. Dean W.A. McDonald 100 %

Performance Measures and Components. Our management develops proposed targets for each Company performance measure based on a variety of factors, including historical corporate performance, internal budgets, forecasts and growth targets, market expectations and strategic objectives. The committee reviews the targets and adjusts them, as it deems appropriate. The committee believes that linking short-term incentive awards to pre-established goals creates a performance-based compensation strategy consistent with shareholder interests. The committee also believes that incentive compensation targets should be established to drive real and sustainable improvements in operating performance and the strategic position of the Company.

The STIP includes the following components and relative weights:

quantitative corporate performance factors (measured from January to December) comprising 50% of the targeted award;
qualitative goals (measured from January 2019 to February 2020) comprising 25% of the targeted award; and
a discretionary factor (measured from January 2019 to February 2020) as determined by the committee comprising 25% of the targeted award.

Each component can achieve two times the target (200%) with respect to the component, with the maximum total payout limited to two times the total target award level (200%).

Quantitative Corporate Performance Factors. For 2019, the quantitative corporate performance factors under the STIP were divided into three factors (including weighting): production (20%), Adjusted EBITDA less capital (20%), and all injury frequency rate (10%).

The production factor converts gold, lead and zinc to silver equivalent at ratios of 78 oz. silver to 1 oz. gold, 16.0 lb. lead, and 12.8 lb. of zinc. Our production target is 48.0 million silver equivalent ounces. Maximum payout is attained if production achieves 50.5 million ounces. The minimum payout is achieved if production is greater than 47.0 million ounces. Equivalent production was 47.2 million ounces. The quantitative production resulted in a 4% value.

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2019 Production Metrics

2019 Production in Silver Equivalent Ounces (includes all metals)
            % Performance Value
50.5 mm Maximum 40 %
48.0 mm Target 20 %
<47.0 mm 0 %

The Adjusted EBITDA less capital5 target was $60 million. Maximum payout is achieved if Adjusted EBITDA less capital was $75 million. There is no payout if Adjusted EBITDA less capital was less than $40 million. Adjusted EBITDA less capital was $49.6 million, which was between target and threshold. The Adjusted EBITDA less capital metric resulted in a 10% value.

2019 Adjusted EBITDA Less Capital Metrics

            % Performance Value
$75 mm Maximum 40 %
$60 mm Target 20 %
<$40 mm 0 %

The AIFR target was a 5% reduction from the 2018 AIFR. Maximum payout is achieved if our AIFR reduction was met at 10%. The threshold payout level is a 5% reduction, below which no payout is earned. The reduction in the AIFR was 20%, which is 390% of target. The 2019 AIFR was 1.61, which is a reduction of 20% from the 2018 rate, and resulted in a 20% value for that metric.

AIFR Metric

            Factor Value
10% Maximum 20 %
5% Target 10 %
<5% 0 %

2019 STIP Quantitative Measure Results

      Maximum       Target       Minimum       Actual       Performance
Value
Production
Silver equivalent ounces 50.5 mm ozs. 48.0 mm ozs. 47.0 mm ozs. 47.2 mm ozs. 4 %
Adjusted EBITDA less capital $75 mm $60 mm $40 mm $49.6 mm 10 %
Work-related injury reduction 10 % 5 % 0 % 20 % 20 %
Total Quantitative 34 %

Qualitative Corporate Performance Factors. In addition to quantitative corporate performance factors, our STIP has a component that is based on qualitative goals relating not only to Hecla as a whole, but also to each NEO. This component is targeted to account for 25% of the total STIP award but can account for 0% to 50% of the target award.

For our 2019 STIP, qualitative objectives for NEOs included those related to (i) safety and health, (ii) environmental, (iii) technology and innovation, (iv) continuous improvement, (v) operations, (vi) finance/accounting/IT, (vii) employee development, (viii) acquisitions, (ix) mine life extension, exploration and reserve growth, (x) investor relations, (xi) government and community affairs, and (xii) legal. While many of the goals are subjective in nature, to the extent possible, objective and quantifiable targets are set in order to improve accountability for results.

5 The non-GAAP measurement of Adjusted EBITDA less capital is calculated as the GAAP measure of net loss plus/less the following items: interest expense, income tax benefit, depreciation, depletion and amortization expense, interest and other income/expense, acquisition costs, loss on investments, unrealized loss (gain) on derivatives contracts, provision for environmental matters, provisional price losses (gains), foreign exchange loss (gain), stock-based compensation, suspension costs, loss (gain) on disposition of properties, plants, equipment and mineral interests, and capital expenditures at our operating mines. A reconciliation of EBITDA less capital to the most comparable GAAP measure of net loss for the year ended December 31, 2019, is included in Appendix A of this Proxy Statement.

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For 2019, the committee assessed qualitative performance at 30%. The committee based its assessment on the following factors:

obtained a final Plan of Operations approval for Rock Creek;
advanced exploration economics at projects in Quebec;
signed a 3-year collective bargaining agreement with the union representing miners at our Lucky Friday Mine;
negotiated milling agreements to process oxides at San Sebastian;
completed design and economic evaluation of the Hugh Zone deposit;
developed and implemented a water management plan at Fire Creek;
developed initial drilling and mining plans for Hatter Graben;
improved availability of underground mobile equipment at Greens Creek;
completed manufacturing of the Remote Vein Miner;
captured and quantified the benefits of continuous improvement initiatives in new technologies;
improved the throughput of Casa Berardi milling with limited capital investment;
expanded Casa Berardi underground resource and extended the underground mine life;
refinanced $475 million of senior notes with an 8-year term;
restructured our credit agreement to provide more flexibility;
reduced outside tax consulting fees by 50%;
implemented successful succession plans for key positions such as our Chief Operating Officer and our General Manager at Greens Creek;
consolidated employee benefit plans;
revised the LTIP to strengthen the connection between shareholder value and payout;
completed 43-101 technical reports at Greens Creek and Casa Berardi;
implemented new innovative exploration technologies;
advanced our ESG profile; and
resolved multiple legal cases in a favorable manner.

