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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

 

 

SCHEDULE 14A INFORMATION

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Securities Exchange Act of 1934

 

 

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Hecla Mining Company

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Table of Contents

LOGO


Table of Contents

MESSAGE FROM YOUR BOARD OF DIRECTORS

 

LOGO    

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

 

Not pictured – Alice Wong

 

     
   

Hecla’s Board of Directors seeks not only to pursue, but also to deliver the highest standard of ethics and integrity in every aspect of the business – in order to be a positive influence wherever the Company operates.

Cover Photo:

Hecla celebrates its 130th year in 2021

Dear Fellow Shareholder:

First and foremost, we would like to express our sincere appreciation for your continued support as a Hecla shareholder. We would also like to take this opportunity to recognize and thank management and the employees of Hecla for maintaining the continuity of the business as they moved quickly to ensure Hecla fostered a safe environment in 2020. While 2020 was an unprecedented year given the global pandemic and market uncertainty, Hecla maintained its commitment to operate sustainably and to create shareholder value, as well as ending the year on a positive note.

Our Response to COVID-19

From the pandemic’s onset, the Board oversaw management’s strong COVID-19 response strategy, which focused on actions to keep employees safe, mines operating, and liquidity accessible. Hecla finished the year with a strong balance sheet and an engaged and committed workforce. While this pandemic is highly unusual, over the course of Hecla’s 130-year history, the Company has dealt with pandemics and had a plan in place that was implemented in February and early March. As the risks and government orders in response increased, Hecla focused on ensuring a safe environment for employees and supporting them as they balanced life challenges resulting from the pandemic. The Company has adjusted its ways of working to protect everyone’s safety and well-being, including allowing the majority of office-based employees to work remotely, suspending almost all travel, providing personal protective equipment, creating electronic health attestation forms, reducing person-to-person interactions, reinforcing hygiene and exposure guidelines with employees in line with guidance from local health officials, implementing limited site access, requiring social distancing, temperature testing, providing 14-day quarantine facilities, and wearing masks while at work. Fortunately, each of the communities where Hecla operates only had a small number of COVID-19 occurrences. Similarly, there were only a small number of cases within the workforce and their families. Given the needs arising from the pandemic, Hecla, through its charitable foundation, contributed a substantial amount of funds to food banks serving communities in which Hecla has operations.

Safety and Health

Hecla’s greatest resource is our people; their health and safety are the Company’s and the Board’s highest priority. Hecla’s goal is to continually improve health and safety performance, so that at the end of each shift Hecla’s workers go home safely – every day. Hecla has developed and sustained a culture of continuous improvement in safety performance which has led to a decrease in its all-injury frequency rate (“AIFR”) seven years in a row. Company-wide, Hecla’s all-injury frequency rate dropped 80% from 2014 to 2020. Hecla, through our charitable foundation, also contributed a significant amount of funds to the American Red Cross for Haines Disaster relief from flooding in Alaska.

Human Capital Management

As of December 31, 2020, Hecla employed nearly 1,600 employees world-wide. Women comprise 9.75% of Hecla’s workforce, and 19% of managerial positions are held by women. 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.

Corporate Responsibility and Sustainability

The Board is committed to overseeing the integration of environmental, social responsibility, and governance principles throughout Hecla. Hecla is committed to sustainable operations founded on proactive engagement with the employees and the communities in which it operates. Corporate responsibility and sustainability are integral to Hecla’s business strategy, and Hecla continuously strives to reduce its environmental footprint. The Company has always focused on delivering strong financial results that respect communities and the environment. To improve its accountability, Hecla reports its performance against the Sustainability Accounting Standards Board metals and mining standards, and

 

2021 Proxy Statement    i

 


Table of Contents

Message from Your Board of Directors

 

relevant aspects of the Task Force on Climate-Change Related Financial Disclosures. The Company has also prioritized the United Nations Sustainable Development Goals that most directly align with Hecla’s business, corporate strategy, and material sustainability issues.

Board Refreshment and Diversity

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. Hecla remains committed to a Board composition that reflects an effective mix of business expertise, company knowledge, and diverse perspectives, and our goal is to strike the right balance between board refreshment and continuity. We have added four new directors to our Board in the past five years, two of whom are women.

To protect the well-being of our shareholders, service providers and employees, this year’s Annual Meeting of Shareholders will again be held in virtual meeting format only. We expect to resume in-person annual meetings sometime in the future.

Your participation and your votes as shareholders 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.

 

LOGO

Ted Crumley

Chairman

 

LOGO

George R. Nethercutt, Jr.

Director

 

LOGO

Charles B. Stanley

Director

 

LOGO

Phillips S. Baker, Jr.

Chief Executive Officer, President and Director

 

LOGO

Stephen F. Ralbovsky

Director

 

LOGO

George R. Johnson

Director

LOGO

Catherine J. Boggs

Director

 

LOGO

Terry V. Rogers

Director

 

LOGO

Alice Wong

Director

 

 

 

 

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Table of Contents

PROXY STATEMENT

VIRTUAL ANNUAL MEETING OF SHAREHOLDERS

MAY 19, 2021

Table of Contents

 

NOTICE OF 2021 VIRTUAL ANNUAL MEETING OF SHAREHOLDERS

    v  

PROXY STATEMENT SUMMARY

    1  

Performance Highlights

    1  

Compensation Actions Taken in 2020

    2  

CEO and Other NEO Pay

    4  

Corporate Governance Highlights

    9  

Class II Director Nominees to Serve Until the 2024 Annual Meeting

    11  

Shareholder Engagement

    11  

GENERAL INFORMATION ABOUT THE MEETING

    13  

Notice and Access

    13  

Record Date, Shares Outstanding and Quorum

    13  

Instructions for the Virtual Annual Meeting

    13  

Broker Non-Votes

    14  

Votes Required for the Proposals

    14  

Proxies

    15  

Proxies Submitted but not Voted

    15  

Methods of Voting

    15  

Revoking a Proxy

    16  

Costs of Solicitation

    16  

Results of the Annual Meeting

    17  

Householding of Proxy Materials

    17  

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

    17  

Annual Report

    18  

CORPORATE RESPONSIBILITY

    19  

Hecla’s Commitment to Environmental, Social Responsibility and Governance

    19  

CORPORATE GOVERNANCE AND RELATED MATTERS

    22  

Hecla’s Board Commitment to Shareholder Engagement

    22  

Shareholder Outreach in 2020

    23  

Prior Proxy Proposals to Amend our Certificate of Incorporation and Bylaws

    24  

The Board’s Role and Activities in 2020

    25  

Role of Board in Risk Oversight

    25  

Director Independence

    27  

Board Tenure, Age and Retirement

    27  

Board Leadership and Executive Sessions

    27  

Director Orientation and Continuing Education

    28  

Board and Committee Self-Evaluation Process

    28  

Evaluation Process

    29  

Committees of the Board and Committee Assignments

    29  

Diversity

    30  

Director Communications

    31  

Succession Planning

    31  

Electronic Access to Corporate Governance Documents

    31  

Corporate Governance Guidelines and Code of Conduct

    32  

Majority Voting for Directors and Director Resignation Policy

    32  

Whistleblower Policy

    32  

Board of Directors Selection Process

    32  

PROPOSAL 1 - ELECTION OF CLASS II DIRECTORS

    37  

Biographical Information

    37  

Current Class  II Nominees for Election to the Board – Term Ending at the 2021 Annual Meeting