Discretionary Factor. The final component of our STIP is at the discretion of the committee and it is targeted to account for 25% of the total STIP award but can account for 0% to 50% of the target award. For 2019, the committee determined the discretionary factor performance value to be at 23%. The committee based its assessment primarily on the following significant performance results by Hecla in 2019:

operated the Lucky Friday Mine with salaried staff and replacement workers;
advanced the EL Toro project and conducted a bulk sample of the Hugh Zone;
achieved highest silver, lead and zinc reserves in the Company’s history;
increased Greens Creek silver reserves by 22% and extended the mine life;
brought high grade intersections into the Casa Berardi Mine plan beginning in 2021;
achieved lowest AIFR in Company’s history;
increased utilization of video systems to reduce travel costs;
negotiated new line of credit;
generated sufficient cash flow in second half of 2019 to repay draws on the revolving line of credit;
consolidated corporate headquarters to one floor and reduced costs;
reduced collateral requirements for bonding;
sold interest in junior mining company for $2 million;
successful base metal hedges; and
successfully negotiated carbon sales to third parties.

NEO Year-end 2019 Performance. The STIP qualitative, quantitative and discretionary factors resulted in a corporate performance that the committee concluded to be 87% of target. NEOs performance is based on a combination of corporate performance, individual goals and the impact they have on shareholder value. The committee believes that our NEOs’ performance goals should support and help achieve the Company’s strategic objectives and be tied to their areas of responsibility. Individual performance goals for each NEO, except the CEO, were proposed by the CEO and reviewed and approved by the committee. The CEO’s goals are based 100% on corporate performance.

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Compensation Discussion and Analysis

After the end of the year, our CEO reviews each NEOs progress against their individual performance goals and makes a recommendation to the committee. When making its award determinations, the committee did not assign a specific weighting to any of the individual’s goals, but instead reviewed each NEO’s progress against their individual goals in the aggregate. The following is a summary description of the performance goal results for each of the NEOs for 2019, except our CEO, who is discussed separately below.

Mr. Hall Year-end 2019 Performance Results
pursued and successfully implemented a new budget model to enhance future growth;
refinanced $506.5 million of senior notes with issuance of $475 million of new senior notes with an 8-year term;
managed cash flows including overseeing active hedging programs;
renegotiated the Company’s revolving line of credit;
determined purchase price accounting related to the Klondex acquisition; and
facilitated the $30 million debt for equity swap with Ressources Quebec.
 
Mr. Roberts Year-end 2019 Performance Results
delivered strong safety performance across the Company;
instrumental in advancing technological improvements at mining operations;
oversaw improved equipment availability at our Greens Creek Mine; and
led the process of operating the Lucky Friday Mine with salaried employees and replacement workers.
 
Mr. Brown Year-end 2019 Performance Results
negotiated third-party toll milling agreements;
negotiated the acquisition of the Dieppe property (a group of claims adjacent to our Casa Berardi mine);
was instrumental in equity divestitures in our investment portfolio;
facilitated the sale of interests in a junior exploration company for $2 million; and
worked with the exploration group to develop geological criteria and project ranking in key strategic areas in Nevada and Abitibi.
 
Mr. Sienko Year-end 2019 Performance Results
led Company’s efforts in successfully resolving multiple litigation and regulatory matters, including a successful appeal to the Montana Supreme Court related to the Montanore Project;
successfully renewed the Company’s at-the-market equity offering program which was instrumental in supporting the Company’s liquidity in 2019 and into 2020;
supported the Board and managed or supported the Company’s corporate governance, regulatory, compliance, and disclosure programs;
supported multiple business units across a wide array of commercial agreements, including amendments to the Company’s revolving credit agreement; and
managed the $30 million debt for equity swap with Ressources Quebec, helping to decrease the Company’s debt.

The committee evaluated each NEO’s performance in managing their functions, the progress they made towards their individual goals and the Company’s goals as discussed above, and the overall success of the Company in 2019. While the NEOs completed various goals, the overall performance of the Company was less than expected during 2019. As a result, the committee exercised negative discretion and determined that each of the NEO’s performance under the STIP to be between 50% and 80% of target, except for Mr. Roberts, who was determined to have achieved 100% of target.

Mr. Baker’s short-term incentive is based 100% on corporate performance. Although the Company produced record ounces of silver, lead and zinc, ended the Lucky Friday Mine labor strike, refinanced the senior notes, and achieved a 20% reduction in AIFR during the STIP period, the committee awarded Mr. Baker 70% of his targeted short-term incentive award, a 20% reduction from the corporate rating of 87%, because the overall performance of the Company was less than expected during 2019 as a whole.

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2019 STIP Award Summary. For 2019, based on the assessment by the committee of the Company’s overall performance on both quantitative and qualitative measures, as well as relevant discretionary factors under the STIP, the committee determined Company performance to be at 87% of target (out of a possible range of 0%-200%). This was comprised of 34% related to the quantitative factors (4% for Production, 10% for Adjusted EBITDA less capital, and 20% for work-related injury reduction); 30% for qualitative factors; and 23% for discretionary.

Set forth in the table below is each NEO’s target award and actual award, which was paid 100% in cash.

Name Base Salary
($)
Base Salary
Factor
(%)
Target
Short-term
Incentive
($)
% to
Target(1)
(%)
Actual
Award(2)
($)
Phillips S. Baker, Jr. 635,000 100 635,000 70 444,500
Lindsay A. Hall 380,000 100 380,000 60 228,000
Lauren M. Roberts(3) 380,000 100 380,000 100 159,600
Robert D. Brown 264,000 70 184,800 50 92,400
David C. Sienko 250,000 70 175,000 80 140,000
Lawrence P. Radford(4) 416,000 100 416,000 0 0
Dr. Dean W.A. McDonald(4) 275,000 100 275,000 0 0
(1) The percentages listed for each of the NEOs generally include corporate achievement of goals and individual performance.
(2) The amount reported in this column was paid in cash to the NEO and is included in the Summary Compensation Table for 2019 on page 75 under Non-Equity Incentive Plan Compensation.
(3) Mr. Robert’s 2019 STIP was prorated from the date of his employment with the Company of August 5, 2019.
(4) Messrs. Radford and McDonald forfeited their STIP awards due to their retirement from the Company on December 11, 2019 and September 30, 2019, respectively.

Long-term Incentive Plan (“LTIP”)

We use the LTIP to focus employees on meeting long-term (three-year) corporate performance goals. The LTIP is also designed to attract and retain employees in a highly competitive talent market. The committee considers mining and general industry market practices, as well as the long-term objectives of the Company, when determining the terms and conditions of long-term incentive goals, such as resource additions, production and cash flow generation.