    37  

Required Vote

    38  

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

    39  

Continuing Class  I Members of the Board – Term Ending at the 2023 Annual Meeting

    40  

COMPENSATION OF NON-MANAGEMENT DIRECTORS

    42  

Compensation Consultant and Peer Group Benchmarking

    42  

Components of Non-Management Director Compensation

    42  

Equity Compensation

    42  

Non-Management Director Compensation for 2020

    43  

Other

    43  

Non-Management Director Stock Ownership

    44  

PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021

    45  

Required Vote

    45  

Pre-Approval Process

    46  

Audit and Non-Audit Fees

    46  

Report of the Audit Committee

    46  

PROPOSAL 3 - APPROVAL, ON AN ADVISORY BASIS, OF OUR EXECUTIVE COMPENSATION

    48  

Required Vote

    49  

COMPENSATION DISCUSSION AND ANALYSIS

    50  

Executive Summary

    50  

Key Operating and Financial Results

    51  

Benchmarking and Competitive Analyses

    51  

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

    53  

Compensation Philosophy and Objectives

    54  

Elements of Total Compensation

    56  

Overview of our Compensation Decisions and Results for 2020

    59  

Other

    68  

Clawback Policy

    69  

Insider Trading Policy

    69  

Stock Ownership Guidelines

    70  

Change in Control Agreements

    70  

Tax and Accounting Considerations

    71  

FUTURE COMPENSATION ACTIONS

    72  

2021 Short-term Incentive Plan

    72  

Outstanding Long-term Incentive Plan Periods (2019-2021, 2020-2022 and 2021-2023)

    73  

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    78  

COMPENSATION COMMITTEE REPORT

    78  

COMPENSATION OF NAMED EXECUTIVE OFFICERS

    79  

Summary Compensation Table for 2020

    79  

Grants of Plan-Based Awards for 2020

    81  

Outstanding Equity Awards at Fiscal Year-End for 2020

    82  

Stock Vested for 2020

    83  

Stock Ownership for NEOs

    84  

Pension Benefits

    85  

Nonqualified Deferred Compensation for 2020

    85  

Potential Payments Upon Termination or Change in Control

    86  

Summary of Potential Payments Upon Termination or Change in Control

    87  

CEO Pay Ratio

    92  

OTHER BENEFITS

    93  

Retirement Plan

    93  
 

 

2021 Proxy Statement    iii

 


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PROPOSAL 4 - APPROVAL OF AMENDMENT TO THE HECLA MINING COMPANY KEY EMPLOYEE DEFERRED COMPENSATION PLAN

    95  

Overview

    95  

Material Features of the Amended Plan

    96  

New Plan Benefits

    98  

Federal Income Tax Consequences

    98  

Equity Compensation Plan Information

    98  

Required Vote

    99  

OTHER MATTERS

    100  

Certain Relationships and Related Transactions

    100  

Political Contributions and Engagement

    101  

Delinquent Section 16(a) Reports

    101  

Shareholder proposals at the 2022 Annual Meeting of Shareholders

    101  

Shareholder proposals to be included in next year’s Proxy Statement

    102  

Security Ownership of Certain Beneficial Owners and Management

    102  

Other Business

    104  

APPENDIX A - HECLA MINING COMPANY KEY EMPLOYEE DEFERRED COMPENSATION PLAN

    A-1  

APPENDIX B - RECONCILIATION OF NON-GAAP MEASURES TO GAAP

    B-1  
 

 

 

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LOGO

NOTICE OF 2021 VIRTUAL ANNUAL MEETING OF SHAREHOLDERS

 

LOGO  

Date and Time

Wednesday, May 19, 2021,

at 10:00 a.m., PDT

 

LOGO  

Virtual Annual Meeting

Shareholders may only

participate online by logging in at:

www.virtualshareholdermeeting.com/HL2021

 

LOGO  

Who Can Vote

The Board of Directors (“Board”) has fixed the close of business on March 22, 2021, 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/HL2021 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 18, 2021.

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 19, 2021. This Proxy Statement and our 2020 Annual Report are available at www.hecla-mining.com.

Due to the ongoing public health impact of the COVID-19 pandemic 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 Wednesday, May 19, 2021, 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 13 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 may return to an in-person Annual Meeting in 2022, but have not yet reached a final determination.

 

Proposals

   Board Vote
Recommendation
  

Page
Reference

For More
Information

Proposal 1–

 

Election of Class II Directors

  

 

LOGO

  FOR each
Director
Nominee        
   37

Proposal 2–

 

Ratification of the Appointment of BDO USA, LLP as our Independent Registered Public Accounting Firm for 2021

  

 

LOGO

  FOR    45

Proposal 3–

 

Approval, on an Advisory Basis, of our Executive Compensation

  

 

LOGO

  FOR    48

Proposal 4–

 

Approval of Amendment to the Hecla Mining Company Key Employee Deferred Compensation Plan

  

 

LOGO

  FOR    95

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 13 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 5, 2021, containing instructions on how to access our Proxy Statement and 2020 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

 

 

LOGO

Michael B. White

Corporate Secretary

April 5, 2021

 

 

2021 Proxy Statement    v

 


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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 2020 performance, please review our Annual Report on Form 10-K.

Performance Highlights

 

 

LOGO

Safety

 

 
 

Achieved the

lowest AIFR in

Company history;

24% reduction from 2019.

 

 
 

 

Mitigated the impacts of COVID-19 through early response and implementation of operational plans and procedures to protect our workforce, operations and communities while maintaining liquidity.

 

 

 

 
 

 

LOGO

Production and Reserves

 

 
 

Achieved 2020 silver production of 13.5 million ounces,

up 7%

from last year, and gold production of 208,962 ounces.

 

 
 

Produced the most silver at our Greens Creek Mine since

obtaining 100%

ownership of it in 2008.

 

 
 

Third highest silver

and gold reserves

in the Company’s 130-year history despite the

COVID-19 pandemic.

 

 
 
 

 

LOGO

Financial Flexibility

 

 
 

 

Recorded 2020 sales of

$691.9 million,

the highest in the Company’s history, despite our Lucky Friday Mine not reaching full production until the
fourth quarter of 2020.

 

 
 

 

Cash flow from operations of

$180.8 million,

and free cash flow of

$89.8 million1

which is the fourth highest in Hecla’s history.

 

 
 

 

Refinanced

our previously outstanding 2021 Senior Notes with issuance of our Senior Notes for total principal of $475 million due in 2028, and Notes issued to Investissement Québec for total principal of CAD$48.2 million due in 2025.

 

 
 

 

Maintained consistent level of debt with an increase of

$6 million, from $517 million to $523 million

 

 
 

 

Year-end cash position of

$130 million, an increase

of $67 million

from 2019, with the credit facility undrawn.

 

 

 

1 

Free cash flow is a non-GAAP measure calculated as cash provided by operating activities (GAAP) less additions to properties, plants, equipment and mineral interests (GAAP). A reconciliation of free cash flow to the most comparable GAAP measure for the year ended December 31, 2020 is included in Appendix B of this Proxy Statement.

 

2021 Proxy Statement    1

 


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Proxy Statement Summary

 

Compensation Actions Taken in 2020 and 2021

Below is a brief summary of actions taken and determinations made by the Compensation Committee (“committee”) in 2020 and 2021. The compensation of our named executive officers (“NEOs”) for 2020 is more fully described in the Compensation Discussion and Analysis (“CD&A”) section of this Proxy Statement, starting on page 50 and in the compensation tables starting on page 79.

Changes in Chief Executive Officer (“CEO”) Compensation. In June 2020, the committee reviewed the Company’s peer and survey data on CEO compensation. As further described below in the CD&A, the committee reduced Mr. Baker’s target total direct compensation to the approximate median of our peer group. Mr. Baker’s performance-based shares and long-term incentive plan units were also reduced, resulting in a total reduction in Mr. Baker’s compensation of approximately 20% from 2019. Mr. Baker’s compensation adjustments were as follows: (i) the number of long-term incentive units granted to Mr. Baker were reduced from 10,000 units to 8,000 units (beginning with the 2020-2022 long-term incentive plan period); and (ii) the target value of performance-based shares granted to Mr. Baker was reduced from $500,000 to $400,000.

2018—2020 Performance-based Shares. In January 2021, the performance-based shares granted to our NEOs’ in June 2018 for the TSR performance period of January 1, 2018 through December 31, 2020 vested with a value of $0.

2020 Short-term Incentive Plan (“STIP”). In considering STIP payments, the committee considered the following accomplishments in 2020: due to the COVID-19 pandemic and the uncertainties in the market, we imposed fiscal and operational discipline, in the form of reduced capital and exploration and general and administrative spending, in order to allow increased cash flow and improve our financial condition. Notwithstanding the impediments we encountered due to COVID-19, we accomplished higher production, better earnings, reduced debt, more cash flow, and stronger share price performance. Most importantly, we achieved these results with a 24% reduction in our AIFR from 2019.

The committee determined STIP performance to be 158% of target comprised of three parts: quantitative measures at 83% (50% target, 100% maximum), qualitative factors at 35% (25% target, 50% maximum) and discretionary factors at 40% (25% target, 50% maximum). The quantitative performance was as follows:

 

2020 STIP Quantitative Measure Results

   Target      Actual     Target
Performance
Value
     Actual
    Performance    
Value
 

Production (Silver equivalent ounces)

     43.0 mm ozs.         43.3 mm ozs.2       20%        23%  

Adjusted EBITDA Less Capital3

     $70.0 mm        $124.4 mm       20%        40%  

AIFR

    
1.45 (10% reduction
from 2019 rate)

 
    
1.22 (24% reduction
from 2019 rate)

 
    10%        20%  

Total Quantitative

  

 

 

 

  

 

 

 

    50%        83%  

Qualitative objectives for NEOs are comprised of over a hundred initiatives related to most aspects of Hecla’s business, including, but not limited to, tasks 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) mine life extension, exploration and reserve growth, (ix) investor relations, (x) government and community affairs, and (xi) legal. The committee assigned a performance factor of 35% to qualitative performance, based on the following:

 

   

successfully ramping up the Lucky Friday Mine to full production while reintegrating former striking union members with the crossover and replacement workers and testing a new mining method;

   

maintained consistent level of debt with an increase of $6 million, from $517 million to $523 million;

   

year-end cash position of $130 million, an increase of $67 million from 2019, with the credit facility undrawn;

   

our Casa Berardi Mine generated free cash flow exceeding $30 million, while establishing lower costs and higher productivity to achieve significantly improved long-term plans;

   

established a new relationship with Investissement Québec with a $32 million long-term loan;

 

2 

The STIP uses fixed budgeted prices, while actual prices for financial reporting are used in our year-end reporting.

3 

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 of environmental matters, provisional price (gains) losses, 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, 2020, is included in Appendix B of this Proxy Statement.

 

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Proxy Statement Summary

 

   

achieved significant tax refunds from most jurisdictions where Hecla has operations;

   

improved resilience to cyber-risks;

   

all US managers received discrimination training, new employees have a meaningful onboarding process, and a new leadership training program was developed and implemented;

   

funded and strengthened our pensions;

   

drilling programs in Nevada and Mexico were implemented earlier than planned;

   

ESG reporting was increased;

   

improved development opportunities for female employees;

   

resolved a number of outstanding litigation matters; and

   

completed a collaboration agreement with the First Nations at our Casa Berardi Mine.

The discretionary component considers Hecla’s overall performance including unanticipated challenges. The committee assigned a performance factor of 40% to discretionary, based on the following:

 

   

Proactively prepared for the pandemic, including by protecting the supply chain, fortifying the balance sheet, and procuring PPE for employees. Pandemic responses included:

   

avoiding operational disruptions due to COVID-19 with proactive steps taken before a pandemic was declared and with protocols that kept operations nearly COVID-19 free;

   

working with state governments in Idaho, Nevada, and Alaska to help make mining deemed an essential industry;

   

strengthened Hecla’s culture despite remote working with consistent company- and office-wide communication;

   

developed programs to support the communities where we operate; and

   

US operations drew on their strong relationships with the Mine Safety and Health Administration (“MSHA”) field offices and worked together to maintain a safe COVID-19 protocol during mine inspections;

   

best safety record in Hecla’s history that significantly exceeded the quantitative goal;

   

achieved the highest revenue, third highest reserves, and fourth highest cash flow in the Company’s history;

   

annual and two-year TSR was one of the best performers compared to peers;

   

achieved strong employee retention and job satisfaction;

   

increased the charitable foundation’s long-term viability;

   

increased exploration activity immediately generating strong results; and

   

developed a “Take it Home” safety contest that was adopted by the National Mining Association.

See NEO Year-end 2020 Performance on page 62. All payouts of the STIP awards were paid in cash. The STIP is more fully described in the CD&A, starting on page 59.

2018-2020 LTIP. The 2018-2020 LTIP had a maximum potential unit value of $375. The committee assessed performance under the 2018-2020 LTIP as follows:

 

Performance Measure

   Target    Actual Performance    % of
Target
   Value
Earned
Per  Unit

Silver Reserve Growth

   30.0 silver oz. added (millions)    21.3 silver oz. added (millions)    71%    $20.75

Production Growth

   86.0 silver equivalent oz. (millions)    84.5 silver equivalent oz. (millions)    98%    $21.25

Mine Site Operating Cash Flow Less Capital4

   $350.0 Cash Flow (millions)    $205.1 Cash Flow (millions)    59%    $       0

Total Shareholder Return (“TSR”)

   8th Hecla ranking vs. peers    7th Hecla ranking vs. peers    100%    $25.00

Total Earned Per Unit

  

 

  

 

  

 

   $67.00

As further described in the CD&A, during this three-year period, performance in reserve growth and production growth exceeded threshold, but were below target levels. Performance in cash flow generation was below the threshold level, and TSR was at the target. As a result, with a range in potential value per unit of $0 to $375, in February 2021, the committee determined the total 2018-2020 LTIP payout was $67.00 per unit. The committee further approved payout of the LTIP awards to be in cash. The 2018-2020 LTIP is more fully described below in the CD&A, starting on page 64.

 

4 

Mine site operating cash flow less capital is a non-GAAP measure calculated as mine site cash provided by operating activities (GAAP) less mine site additions to properties, plants, equipment and mineral interests (GAAP). A reconciliation of mine site operating cash flow to the most comparable GAAP measure for the year ended December 31, 2020 is included in Appendix B of this Proxy Statement.

 

2021 Proxy Statement    3

 


Table of Contents

Proxy Statement Summary

 

CEO and Other NEO Pay

 

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

 

LOGO

  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 recognized the risk posed by COVID-19 during January 2020 and was instrumental in preparing the Company for the potential operational impacts, including human capital, cash flow, supply chain, and relations with the state and local governments where we operate. The Compensation Committee awarded Mr. Baker 190% of his targeted short-term incentive award, due to his advanced recognition of the COVID-19 risks, his strategic leadership in preparing for the restrictions and overall strong performance of the Company.