Under the LTIP, a new performance period begins each calendar year and runs for three years. The three-year performance period recognizes that some value-creating activities require a significant period of time to be implemented and for measurable results to accrue. Starting a new performance period each year also gives the committee flexibility to adjust for new business conditions, circumstances or priorities in setting the performance metrics and goals for each three-year cycle. Performance units are assigned to each NEO at the beginning of each three-year period and provide the basis for the amount of awards made to each NEO under the LTIP. Performance units are designed to encourage management to deliver long-term value. Performance units reinforce Hecla’s business strategy by clearly establishing our key performance elements (e.g., reserve growth, production growth, cash flow, and relative TSR) and the associated long-term performance objectives that must be met for us to be successful and create value for shareholders.

2017-2019 LTIP. In February 2017, the committee approved the 2017-2019 LTIP, which has a target unit value of $100 and a maximum potential value of $375. Performance units are paid out in the first half of the year following the end of each performance period, upon approval by the committee. At the discretion of the committee, the payouts may be in the form of cash, common stock, or a combination of both.

The tables below summarize the performance unit valuation ranges for silver equivalent reserve growth, production growth, cash contribution, and TSR for the 2017-2019 plan period. These are important goals for the following reasons:

Silver equivalent reserve growth. Silver equivalent reserve growth remains a fundamental value creator. We need to replace and add reserves to extend mine lives and grow production. This is critical to the achievement of our long-term success. In the context of this plan, reserves include the silver equivalent of gold but not base metals. Silver equivalent reserve and resource growth includes gold converted to silver equivalent at a ratio of 71 silver ounces to 1 gold ounce.
Silver production growth. One of the most important components of value is demonstrable production growth.

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Cash flow. The cash flow goal is a key element in creating shareholder value. When used in the context of our LTIP, “cash flow” is measured by comparing (i) the actual cash cost, after by-product credits multiplied by actual silver/gold production versus (ii) budgeted cash cost, after by-product credits multiplied by the budgeted silver/gold production over a three-year period. “Cash cost, after by-product credits,” a non-GAAP measure, includes all direct and indirect operating cash costs related directly to the physical activities of producing the primary metal, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, royalties and mining production taxes, and offsets that amount by the production value of all metals other than the primary metal produced at each unit.
TSR. TSR provides a performance metric relative to our peers. This objective differs from the other objectives which are focused on activities that in an absolute sense should be value drivers: reserves and resources, production, and cash contribution. TSR measures the price appreciation of our stock, including dividends paid during the performance period, and thereby simulates the actual investment performance of Hecla stock. Any payout is based on how Hecla’s TSR performance compares to the TSR of the common stock of our peer group.

2017-2019 Long-term Incentive Plan

Silver Equivalent (includes Gold) Reserve Growth
Ounce Target
(millions)
Additional Reserve
(millions)
Unit Value
405.6 90      $ 75.00
375.6 60 $ 50.00
345.6 Target 30 $ 25.00
315.6 0 $ 5.00
                                 
Silver Equivalent (includes Gold) Production Growth
Production
(in mm ozs.)
Average Short-term
Production
(in mm ozs.)
Unit Value
100.0 33.3    $ 100.00
96.0 32.0 $ 75.00
93.0 31.0 $ 50.00
90.0 Target 30.0 $ 25.00
85.0 28.3 $ 10.00
 
Mine Site Operating Cash Flow Less Capital
Cash Generation
(millions)
                              Unit Value
$375    $ 100.00
$350 $ 50.00
$300 Target $ 25.00
$250 $ 5.00
 
Total Shareholder Return
Percentile rank
within Peer Group
Companies
                                  Unit Value
100% $ 100.00
90% $ 90.00
80% $ 75.00
70% $ 50.00
60% $ 30.00
50% Target $ 25.00
<50% $ 0.00

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2017-2019 LTIP Performance Summary

Performance Measure       Target       Actual
Performance
      % of
Target
      Value Earned
Per Unit
Silver Reserve Growth 30.0 silver 89.1 silver 297 %            $ 74.25
equivalent oz. equivalent oz.
added (millions) added (millions)
Production Growth 90.0 silver 90.0 silver 100 % $ 25.00
equivalent oz. equivalent oz.
added (millions) added (millions)
Cash Flow $300 cash flow $234.3 cash flow 66 % $ 0
(millions) (millions)
Total Shareholder Return 50% Hecla <50% Hecla 40 % $ 0
ranking vs. peers ranking vs. peers
Total Earned Per Unit $ 99.25

During this three-year period, performance in reserve growth was very robust in the second year of this 3-year LTIP period. During 2018, we achieved significant growth, primarily at Greens Creek and Casa Berardi, and in 2019 modest gains were made as well. The increase resulted in an additional 89.1 million silver equivalent ounces over the 3-year term. Production growth was slightly below target during 2017 and 2018, and exceeded the target during 2019. The full production over the LTIP period was 90 million silver equivalent ounces, which was 100% of target. Cash flow exceeded target in 2017, but 2018 and 2019 were below target, resulting in a cash flow generation of 66% of target for the full 3-year period. Hecla’s relative TSR over the 3-year LTIP period ranked 13th among the 16 peer companies (inclusive of Hecla). The benchmark price was set at the beginning of 2017 following the exceptionally strong year of 2016. As a result, with a range in potential value per unit of $0 to $375, in February 2020, the committee determined that the total 2017-2019 LTIP payout was $99.25 per unit. The committee and the Board further approved payout of the LTIP awards to be 100% in Hecla common stock issued under the 2010 Stock Incentive Plan.

2017-2019 LTIP Award Summary

The following chart shows the number of performance units awarded in 2017 to each NEO, the unit value achieved, the total amount of the award (number of units x $99.25 = total award value), and the amount of equity received.

Name       2017-2019
Performance Units
(#)
     Unit Value
($)
      Total Amount
of Award(1)
($)
      Equity Received(2)
(#)
Phillips S. Baker, Jr. 11,400 99.25 1,131,450 621,676
Lindsay A. Hall 5,000 99.25 496,250 272,665
Lauren M. Roberts 556 (3)  99.25 55,183 30,320
Robert D. Brown 3,000 99.25 297,750 163,599
David C. Sienko 3,000 99.25 297,750 163,599
Lawrence P. Radford(4) 5,000 99.25 0 0
Dr. Dean W.A. McDonald(4) 3,600 99.25 0 0
(1) The amount reported in this column was paid in equity to the NEO and is also reported in the Summary Compensation Table for 2019 on page 75 under Non-Equity Incentive Plan Compensation.
(2) The equity portion of the 2017-2019 LTIP award was determined by dividing the cash value of the award by the closing price of the Company’s common stock on the NYSE on March 31, 2020 ($1.82).
(3) Mr. Robert’s 2017-2019 LTIP units were prorated because he joined the Company in August 2019.
(4) Messrs. Radford and McDonald retired from the Company on December 11, 2019 and September 30, 2019, respectively, and therefore their LTIP awards were forfeited.

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Equity

We have no program, plan or practice to time the grant of stock-based awards relative to the release of material non-public information or other corporate events. All equity grants to executive officers are approved by the committee at regularly scheduled meetings or, in limited cases involving key recruits or promotions, by a special meeting or unanimous written consent. The grant date is the meeting date, or a fixed, future date specified at the time of the grant. Under the terms of our 2010 Stock Incentive Plan, the fair market value of any award is determined by the closing price of our common stock on the NYSE on the date of grant or a fixed, future date specified at the time of grant. In addition, the committee typically makes equity grants to NEOs in the first half of the year.

Restricted Stock Units (“RSUs”)

RSUs are granted to the NEOs under the 2010 Stock Incentive Plan. RSUs are used to retain our NEOs and align their interests with the long-term interests of our shareholders. The committee awarded RSUs to each NEO in June 2019, other than Mr. Roberts, whose RSUs were granted on August 5, 2019, his date of hire. The RSUs vest in three equal amounts with vesting dates of June 21, 2020, June 21, 2021, and June 21, 2022. See Grants of Plan-Based Awards for 2019 on page 77.

In December 2014, the committee amended the 2010 Stock Incentive Plan and Key Employee Deferred Compensation Plan so that any RSUs vesting after 2014 would no longer be credited with dividend equivalents. In order to incentivize RSU recipients to continue working for the Company, RSU awards require both an age and years of service trigger in order to qualify for vesting of the RSUs as of the employee’s retirement. The 2010 Stock Incentive Plan provides that for purposes of the RSU awards, RSU recipients who retire under Hecla Mining Company’s Retirement Plan must be at least age: (i) 60 and have 15 or more years of service with the Company; (ii) 65 and have seven or more years of service with the Company; or (iii) 68, in order to receive their unvested RSUs after retirement. If one of the above requirements are met, the recipient will receive their RSUs on the original vesting dates. In 2018, we amended our 2010 Stock Incentive Plan to provide for a double-trigger upon a change of control.

In 2019, we granted RSUs to 135 employees under the 2010 Stock Incentive Plan, including the NEOs as follows:

NEO       Value of Restricted
Stock Units
      Target Number
of Shares(1)
Phillips S. Baker, Jr.                  $ 400,000 217,391
Lindsay A. Hall $ 225,000 122,283
Lauren M. Roberts(2) $ 225,000 111,940
Robert D. Brown $ 150,000 81,522
David C. Sienko $ 150,000 81,522
Lawrence P. Radford(3) $ 225,000 122,283
Dr. Dean W.A. McDonald(3) $ 200,000 108,696
(1) Target number of shares was determined by dividing the value of the restricted stock units awarded by the closing price of our common stock on the NYSE on June 21, 2019 ($1.84).
(2) Target number of shares was determined by dividing the value of the restricted stock units awarded by the closing price of our common stock on the NYSE on August 5, 2019 ($2.01).
(3) Messrs. Radford and McDonald retired from the Company on December 11, 2019 and September 30, 2019, respectively, without satisfying the vesting criteria, therefore all outstanding RSU awards were forfeited.

Performance-based Shares (“PSUs”)

We grant PSUs to certain executive officers, including our NEOs. The value of the awards is based on the ranking of the market performance of our common stock relative to the performance of the common stock of a group of peer companies over a three-year measurement period. The number of shares to be issued is based on the target value of the awards divided by the share price at grant date. The compensation cost is measured using a Monte Carlo simulation to estimate their value at grant date.

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In June 2019, the committee granted PSUs to our NEOs (with the exception of Mr. Roberts), with a target value listed below. The value of these PSUs will be based on the TSR of our common stock for the three-year period from January 1, 2019 through December 31, 2021, based on the percentile rank listed below within a group of peer companies.

NEO       Target Value of
Performance-based
Shares
      Target Number
of Shares(1)
Phillips S. Baker, Jr.                   $ 500,000 156,658
Lindsay A. Hall                   $ 150,000 81,522
Lauren M. Roberts(2) $ 150,000 74,627
Robert D. Brown $ 115,000 62,500
David C. Sienko $ 100,000 54,348
Lawrence P. Radford(3) $ 150,000 81,522
Dr. Dean W.A. McDonald(3) $ 125,000 67,935
(1) Target number of shares was determined by dividing the target value of the PSUs by the closing price of our common stock on the NYSE on June 21, 2019 ($1.84).
(2) Target number of shares was determined by dividing the target value of the PSUs by the closing price of our common stock on the NYSE on August 5, 2019 ($2.01).
(3) Messrs. Radford and McDonald retired from the Company on December 11, 2019 and September 30, 2019, respectively, without satisfying the vesting criteria, therefore all outstanding PSU awards were forfeited.

Company TSR Rank Among Peers       TSR Performance Multiplier
50th percentile Threshold award at 50% of target
60th percentile Target award at grant value
100th percentile Maximum award at 200% of target

If Hecla’s performance is below the 50th percentile, the award is zero. If Hecla’s performance is between the 50th and 100th percentile, the award is prorated. Except for Mr. Roberts, for any award, the number of shares issued at the conclusion of the three-year performance period (December 31, 2021), will be determined by using the share price on the date of original grant (June 21, 2019) of $1.84. In the case of Mr. Roberts, the number of shares issued at the conclusion of the three-year performance period (December 31, 2021), will be determined by using the share price on the date of original grant (August 5, 2019) of $2.01.

Hecla’s TSR performance versus that of our peer group will be based on the average closing share price over the last sixty (60) calendar days prior to January 1, 2019, as the base price and average closing share price over the last sixty (60) calendar days of the three-year performance period to determine relative share value performance and ranking among peers.

The industry peer group used for purposes of the 2019-2021 TSR PSUs discussed above is listed on page 49.