2020 Achievements

 

 

Early recognition of the risks posed by COVID-19, and led the Company in proactively preparing for the pandemic;

 

Highest revenue in the Company’s history, third highest reserves, and fourth highest free cash flow;

 

TSR among the best of peers at 165% for two years and 90% for one year; and

 

Achieved a 24% reduction in AIFR.

Compensation (determined in accordance with SEC rules)

 

      Base
Salary
     Short-term
Incentive
     Long-term
Incentive
     Restricted
Stock Units
     Performance-
Based Shares
(1)
     Year-over-Year
Change
    Total Direct
Compensation
 

2020

  

$

635,000

 

  

$

1,206,500

 

  

$

763,800

 

  

$

400,000

 

  

$

81,848

 

  

p

18.2

 

$

3,087,148

 

2019

  

$

635,000

 

  

$

444,500

 

  

$

1,131,450

 

  

$

399,999

 

  

 

 

  

q

22.0

 

$

2,610,949

 

2018

  

$

635,000

 

  

$

317,500

 

  

$

1,527,125

 

  

$

499,999

 

  

$

370,860

 

  

q

14.9

 

$

3,350,484

 

(1) 

The amounts in this column reflect the aggregate grant date fair value of the performance-based shares for accounting purposes determined in accordance with SEC rules and do not reflect the actual economic value that may be realized by the NEO at the end of the relevant three-year performance period. Because share performance against the peer group did not meet the threshold for the three-year period 2018-2020, the shares of stock underlying performance-based shares were not issued to our NEOs (i.e., there was zero payout). See 2018-2020 PSU Results on page 68.

2020 Pay Mix

 

LOGO

Share Ownership – Mr. Baker exceeds the Company’s minimum equity ownership as of December 31, 2020

 

Level Required

   Share/Equity Holdings     Average Share Price
for calendar year
2020
     Total Value  

6 x Base Salary (=$3,810,000)

  

 

5,424,863

 

$

4.0506

 

  

$

21,973,950

 

*

Does not include unvested performance-based units. Includes shares of our common stock deferred under our Key Employee Deferred Compensation Plan.

 

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Proxy Statement Summary

 

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

 

LOGO

  Mr. Hall has over 42 years experience in finance in the mining and energy industries. He managed the Company’s financial reporting, internal controls, treasury, and information technology until his resignation in February 2021. He was 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 2020 compensation was based in part on specific objectives.

2020 Achievements

 

 

Managed efforts to assure adequate cash availability during the COVID-19 lockdowns;

 

Led the effort to maintain a consistent level of debt with an increase of $6 million, from $517 million to $523 million;

 

Achieved an increase in cash of $67 million from 2019 with the credit facility undrawn at year-end;

 

Negotiated a settlement with a concentrate shipping company regarding a $4 million contractual dispute; and

 

Prepared the finance and accounting departments for the transition to his successor due to his retirement in 2021.

Compensation (determined in accordance with SEC rules)

 

      Base
Salary
     Short-term
Incentive
     Long-term
Incentive
     Restricted
Stock Units
     Performance-
Based
Shares
(1)
     Year-over-Year
Change
    Total Direct
Compensation
 

2020

  

$

380,000

 

  

$

646,000

 

  

$

335,000

 

  

$

225,000

 

  

$

30,693

 

  

p

21.6

 

$

1,616,693

 

2019

  

$

380,000

 

  

$

228,000

 

  

$

496,250

 

  

$

225,000

 

  

 

 

  

q

12.3

 

$

1,329,250

 

2018

  

$

380,000

 

  

$

190,000

 

  

$

543,817

 

  

$

300,000

 

  

$

101,987

 

  

p

1.3

 

$

1,515,804

 

(1) 

The amounts in this column reflect the aggregate grant date fair value of the performance-based shares for accounting purposes determined in accordance with SEC rules and do not reflect the actual economic value that may be realized by the NEO at the end of the relevant three-year performance period. Because share performance against the peer group did not meet the threshold for the three-year period 2018-2020, the shares of stock underlying performance-based shares were not issued to our NEOs (i.e., there was zero payout). See 2018-2020 PSU Results on page 68.

2020 Pay Mix

 

LOGO

Share Ownership – Mr. Hall exceeds the Company’s minimum equity ownership as of December 31, 2020

 

Level Required

   Share/Equity Holdings     Average Share Price
for calendar year  2020
     Total Value  

2x Base Salary (=$760,000)

  

 

976,501

 

$

4.0506

 

  

$

3,955,415

 

*

Does not include unvested performance-based units.

 

2021 Proxy Statement    5

 


Table of Contents

Proxy Statement Summary

 

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

 

LOGO

  Mr. Roberts has over 32 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 2020 was based in part on performance against the corporate metrics and in part on his 2020 individual achievements.

2020 Achievements

 

 

Oversaw the strongest safety performance in the Company’s history;

 

Developed site specific quarantine procedures to prevent the COVID-19 virus from materially affecting our mines;

 

Led the process of ramping up the Lucky Friday Mine back to full operation;

 

Delivered an increase in silver production; and

 

Implemented a Casa Berardi Mine cost savings and productivity program.

Compensation (determined in accordance with SEC rules)

 

      Base
Salary
     Short-term
Incentive
     Long-term
Incentive
     Restricted
Stock Units
     Performance-
Based Shares
(1)
     Year-over-Year
Change
    Total Direct
Compensation
 

2020

  

$

380,000

 

  

$

703,000

 

  

$

126,563

 

  

$

225,000

 

  

$

30,693

 

  

p

78.7

 

$

1,465,256

 

2019(2)

  

$

380,000

 

  

$

159,600

 

  

$

55,183

 

  

$

225,000

 

  

 

 

  

 

NA

 

$

819,783

 

(1) 

The amounts in this column reflect the aggregate grant date fair value of the performance-based shares for accounting purposes determined in accordance with SEC rules and do not reflect the actual economic value that may be realized by the NEO at the end of the relevant three-year performance period. Because share performance against the peer group did not meet the threshold for the three-year period 2018-2020, the shares of stock underlying performance-based shares were not issued to our NEOs (i.e., there was zero payout). See 2018-2020 PSU Results on page 68.

(2) 

Mr. Roberts joined the Company in August 2019.

2020 Pay Mix

 

LOGO

Share Ownership – Mr. Roberts exceeds the Company’s minimum equity ownership as of December 31, 2020

 

Level Required

   Share/Equity Holdings     Average Share Price
for calendar year  2020
     Total Value  

2x Base Salary (=$760,000)

  

 

393,555

 

$

4.0506

 

  

$

1,594,134

 

*

Does not include unvested performance-based units. Includes shares of our common stock deferred under our Key Employee Deferred Compensation Plan.

 

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Proxy Statement Summary

 

Robert D. Brown, Vice President – Corporate Development

 

LOGO

  Mr. Brown has over 27 years experience in the mining industry. As Hecla’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 2020 was based in part on his individual contribution to the Company.

2020 Achievements

 

 

Helped to highlight value in Hecla’s non-operating property portfolio by leading strategic reviews of Heva Hosco and Rock Creek/Montanore;

 

Developed analysis of Hecla and the silver industry with respect to jurisdictional risk, market, deposits, and peers and helped to implement findings in our marketing and strategic plan;

 

Secured processing of Fire Creek bulk sample at third-party facility; and

 

Completed and expanded due diligence of third-party projects despite COVID-19 restrictions.