2017-2019 PSU Results

On June 7, 2017, the committee granted PSUs of Hecla’s common stock to our NEOs.

To determine the relative share performance, Hecla’s TSR performance versus that of peer group companies was based on the average closing share price over the last sixty (60) calendar days prior to January 1, 2017, as the base price, compared with the average closing share price over the last sixty (60) calendar days of the three-year performance period (ending December 31, 2019).

The following table shows the calculation of the PSU results at the end of the three-year performance period on December 31, 2019. Hecla’s TSR ranked 12th among the 15 companies in the peer group based on TSR from 2017 through 2019, including dividends paid during that period. Ranking 12th places Hecla at 21.4% among the peer companies, which equates to an award value to our CEO and NEOs of $0.

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TOTAL SHAREHOLDER RETURN – January 1, 2017 through December 31, 2019

Peer Name       Average Stock
Price over 60-day
period leading up to
1/1/2017
($)
      Average Stock
Price over 60-day
period leading up to
12/31/19
($)
      Dividends Paid
(1/1/17 thru
12/31/19)
($)
      TSR thru
12/31/19
(%)
      Rank
(%)
      Rank
(#)
      Payout
($)
SSR Mining 9.70 16.09 0.00 65.86 100.0 1 1,200,000
Centerra Gold 6.65 10.49 0.00 57.64 92.9 2 1,092,857
B2Gold 3.25 4.81 0.00 47.73 85.7 3 985,714
First Majestic Silver 8.39 10.85 0.00 29.32 78.6 4 878,571
Detour Gold 17.77 22.96 0.00 29.24 71.4 5 771,429
Pan American 16.15 19.89 0.38 25.55 64.3 6 664,286
IAMGOLD 3.75 3.53 0.00 -5.99 57.1 7 557,143
TARGET PAYOUT 500,000
Alamos Gold 6.49 5.50 0.08 -14.06 50.0 8 300,000
THRESHOLD PAYOUT 0
Coeur Mining 9.87 6.85 0.00 -30.55 42.9 9 0
Endeavour Silver 3.85 2.25 0.00 -41.63 35.7 10 0
Eldorado Gold 14.71 7.69 0.00 -47.74 28.6 11 0
Hecla 6.00 2.72 0.03 -54.12 21.4 12 0
Tahoe Resources(1) 9.75 4.10 0.00 -57.94 14.3 13 0
New Gold 3.68 0.85 0.00 -76.82 7.1 14 0
Primero(2) 0.89 0.03 0.00 -96.63 0.0 15 0
(1) Pan American acquired Tahoe in February 2019.
(2) First Majestic Silver acquired Primero in 2018.

Stock Options. We have not issued any stock options to our NEOs (or any other employee) for the past nine years. If any future stock options are granted under the 2010 Stock Incentive Plan, they will be issued with an exercise price based on the fair market value (the closing sales price of our common stock on the NYSE on the date of grant).

Other

Nonqualified Deferred Compensation Plan. We maintain the Key Employee Deferred Compensation Plan (the “KEDCP”), a nonqualified deferred compensation plan, under which participants may defer all or a portion of their annual base salary, performance-based compensation awarded under our STIP and LTIP, and RSUs granted under the 2010 Stock Incentive Plan. Participants may elect to have their deferred base salary and STIP or LTIP awards valued based on Hecla common stock and credited to a stock account. Deferred RSUs are credited to a stock account. The KEDCP provides for discretionary matching contributions on base salary, STIP and LTIP amounts deferred to a stock account and discretionary Company contributions that are credited to a participant’s stock account. The deferral features promote alignment of the interests of participants with those of our shareholders. Investment accounts are credited monthly with an amount based on the prime rate for corporate borrowers. Participants receive distributions from their accounts only upon separation from service with us, a fixed date or schedule selected by the participant, death, disability, an unforeseeable emergency or a change in control, as these events are defined under Section 409A of the Internal Revenue Code. The amounts deferred are unfunded and unsecured obligations of Hecla, receive no preferential standing, and are subject to the same risks as any of our other general obligations. Additional details about the KEDCP are described in the narrative accompanying the Nonqualified Deferred Compensation for 2019 table on page 82.

Benefits. We provide our employees with a benefits package that is designed to attract and retain the talent needed to manage Hecla. As part of that, most U.S salaried employees, including the U.S. NEOs, are eligible to participate in the Hecla Mining Company Retirement Plan, our 401(k) plan, which includes matching contributions by Hecla of up to 6%, health, vision, dental coverage, and paid time off, including vacations and holidays. All Canadian salaried employees, including the Canadian NEOs, are eligible to participate in a similar benefits package. NEOs are eligible to receive certain additional benefits, as described below. The committee intends for the type and value of such benefits offered to be competitive with general market practices.

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Other Qualified and Nonqualified Benefit Plans. Under the Hecla Mining Company Retirement Plan (“Retirement Plan”), which is a defined benefit plan, upon normal retirement, each participant is eligible to receive a monthly benefit equal to a certain percentage of final average annual earnings for each year of credited service. Additional details about the Retirement Plan are in the narrative accompanying the Pension Benefits table on page 81. Under Hecla’s unfunded Supplemental Excess Retirement Plan, the amount of any benefits not payable under the Retirement Plan because of the limitations imposed by the Internal Revenue Code and/or the Employee Retirement Income Security Act, and certain reductions of benefits, if any, due to a deferral of salary made under our KEDCP, may be paid out of our general funds to employees who are adversely affected. The Retirement Plan and Supplemental Excess Retirement Plan define earnings for purposes of the plans to include base salary plus any other cash incentives up until July 1, 2013, after which only base salary plus one-half of STIP compensation is included (no LTIP compensation is included).

Personal Benefits. We do not provide company-paid cars, country club memberships, or other similar perquisites to our executives. The only material personal benefit provided by Hecla is a relocation benefit, which is offered as needed to meet specific recruitment needs.

Clawback Policy

At its February 2013 meeting, the committee adopted a clawback policy with respect to incentive awards to executive officers. The policy provides that in the event of a restatement of our financial results as a result of material non-compliance with financial reporting requirements, the Board will review incentive compensation that was paid to our current and former executive officers under the Company’s STIP and LTIP (or any successor plans) based solely on the achievement of specific corporate financial goals (“Incentive Award”) during the period of the restatement. If any Incentive Award would have been lower had it been calculated based on the Company’s restated financial results, the Board will, as and to the extent it deems appropriate, including with respect to intent or level of culpability of the relevant individual(s), seek to recover from any executive officer, any portion of an Incentive Award paid in excess of what would have been paid based on the restated financial results. The policy does not apply in any situation where a restatement is not the result of material non-compliance with financial reporting requirements, such as any restatement due to a change in applicable accounting rules, standards or interpretations, a change in segment designations or the discontinuance of an operation.

In December 2015, the committee amended each of our incentive plans (STIP, LTIP, KEDCP, and 2010 Stock Incentive Plan) to include a clawback provision consistent with the clawback policy described above.

Insider Trading Policy

Our insider trading policy prohibits all directors, executive officers (as defined under Section 16 of the Exchange Act) and certain other employees designated as insiders from purchasing or selling any Company securities three weeks before through two days after the public release of any of our periodic results (including the filing of any Form 10-Q or Form 10-K), or at any other time during the year while in possession of material non-public information about the Company. In addition, directors and officers are prohibited from short-term trading, short sales, options trading, trading on margin, hedging or pledging any securities of the Company.

Stock Ownership Guidelines

To more closely align the Company’s independent directors’ financial interests with those of the shareholders, in June 2012, the Compensation Committee and Board adopted stock ownership guidelines for our independent directors. Under these guidelines, each independent director is required to own shares of common stock (which includes shares held under the Hecla Mining Company Stock Plan for Nonemployee Directors) valued at three times his or her annual cash retainer within five years of his or her appointment to the Board.

In the event an independent director’s cash retainer increases, he or she will have three years from the date of the increase to acquire any additional shares needed to meet these guidelines.

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Similarly, we believe that it is important to encourage our executive officers to hold a material amount of our common stock and to link their long-term economic interest directly to that of our shareholders. To achieve this goal, in June 2012, the committee and Board established stock ownership guidelines for the Company’s senior management. The guidelines for the CEO are six times base salary, and for the other executive officers, two times base salary. These guidelines shall be achieved by the later of (i) June 2017 or (ii) five years after the executive officer is hired to such position. Unvested RSUs and shares held directly are considered owned for purposes of the guidelines. If an executive officer becomes subject to a greater ownership amount due to a promotion or an increase in base salary, he or she must meet the higher ownership requirement within three years.

Because of fluctuations in the Company’s stock price, in February 2016, the committee and the Board amended the stock ownership guidelines to provide a valuation methodology that consists of valuing the shares held by using the average closing price of the Company’s common stock on the NYSE for the previous calendar year. Because share prices of all companies are subject to market volatility, the Board believes that it would be unfair to require an executive or director to buy more shares simply because Hecla’s stock price drops. In the event there is a significant decline in Hecla’s stock price that causes an executive or director’s holdings to fall below the applicable threshold, the executive or directors will not be required to purchase additional shares to meet the threshold, but they generally may not sell or transfer any shares until the threshold has again been achieved. See Non-management Director Stock Ownership table on page 40, and Stock Ownership for NEOs table on page 81 for further information.

Change in Control Agreements

We have entered into change in control agreements (“CIC Agreements”) with each of our NEOs. Under the terms of our CIC Agreements, the CEO and the other NEOs are entitled to payments and benefits upon the occurrence of specified events, including termination of employment (with or without cause) following a change in control of the Company. The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of calendar year-end, are described in detail in the section entitled Potential Payments Upon Termination or Change in Control on page 83.

The termination of employment provisions of the CIC Agreements were entered into to address competitive concerns when the NEOs were recruited to Hecla by providing these individuals with a fixed amount of compensation that would offset the risk of leaving their prior employer or foregoing other opportunities to join the Company. At the time of entering into these arrangements, the committee considered the aggregate potential obligations of the Company in the context of the desirability of hiring the individual and the expected compensation upon joining Hecla.

The committee believes that these CIC Agreements are important for a number of reasons, including providing reasonable compensation opportunities in the unique circumstances of a change in control that are not provided by other elements of our compensation program. Further, change in control benefits, if structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that key executives will leave Hecla before a transaction closes. The committee also believes that these agreements motivate the executives to make decisions that are in the best interests of our shareholders in the event of a pending change in control. These agreements provide executives with the necessary job stability and financial security during a change in control transaction and the subsequent period of uncertainty to help them stay focused on managing Hecla rather than on their own personal employment situation. The committee believes that all these objectives serve our shareholders’ interests. The committee also believes that change in control provisions are an essential component of the executive compensation program and are necessary to attract and retain senior talent in the highly competitive talent market in which we compete.

The change in control provisions were developed by the Company and the committee based on market and industry competitive practices. The Company and the committee periodically review the benefits provided under the CIC Agreements to ensure that they serve our interests in retaining our key executives, are consistent with market and industry practice, and are reasonable.

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Tax and Accounting Considerations

Our compensation programs are affected by each of the following:

Accounting for Stock-Based Compensation. We take into account certain requirements of GAAP in determining changes to policies and practices for our stock-based compensation programs.

Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code Section 162(m)”), generally provides that compensation in excess of $1 million paid to the CEO and certain other employees, including NEOs (“covered employees”) of a public company will not be deductible for U.S. federal income tax purposes.

Our primary objective in designing and administering our compensation policies is to support and encourage the achievement of our strategic goals and to enhance long-term shareholder value. We also believe that it is important to preserve flexibility in administering compensation programs. For these and other reasons, the committee has determined that it will not necessarily seek to limit executive compensation to the amount that would be fully deductible under Code Section 162(m).

Effective for taxable years beginning after December 31, 2017, the exemption from Code Section 162(m) for performance-based compensation was repealed in the tax reform legislation signed into law on December 22, 2017. Thus, it is anticipated that future compensation in excess of $1 million paid to covered employees will not be deductible for U.S. federal income tax purposes.

The committee will continue to monitor developments and assess alternatives for managing the deductibility of compensation payments and benefits to the extent reasonably practicable, as determined by the committee to be consistent with our compensation policies and in the best interests of the Company and our shareholders.

Section 409A of the Internal Revenue Code. Section 409A imposes additional significant taxes in the event that an executive officer or director receives “deferred compensation” that does not satisfy the requirements of Section 409A. Our plans are intended to be exempt from, or comply with, Section 409A.