Compensation (determined in accordance with SEC rules)

 

      Base
Salary
     Short-term
Incentive
     Long-term
Incentive
     Restricted
Stock Units
     Performance-
Based Shares
(1)
     Year-over-Year
Change
    Total Direct
Compensation
 

2020

  

$

264,000

 

  

$

203,280

 

  

$

201,000

 

  

$

160,000

 

  

$

21,485

 

  

p

5.7

 

$

849,765

 

2019

  

$

264,000

 

  

$

92,400

 

  

$

297,750

 

  

$

150,000

 

  

 

 

  

q

23.3

 

$

804,150

 

2018

   $ 264,000      $ 118,800      $ 385,800      $ 199,999      $ 80,534      q 0.2   $ 1,048,953  
(1) 

The amounts in this column reflect the aggregate grant date fair value of the performance-based shares for accounting purposes determined in accordance with SEC rules and do not reflect the actual economic value that may be realized by the NEO at the end of the relevant three-year performance period. Because share performance against the peer group did not meet the threshold for the three-year period 2018-2020, the shares of stock underlying performance-based shares were not issued to our NEOs (i.e., there was zero payout). See 2018-2020 PSU Results on page 68.

2020 Pay Mix

 

LOGO

Share Ownership – Mr. Brown exceeds the Company’s minimum equity ownership as of December 31, 2020

 

Level Required

   Share/Equity Holdings     Average Share Price
for calendar year  2020
     Total Value  

2x Base Salary (=$528,000)

  

 

306,885

 

$

4.0506

 

  

$

1,243,068

 

*

Does not include unvested performance-based units.

 

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Proxy Statement Summary

 

David C. Sienko, Vice President – General Counsel

 

LOGO

  Mr. Sienko has 27 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, disclosures, and litigation matters. Mr. Sienko’s 2020 compensation was based in part on specific objectives and his STIP in 2020 was based in part on his contribution in leading the Company through legal and regulatory matters.

2020 Achievements

 

 

Led the Company’s efforts to successfully resolve key litigation and regulatory matters including a class action claim related to the Klondex acquisition, and a lawsuit challenging the Montanore mining claims;

 

Successfully resolved various other tax and insurance disputes;

 

Supported the Board and managed or supported the Company’s corporate governance, regulatory compliance, and disclosure programs; and

 

Supported various business units during the review of key contracts related to supply chain and sales of products.

Compensation (determined in accordance with SEC rules)

 

      Base
Salary
   Short-
term
Incentive
   Long-term
Incentive
   Restricted
Stock
Units
   Performance-
Based
Shares
(1)
   Year-
over-
Year
Change
 

Total Direct  

Compensation  

2020

    

$

256,875

    

$

231,875

    

$

201,000

    

$

150,000

    

$

20,462

    

p

3.7

%

   

$

868,337  

2019

    

$

250,000

    

$

140,000

    

$

297,750

    

$

150,000

    

 

    

q

18.3

%

   

$

837,750  

2018

     $ 250,000      $ 150,000      $ 385,800      $ 175,000      $ 64,901      p 1.9 %     $ 1,025,701  
(1) 

The amounts in this column reflect the aggregate grant date fair value of the performance-based shares for accounting purposes determined in accordance with SEC rules and do not reflect the actual economic value that may be realized by the NEO at the end of the relevant three-year performance period. Because share performance against the peer group did not meet the threshold for the three-year period 2018-2020, the shares of stock underlying performance-based shares were not issued to our NEOs (i.e., there was zero payout). See 2018-2020 PSU Results on page 68.

2020 Pay Mix

 

LOGO

Share Ownership – Mr. Sienko exceeds the Company’s minimum equity ownership as of December 31, 2020

 

Level Required

   Share/Equity Holdings   Average Share Price
for calendar year  2020
   Total Value

2x Base Salary (=$530,000)

    

 

754,165

*

   

$

4.0506

    

$

3,054,821

*

Does not include unvested performance-based units.

 

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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

   79.5% of the CEO’s and 68.3% of the other NEOs’ pay is at-risk. Over 66.5% of total compensation for the CEO is performance-based and 55.9% 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, and are generally forfeited if the recipient resigns, retires, or is otherwise terminated, unless they meet certain age and years of service conditions. Our 2010 Stock Incentive Plan provides for a double-trigger vesting 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. For the last two years the performance-based shares have had no value.  

 

Change in Control Agreements

   Our change in control agreements contain double-trigger payments 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.    

 

 

2021 Proxy Statement    9

 


Table of Contents

Proxy Statement Summary

 

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, one new director in 2017, and one new director in 2021, thereby reducing the average tenure of the Board.  

 

Independence

   Eight of nine 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 independent directors are included on the agenda for every regularly scheduled Board meeting.  

 

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 amended in February 2020, and our Governance and Social Responsibility Committee (sometimes referred to herein as the “Governance Committee”) (f/k/a Corporate Governance and Directors Nominating Committee) amended its charter in March 2021.  

 

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 review potential successors to our CEO and other senior executives annually to develop our future leaders and ensure we can sustain business continuity, if any of these key employees were to leave our Company.    

 

 

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Proxy Statement Summary

 

Class II Director Nominees to Serve Until the 2024 Annual Meeting

Our Board is currently composed of nine 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 2024. Our director, George R. Nethercutt, Jr., has reached the mandatory retirement age and will not be standing for re-election at the Annual Meeting. The size of the Board is expected to be reduced to eight at the Annual Meeting. See page 37 for more information on the director nominees.

 

Class II Director Nominees

  Experience and Qualifications

Stephen F. Ralbovsky (age 67)
Director since 2016
Founder and Principal of Wolf Sky Consulting LLC

 

Committees served on:
Audit (Chair)

Governance and Social Responsibility

 

•  Audit Committee financial expert

•  Corporate Governance

•  Finance

•  Industry experience

•  International business

•  Industry association participation

 

•  Senior leadership

•  Legal and compliance

•  Reputation in the industry

•  Risk management

•  Strategic planning, business development, and business operations

Catherine “Cassie” J. Boggs (age 66) Director since 2017
Former General Counsel at Resource Capital Funds

 

Committees served on:
Governance and Social Responsibility (Chair)

Audit

Compensation

 

•  Corporate Governance

•  Finance

•  Industry experience

•  International business

•  Industry association participation

•  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 and social responsibility 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 November and December 2020, we contacted 30 of our top shareholders, representing approximately 55% of our aggregate outstanding shares of common stock, and engaged with all who responded to our invitation to discuss executive compensation and environmental, social responsibility and governance (“ESG”) matters. This led to focused discussions between senior executives (excluding our CEO) 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.

 

October through November:

 

•  Conduct fall shareholder outreach program

•  Participate in shareholder conferences

•  Engage with investors and proxy advisory firms on proxy disclosures

  

December through February:

 

•  Report to the Board or respective committee on shareholder outreach results

•  Prepare Proxy Statement and Annual Report

  

April through June:

 

•  Review proxy advisory firm reports

•  Hold Annual Shareholders Meeting

•  Publish Social Responsibility Report

In 2020, we increased our focus and efforts on incorporating additional ESG factors into our long-term business strategy and incentive compensation programs and communicated our ESG practices and performance with investors and other stakeholders. In 2020, management conducted approximately 15 presentations for analysts and investors, held approximately 140 one-on-one and group meetings with investors, and hosted 4 quarterly 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.