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FUTURE COMPENSATION ACTIONS

2020 Short-term Incentive Plan

The plan was formerly named “Annual Incentive Plan”, but in February 2019, we renamed the plan to Short-term Incentive Plan (“STIP”). The changed name more accurately reflects the way the plan works, as the qualitative and discretionary factors are measured over a time period that extends beyond the calendar year. Furthermore, eligibility for payment under the plan requires employees be on the payroll roster at the time the bonus is paid. A change in the name of the plan helps reinforce to our employees that both eligibility under the plan and the goal measurement timeframe under the plan extend beyond the calendar year. The factors for the STIP may be modified by the committee from time to time, including with respect to the relative weights:

quantitative corporate performance factors (measured on a calendar year basis), comprising 50% of the overall targeted award;
qualitative factors (measured from January 1 of the plan year until the end of February of the following year), comprising 25% of the overall targeted award; and
a discretionary factor (measured from January 1 of the plan year until the end of February of the following year) as determined by the committee, comprising 25% of the overall targeted award.

The maximum total payout for each of the three factors, and in the aggregate, can be up to two times the target award. In order to be eligible for payout, an employee must be on the payroll at the time the STIP is paid, which is typically at or near the end of March or beginning of April.

Quantitative Goals

The 2020 STIP is like the 2019 STIP and contains three quantitative goals. For the 2020 STIP, the quantitative corporate performance factors are divided into three factors (including weighting): production (20%), Adjusted EBITDA less capital (20%), and AIFR reduction (10%).

The production factor converts gold, lead and zinc to silver equivalent at ratios of 87.5 oz. silver to 1 oz. gold, 18.8 lb. lead, and 16.0 lb. of zinc. Our production target is 43.0 million silver equivalent ounces. Maximum payout is attained if production achieves 45.5 million ounces. The minimum payout is achieved if production is greater than 41.0 million ounces.

2020 Production Metrics

2020 Production in Silver Equivalent Ounces (includes all metals)
                Factor Value
45.5mm Maximum 40%
43.0mm Target 20%
<41.0mm 0%

The minimum threshold for the Adjusted EBITDA less capital goal is <$50 million. The maximum limit is $90 million, and target is set at $70 million.

2020 Adjusted EBITDA Less Capital Metrics
                Factor Value
$90mm Maximum 40%
$70mm Target 20%
<$50m 0%

The AIFR reduction target is 5%. The 2019 national AIFR was approximately 2.4. A 10% reduction would result in the maximum limit, and a reduction of 0%, would result in no payout.

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Future Compensation Actions

2020 AIFR Reduction Metrics
            Factor Value
10% Maximum 20%
5% Target 10%
0% 0%

Qualitative Goals

Qualitative performance factors comprise 25% of the overall potential award. There are over 100 qualitative goals that are recommended by management, approved by the committee, and cover the areas of safety and health, environmental, technology and innovation, continuous improvement, operations, financial and cost controls, balance sheet management, employee development, benefit plans, acquisitions, mine life extension, exploration and reserve growth, investor relations, government and community affairs, and legal. These qualitative goals are recognized and treated as commonly shared goals among all functions and locations.

Outstanding Long-term Incentive Plan Periods

Below we provide the current three-year LTIP periods that are outstanding.

2018-2020 LTIP

In February 2018, the committee approved the 2018-2020 LTIP, which has a target unit value of $100. The 2018-2020 LTIP has four factors, which are repeat factors from the 2017-2019 LTIP, with a maximum potential payout of $375 per unit. The four factors are: silver equivalent reserve growth (gold is converted into silver equivalent at a ratio of 71 silver ounces to 1 gold ounce), silver equivalent production growth (includes silver and gold, but not base metals), TSR and mine site operating cash flow less capital.

Silver Equivalent (includes Gold) Reserve Growth
Silver Equivalent Ounce Target
(millions)
      Additional Reserve
(millions)
        Unit Value
427.6 90       $ 75.00
397.6 60 $ 50.00
367.6 30 $ 25.00
337.6 0 $ 10.00

Silver Equivalent (includes Gold) Production Growth
Target
(in mm ozs.)
      Average Annual Target
(in mm ozs.)
      Unit Value
105.0 35.0       $ 100.00
96.0 32.0 $ 75.00
90.0 30.0 $ 50.00
86.0 28.7 $ 25.00
80.0 26.7 $ 10.00
 
Mine Site Operating Cash Flow Less Capital
Cash Target
(millions)
            Unit Value
$425 $ 100.00
$375 $ 50.00
$350 $ 25.00
$330 $ 10.00

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Future Compensation Actions

Total Shareholder Return
Ranking within Peer Group Companies       Unit Value
Top 2      $ 100.00
Top 4 $ 75.00
Top 6 $ 50.00
Top 8 $ 25.00
<Top 8 $ 0.00

2019-2021 LTIP

In February 2019, the committee approved the 2019-2021 LTIP, which has changed from prior years. First, the target unit of each factor value has been reduced from $100 to $90 with only three factors: reserve growth, production growth, and mine site operating cash flow (less capital). Secondly, the TSR factor has been removed and is now a multiplier with a value of 10% to 250% based on relative performance. The payout has also been capped at target if the absolute share return is negative.

Silver Equivalent (includes Gold) Reserve Growth
Ounce Target
(millions)
      Additional Reserve
(millions)
       Unit Value
520 90        $ 70.00
480 60 $ 50.00
450 30 $ 30.00
420 0 $ 10.00
 
Silver Equivalent (includes Gold) Production Growth
Target
(in mm ozs.)
Average Annual Target
(in mm ozs.)
Unit Value
120 40.0 $ 70.00
115 38.3 $ 50.00
108 36.0 $ 30.00
100 33.3 $ 10.00
 
Mine Site Operating Cash Flow (Less Capital)
Cash Target
(in millions)
Unit
Value
$450 $ 70.00
$400 $ 50.00
$375 $ 30.00
$300 $ 10.00

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Future Compensation Actions

TSR (Multiplier)