 

2021 Proxy Statement    11

 


Table of Contents

Proxy Statement Summary

 

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 2020 on page 23 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 5, 2021, 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 15 under Methods of Voting. As of the Record Date, 535,333,953 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 pandemic, 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 may return to an in-person Annual Meeting in 2022, but have not yet reached a final determination.

To participate in the virtual meeting, visit www.virtualshareholdermeeting.com/HL2021 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 19, 2021. The meeting will begin promptly at 10:00 a.m. PDT on May 19, 2021.

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 17, 2021 and until 11:59 p.m. PDT on May 18, 2021, 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/HL2021, 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

 

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Table of Contents

General Information About The Meeting

 

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 hmc-info@hecla-mining.com. 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), Proposal 3 (Approval of our Named Executive Officer Compensation), and Proposal 4 (Approval of Amendment to the Hecla Mining Company Key Employee Deferred Compensation Plan) are “non-routine” matters. Accordingly, if you do not direct your broker how to vote for Proposals 1, 3 or 4, 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 II 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 32 for a description of our director resignation policy.

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

Proposal 2 – Ratification of the Appointment of BDO USA, LLP as our Independent Registered Public Accounting Firm for 2021. 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 2021 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 2021.

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 48. 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

 

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General Information About The Meeting

 

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.

Proposal 4 – Approval of Amendment to the Hecla Mining Company Key Employee Deferred Compensation Plan. Approval of this proposal 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 4 must exceed the number voted “against” Proposal 4 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.

You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to approve an amendment to our Hecla Mining Company Key Employee Deferred Compensation Plan.

Discretionary voting by proxies on other matters. Aside from the proposals discussed above, no other proposals have been timely submitted in accordance with our Bylaws, and 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.

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 each of Messrs. Baker and 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 II Directors; (ii) ratification of the appointment of the independent registered public accountants; (iii) approval, on an advisory basis, of our executive compensation; and (iv) approval of an amendment to our Hecla Mining Company Key Employee Deferred Compensation Plan.

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.

 

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General Information About The Meeting

 

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/HL2021.

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 10:00 a.m., Eastern Daylight Time, on May 17, 2021, 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

 

   

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.

 

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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 hmc-info@hecla-mining.com.

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.

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.”

 

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Annual Report

Our Annual Report to Shareholders, consisting of our Form 10-K for the year ended December 31, 2020, 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, 2020, 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 Environmental, Social Responsibility and Governance (“ESG”)

Responsible mining means being transparent, managing risks that could impact our operations, people, the environment and our communities. This includes integrating into our business strategies, the ESG performance factors that are most important to our stakeholders and business. We benchmark against the Sustainability Accounting Standards Board (“SASB”) metals and mining standards and relevant aspects of the Task Force on Climate-Related Financial Disclosures. We have also prioritized the United Nations Foundation Sustainable Development Goals that most directly align with our business, corporate strategy, and material sustainability issues.

On our website, you can find Hecla’s ESG reporting and data and view our SASB-compliant 2019 Sustainability Report. Our 2020 Sustainability Report will be available on our website in the second quarter of 2021. Governance is discussed in the next section of this Proxy Statement, so this section primarily focuses on the 2020 highlights around the areas of environment, human capital management, safety, and community engagement.

ESG Oversight

Two committees of the Board provide ESG oversight. The Health, Safety, Environmental and Technical Committee of Hecla’s Board is tasked with overseeing ESG risks, strategic plans, and progress on issues that may potentially adversely impact Hecla’s operations, activities, plans, strategies, or reputation. The focus is primarily internal matters and the technical requirements on ESG matters. The Governance and Social Responsibility Committee is tasked with reviewing and making recommendations to the Board for ESG matters. The focus is primarily on policy and external matters. Each committee will rely on the activities of the other.

At the executive level, the Senior Vice President and Chief Operating Officer, and the Vice President of External Affairs reports directly to the Chief Executive Officer and are responsible for implementing the Company’s ESG programs. At our operations, the Vice President – General Managers ensure continuous improvement toward sustainability goals.

Environment

Mining operations can directly or indirectly impact the environment, including climate, water, land, and air. At each of our sites, we seek to reduce our environmental impact and set reduction targets for freshwater and energy use.

Climate Change

Hecla is aware of and seeks to manage any potential physical and transition risks or opportunities from climate change. In 2021, we also will be establishing targets against the goal of being net carbon neutral by 2030. You can find more information on this and other ESG topics on our website at www.hecla-mining.com, and selecting “Responsible Mining.”

Risk Management

Hecla conducts on at least a triennial basis, structured high-level risk assessments (“HLRAs”) which include climate change considerations and appropriate materiality re-assessments. We then develop site specific management action plans that are assigned to each site management team for resolution. Each key risk identified in the HLRA response action plan is designated an appropriate performance metric by which progress can be measured.

 

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Corporate Responsibility

 

   LOGO      

 

Environmental Highlights

 

 

Climate Change:

 

    36% increase in silver ounces produced per ton of Scope 1 and 2 greenhouse gas emissions over the last 3 years.

Total Energy Intensity:

    Achieved more than our multi-year 5% energy reduction goal.

 

 

LOGO

Integrated Environment Working Groups:

 

    Each of our sites has a Tailings, Waste and Water working group that considers, among other aspects, climate changes that could affect site operations which are then integrated into design of mine facility infrastructure.

Renewable Energy:

 

    In 2020, 95% of our electricity was line power. Of that, 76% was from renewable energy sources (hydropower).

Toward Sustainable Mining Program (TSM):

 

    Our Casa Berardi Mine accomplished its goal of achieving or exceeding a Level A rating for elements of Canada’s TSM program, which includes energy and GHG emissions management, tailings management, biodiversity conservation management, and mine closure framework.  

Closure:

 

    Hecla completed reclamation of the 300-acre Troy Tailings Storage Facility and the State of Montana released nearly $8.0 million in financial assurances back to the Company as a result of meeting or exceeding regulatory requirements. Hecla partnered with local suppliers, contractors, and regional indigenous peoples to harvest seed and plant over 200,000 shrubs and trees to recreate a self-sustaining native plant community and wildlife habitat.  
 

 

Safety and Health

Hecla’s commitment to continuous improvement in health and safety is part of our corporate culture. Our goal is to continually identify hazards and mitigate risks at our operations in order to achieve zero occupational injuries and illnesses.

 

 

   LOGO   

  

 

Safety and Health Highlights

 

 

Lowest Injury Rate in Company History:

 

 

LOGO

Zero Fatalities:

 

    In 2020, we had zero employee or contractor fatalities.

Decrease in Non-compliance Violations:

 

    We had 202 total non-compliance violations in 2020, representing a 37% reduction since 2018.
 

 

 

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Corporate Responsibility

 

Human Capital Management

Hecla’s human capital management is dedicated to continuously investing in the technology, training, systems, and programs that help protect and support our people. We also seek to have our workforce mirror the local demographic diversity including woman, ethnicities, and local indigenous people.

At the executive level, the Vice President of Human Resources reports directly to the Chief Executive Officer and is responsible for implementing the Company’s human capital management program. The position is an executive-level position to reflect the priority we place on utilizing our human capital resources to meet our business strategy. At the local level, each operating site has a human resource professional whose primary role is to manage the Company’s human capital management program at their respective site.

 

   LOGO      

 

Human Capital Management Highlights

 

 

Gender Diversity:

 

    9.75% of our workforce is women and women hold 19% of managerial positions.

Hiring Local:

 

    80% of our workforce is local to our operations.

Hiring First Nations:

 

    The number of First Nations hired from the Abitibiwinni (Pikogan) community by Hecla Quebec has more than quadrupled since 2018 from six to an average of 25 who worked at our Casa Berardi Mine in 2020.

Protecting Human Rights:

 

    In 2020, our Board approved and published a human rights policy statement codifying our commitment to seeking to conduct our business in a manner that is consistent with the United Nations Universal Declaration of Human Rights and the United Nations Guiding Principles on Business and Human Rights.

COVID-19 Protocols:

 

    Even before the pandemic was determined, we aggressively updated our health and safety protocols throughout the Company. In addition, at our Greens Creek Mine, all employees are quarantined before being allowed to go to the mine. Testing occurs before the quarantine, first day of quarantine, and the final test before being allowed on site. With vaccinations, testing will continue, but vaccinated employees will not need to be quarantined.
 

 

Community Engagement

Responsible mining means integrating with the community to support the economic and social framework of these host communities.

 

 

   LOGO   

  

 

Community Engagement Highlights

 

Supplier Code of Conduct:

The Company has a Supplier Code of Conduct that sets out the minimum standards of conduct expected from all suppliers wishing to do business with, or on behalf of, Hecla and its subsidiaries.

 

First Nations Cooperation Agreement:

 

    Hecla Quebec and the Council of the Abitibiwinni First Nation (“CAFN”) signed a Cooperation Agreement that ensures employment and business opportunities for CAFN and creates a mechanism that allows the First Nation community to benefit financially from the long-term success of Casa Berardi Mine projects.

Helping Communities During COVID-19:

 

    Hecla partnered with local business organizations near our operations and provided more than $150,000 worth of vouchers for Hecla employees to purchase goods and services at local businesses. In addition to donating money, PPE, and food to local food banks and first responders, our employees volunteered to support those in need in their local community.

Engaging with Stakeholders:

 

    As an example of engaging with our stakeholders, feedback from the Casa Berardi Mine Liaison Committee resulted in Hecla Quebec incorporating ESG factors into its long-term business strategy and incentive compensation programs, and increased communicating ESG practices and performance to stakeholders. In addition, a community advisory committee was reestablished at our Greens Creek Mine using remote meeting methods due to COVID-19.

Building a Skilled Workforce:

 

    In 2020, our Greens Creek Mine renewed a partnership with the University of Alaska Southeast (UAS) Center for Mine Training with a gift of $315,000 for scholarship assistance over the next three years. This makes over $1.2 million invested by the Company in this program over the past nine years.  
 

 

 

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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.”

Hecla’s Board 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.

 

 

LOGO

 

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Corporate Governance and Related Matters

 

Shareholder Outreach in 2020

Over the last several years we have undertaken significant shareholder outreach efforts in order to elicit and understand the concerns of our shareholders. In November and December 2020, we sought engagement with 30 of our largest shareholders. Of the 30 invitations we sent, only 3 large shareholders responded, as well as two proxy advisory firms. All others responded they did not need to meet with the Hecla outreach team to discuss any compensation or ESG matters. Also, in 2020, we conducted meetings and conference calls with investors and analysts and participated in invitation only investment conferences. In 2020, management conducted approximately 15 presentations, held approximately 140 one-on-one and 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 2020, our Say-on-Pay proposal received 72% support. The one recurring 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. In June 2020, the Compensation Committee reviewed our pay policy, and amended it by targeting base salaries below the median of our peer group, but targeting incentives above the peer median. The total direct compensation of our NEOs’ is now targeted at approximately the 50th percentile. The process of setting targeted compensation includes consideration of each NEO’s skills, experience, knowledge, and reputation in the industry, as well as Company needs. 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. Due to this change in our pay policy, the CEO’s total direct compensation was reduced by 20%.

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.

In our 2020 and 2021 shareholder outreach, we discussed three of our corporate governance features that may have an anti-takeover effect on the Company with certain institutional 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 and 2021 Annual Meetings. See Prior Proxy Proposals to Amend our Certificate of Incorporation and Bylaws on the next page for further discussion.

Other corporate governance topics discussed in our outreach program have included board diversity and refreshment. In response, we added two new directors in 2016, one new director in 2017, and one new director in 2021, thereby reducing the average tenure of the Board. We also have one director, who will not stand for re-election at the May 2021 Annual Meeting due to mandatory retirement, and several other directors who are within one to two years of retirement age, and will not be standing for re-election at the end of their respective terms, thus allowing us to refresh the Board further within the next few years.

ESG Matters

Another topic of discussion with our shareholders and proxy advisory firms was on ESG matters, and specifically how we managed through the COVID-19 pandemic. In early 2020, we were considered an essential business at the beginning of the pandemic in Nevada, Alaska and Idaho, and launched a proactive response to the escalating COVID-19 pandemic, while temporarily suspending operations at our Casa Berardi Mine, and at our San Sebastian Mine due to government mandated closures. Both of those sites returned to full operations within a few weeks to a month. To mitigate the impact of COVID-19, we took precautionary measures, including implementing very detailed corporate and site-specific plans in early 2020. Our plans included being flexible and quickly adapting to enhanced cleaning practices, implementing temperature testing, and quarantining protocols. We also commenced remote work protocols for those employees who wished to work remotely and could effectively do so. We took those actions to secure the safety of our employees, our vendors, and the communities in which our team members live and work, and to adhere to the Center for Disease Control recommendations.    

 

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Corporate Governance and Related Matters

 

Prior Proxy Proposals to Amend our Certificate of Incorporation and Bylaws

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 another proposal in our proxy statement to approve amendments to certain provisions contained in our charter in order to lower the supermajority voting provisions contained in those documents. In 2018, we included an advisory proposal to our shareholders to declassify our Board, which received majority support; and, in 2019, we included a proposal to approve charter 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.

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  

 

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In 2019, 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 2020 Annual Meeting. 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. In 2020, we consulted several of our large shareholders and two proxy advisory firms on the same matter, and the Board determined not to submit any of those proposals for shareholder votes at the 2021 Annual Meeting as well. 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 2020

Our Board acts as the ultimate decision-making body of the Company on certain fundamental matters and advises and oversees senior management on other matters. In carrying out its responsibilities, the Board reviews and assesses Hecla’s long-term strategy. During 2020, there were five 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 2020. In 2020, each director attended 100% of the meetings of the Board and 95% of the meetings of the committees of which they are a member.                

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.

 

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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

•  Strategic                                                            

 

•  Legal and regulatory

•  Reputational                

  

•  Financing, including borrowing, liquidity, capital allocation and hedging

 

     LOGO

Management

  LOGO      

Audit Committee

•  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

  

 

•  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, privacy, and data protection

 

  

Governance and Social Responsibility Committee (“Governance Committee”)

  

 

•  Monitors governance structure, policies, and processes

•  Monitors legal and policy matters with potential significant reputational impact

•  Monitors environmental, climate, health, safety, sustainability, social (including, but not limited to community relations, indigenous peoples relations, and diversity and inclusion), and public policy trends, issues, guidance, concerns and risks and other corporate responsibility matters (collectively “ESG”)

•  Shareholder concerns

 

  

Compensation Committee

                                                                     

 

•  Oversees executive compensation policies and practices

•  Assesses the Company’s compensation arrangements to determine if their provisions and operations create undesired or unintentional risks of a material nature

•  Approves compensation levels and programs for the executive officers, including the CEO

 

    

Health, Safety, Environmental and Technical Committee

    

 

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

•  Monitors the implementation and effectiveness of health, safety, environmental and sustainability policies and systems

•  Oversees strategy and efforts to protect and improve the quality of the environment, including climate change and sustainability policies and programs

•  Monitors efforts to create a culture of continuous improvement related to health, safety, environmental and sustainability practices

 

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 2021. 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 100 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.    Alice Wong

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 11 years, which reflects a balance of company experience and new perspectives. The average age of our directors is 67. Our Bylaws and Corporate Governance Guidelines provide that directors will not be nominated for re-election after their 75th birthday. Mr. Nethercutt has reached the mandatory age of retirement and will not stand for re-election at the Annual Meeting.