The TSR provides a relative performance metric to our peers, with an absolute performance metric applicable in the event we are in the top 3 amongst the peer group on a relative basis. This component of the 2019-2021 LTIP is different than the other components in that the TSR serves as a multiplier (either increasing or decreasing an award). This component insures alignment of the results of the other components with share performance. If Hecla’s relative TSR performance is in the mid-range (7th – 9th), the multiplier is 100% of the value achieved by the other three components, and thus has no positive or negative affect on the unit value earned. If Hecla’s relative TSR is in the top 6, the multiplier is positive, and thus would enhance the unit value because the relative TSR was strong. If Hecla’s relative TSR is in the bottom 6, the multiplier is negative. If the relative TSR is in the top 3, and the TSR is positive on an absolute basis, the TSR multiplier is 250%. Regardless of the unit value earned by the unit values, in the event Hecla’s absolute TSR is negative, the multiplier is capped at 100% of the value derived from unit value performance. The 2019-2021 peer group consists of the following companies:

IAMGOLD New Gold Alamos Gold
Hochschild Mining Fresnillo First Majestic
B2Gold Pan American Silver Oceana Gold
Centerra Gold Silver Standard Detour Gold
Coeur d’Alene Mines Endeavour Silver

TSR
Ranking within Peer Group Companies       Multiplier
1st – 3rd 250 %
4th – 6th 175 %
7th – 9th 100 %
10th – 12th 33 %
13th – 15th 10 %

2020-2022 LTIP

In March 2020, the committee approved the 2020-2022 LTIP, which is similar to the 2019-2021 LTIP. The target unit of each factor value is $90 with only three factors: reserve growth, production growth, and mine site operating cash flow (less capital). The TSR factor is the same as the 2019-2021 LTIP described above. The payout has also been capped at target if the absolute share return is negative.

Silver Equivalent (includes only Gold) Reserve Growth
Ounce Target
(millions)
      Additional Reserve
(millions)
      Unit Value
540 90        $ 70.00
510 60 $ 50.00
480 30 $ 30.00
450 0 $ 10.00
 
Silver Equivalent (includes only Gold) Production Growth
Target
(in mm ozs.)
Average Annual Target
(in mm ozs.)
Unit Value
102 34.0 $ 70.00
96 32.0 $ 50.00
90 30.0 $ 30.00
87 27.0 $ 10.00
 
Mine Site Operating Cash Flow (Less Capital)
Cash Target
(in millions)
Unit
Value
$350 $ 70.00
$300 $ 50.00
$275 $ 30.00
$200 $ 10.00

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Future Compensation Actions

TSR (Multiplier)

The TSR provides a relative performance metric to our peers, with an absolute performance metric applicable in the event we are in the top 3 amongst the peer group on a relative basis. This component of the 2020-2022 LTIP is different than the other components in that the TSR serves as a multiplier (either positive or negative). This component insures alignment of the results of the other components with share performance. If Hecla’s relative TSR performance is in the mid-range (9th – 14th), the multiplier is 100% of the value achieved by the other three components, and thus has no positive or negative affect on the unit value earned. If Hecla’s relative TSR is in the top 8, the multiplier is positive, and thus would enhance the unit value because the relative TSR was strong. If Hecla’s relative TSR is in the bottom 8, the multiplier is negative. If the relative TSR is in the top 2, and the TSR is positive on an absolute basis, the TSR multiplier is 250%. Regardless of the unit value earned by the unit values, in the event Hecla’s absolute TSR is negative, the multiplier is capped at 100% of the value derived from the unit value performance.

The 2020-2022 peer group consists of the following companies:

IAMGOLD Pan American Silver Hochschild Mining
Silver Standard B2Gold First Majestic Silver
Centerra Gold Torex Minerals Alamos Gold
Endeavour Silver Oceana Gold Eldorado Gold
Coeur Mining SLV Silver Trust Pretium Resources
GLD Gold Share New Gold GDX Vectors Gold Miner ETF
Fresnillo GDXJ Vectors Junior Gold Miner ETF Equinox Gold

TSR
Ranking within Peer Group Companies       Multiplier
1st – 2nd 250 %
3rd – 5th 175 %
6th – 8th 135 %
9th – 14th 100 %
15th – 17th 75 %
18th – 20th 50 %
21st – 22nd 10 %

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee are set forth in the Compensation Committee Report. There are no members of the committee who were officers or employees of Hecla or any of our subsidiaries during the calendar year, formerly were officers of Hecla or any of our subsidiaries, or had any relationship otherwise requiring disclosure under the proxy rules promulgated by the SEC or the NYSE.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Hecla’s management and its independent compensation consultant. Based on its review and discussions, the committee recommended to the Board, and the Board has approved, the Compensation Discussion and Analysis included in this Proxy Statement and incorporated by reference in Hecla’s Annual Report on Form 10-K for the year ended December 31, 2019.

Respectfully submitted by
The Compensation Committee of the
Board of Directors
 
Terry V. Rogers, Chair
Catherine J. Boggs
Ted Crumley
George R. Nethercutt, Jr.

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COMPENSATION OF NAMED EXECUTIVE OFFICERS

Summary Compensation Table for 2019

The following compensation tables provide information regarding the compensation of our CEO, CFO, and three other most highly compensated officers for the year ended December 31, 2019, determined in accordance with SEC rules. Mr. Lawrence P. Radford, our former Senior Vice President and Chief Technical Officer and Dr. Dean W.A. McDonald, our former Senior Vice President of Exploration, retired on December 11, 2019 and September 30, 2019, respectively.

Name and Principal
Position
  Year      Salary(1)
($)
Stock
Awards(2)
($)
Non-Equity
Incentive Plan
Compensation(3)
($)
     Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings(4)
($)
All Other
Compensation
($)
Total
($)
Phillips S. Baker, Jr.
President and CEO
2019 635,000 399,999 (5)  1,575,950 2,452,596 18,801 (7)  5,082,346
2018 635,000 870,859 1,844,625 317,452 18,606 3,686,542
2017 618,750 842,802 2,473,625 1,017,111 18,306 4,970,594
Lindsay A. Hall(8)
Senior Vice President and CFO
2019 380,000 225,000 (5)  724,250 254,053 (6)  18,750 (7)  1,602,053
2018 380,000 401,987 733,817 126,137 18,210 1,660,151
2017 380,000 413,558 701,926 143,281 17,790 1,656,555
Lauren M. Roberts
Senior Vice President and COO
2019 142,501 (9)  225,000 (5)  214,783 53,083 3,453 (7)  638,820
Robert D. Brown(8)
Vice President – Corporate
Development
2019 264,000 150,000 (5)  390,150 140,532 (6)  18,750 (7)  963,432
2018 264,000 280,353 504,600 33,252