 

       
Directors       

Tenure

      

Backgrounds

61 – 65   ····

    

0 –  5     ····

    

1/9   Asian

66 – 70   ··

         

6 – 10    

    

1/9   American Indian and Alaska Native 

71 – 75   ··

    

11 – 15   ··

         

2/9   Women

76 –  80   ·

    

16 – 25   ···

    

9/9   Diverse Backgrounds

     

Average Age: 67

 

    

Average Tenure: 11 yrs.

 

    

Accounting, Geology, Legal, Engineering, Finance, Mining, Senior Leadership, International Business and ESG

 

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

 

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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.

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 2020 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
  LOGO   2   Annual Board and
Committee
Evaluations
    LOGO     3   Summary of
Evaluations
    LOGO     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; Governance and Social Responsibility; 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 2020. All committee members attended 95% of all meetings of the committees on which they were a member.

 

Executive Committee Members

   Functions of the Committee    Meetings in 2020

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

   None

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

   Functions of the Committee    Meetings in 2020

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

Alice Wong(4)

  

•  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 46

   6

Compensation Committee

Members(2)

   Functions of the Committee    Meetings in 2020

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 CD&A on page 50

   5

 

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Governance

and Social Responsibility

Committee Members(2)

   Functions of the Committee    Meetings in 2020

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

  

•  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

•  recommend policies, programs, practices, metrics, performance indicators and progress concerning ESG matters to the Board

•  recommend to the Board any action on ESG and related matters that may be required or considered advisable

   4

Health, Safety,

Environmental and Technical

Committee Members

   Functions of the Committee    Meetings in 2020

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

Alice Wong(4)

  

•  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.

(4)

Ms. Wong was appointed to the Board and each of the Audit and Health, Safety, Environmental and Technical committees on February 26, 2021.

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

 

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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.

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, Governance and Social Responsibility, 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 Guidelines and Code of Conduct

The Board has adopted Corporate Governance Guidelines and a Code of Conduct in accordance with SEC and 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 and Chief Financial Officer 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 our 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 our anonymous telephone hotline. 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.

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 February 26, 2021, the Board increased the size of the Board from eight members to nine members due to the appointment of a new Class I director (Ms. Alice Wong).

 

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Identifying and Evaluating Nominees for Director

Director Selection Process

 

1   Candidate Recommendations     LOGO     2   Governance Committee     LOGO     3  

Board of

Directors

    LOGO     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, backgrounds, 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 four 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 and diversity, 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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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.

 

Director Qualifications and Experience

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Audit Committee Financial Expert

                             

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.

                         

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

Experience with governance principals and policies. All our directors have had experience in corporate governance.

                 

Environmental and Social Responsibility

Experience with environmental and social responsibility initiatives, including sustainability, diversity, and inclusion. Six of our directors have experience in environmental and social responsibility.

                       

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. Eight of our directors have financial knowledge.

                   

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. Three of our directors has experience in geology, mining, and/or engineering.

                             

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.

                 

Industry Association Participation

Experience in organizations that support companies and employers in the mining industry and protect their rights. Three of our directors have chaired an industry organization. Seven of our directors have a long and highly regarded reputation in the industry.

                     

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.

                 

Senior Leadership

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. Eight of our directors have senior business leadership experience.

                   

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.

                           

Reputation in the Industry

                     

 

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Corporate Governance and Related Matters

 

Director Qualifications and Experience

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

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.

                 

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.

                 
(1) 

Mr. Nethercutt will be retiring at the Annual Meeting.

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 101. 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 102. 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

 

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Corporate Governance and Related Matters

 

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 II 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 three Class II directors whose terms will expire at the 2021 Annual Meeting: Stephen F. Ralbovsky, Catherine “Cassie” J. Boggs, and George R. Nethercutt, Jr. Mr. Nethercutt has reached the mandatory retirement age and will not stand for re-election.

At a meeting held by the Governance and Social Responsibility Committee in February 2021, the committee determined the directors whose terms are expiring – Mr. Ralbovsky and Ms. Boggs – 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 2024.

It is intended that the proxies solicited hereby from our shareholders that do not provide voting instructions will be voted FOR the election of Stephen F. Ralbovsky and Catherine “Cassie” J. Boggs. 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 director nominee 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, finance, and company and industry knowledge, and we believe that, as a group, they work effectively together in overseeing our business.

Current Class II Nominees for Election to the Board – Term Ending at the 2021 Annual Meeting

If elected, the nominees will each serve for a three-year term ending in 2024. The nominees are as follows:

 

 

LOGO

 

   Stephen F. Ralbovsky
   Founder and Principal of Wolf Sky Consulting LLC
  

Age: 67

Director since: 2016

Other Directorships: None

 

 

Hecla Committees:

•  Audit (Chair)

•  Governance and Social Responsibility

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 is a CPA and 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 II Directors

 

 

LOGO

 

   Catherine “Cassie” J. Boggs
   Former General Counsel at Resource Capital Funds
  

Age: 66

Director since: 2017

Other Directorships: Funzeleo

 

 

Hecla Committees:

•  Governance and Social Responsibility (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. She has served as an Adjunct Professor at the University of Denver, Sturm College of Law since January 2021.

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.

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 32 for a description of our director resignation policy.

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

 

    
   LOGO      

 

 

The Board recommends that shareholders vote “FOR” the election of Stephen F. Ralbovsky and Catherine “Cassie” J. Boggs.

 
    

 

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Proposal 1 — Election of Class II Directors

 

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

 

 

LOGO

 

   Ted Crumley
   Former Executive Vice President and Chief Financial Officer OfficeMax Incorporated
  

Age: 76

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 26 years of service on Hecla’s Board, Mr. Crumley understands all aspects of our business.

 

 

LOGO

 

   Terry V. Rogers, C. Dir., H.R.C.C.C.
   Former Senior Vice President and Chief Operating Officer Cameco Corporation
  

Age: 74

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.

 

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Proposal 1 — Election of Class II Directors

 

 

LOGO

 

   Charles B. Stanley
   Managing Member of Cutthroat Energy, LLC
  

Age: 62

Director since: 2007

Other Directorships: None

 

 

Hecla Committees:

•  Health, Safety, Environmental and Technical

•  Audit

Mr. Stanley has been the Managing Member of Cutthroat Energy, LLC, since April 2019. Prior to that, Mr. Stanley was Chief Executive Officer, President and Director of QEP Resources, Inc. from May 2010 until his retirement in January 2019, and Chairman of QEP’s Board of Directors 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.

Continuing Class I Members of the Board – Term Ending at the 2023 Annual Meeting

 

 

LOGO

 

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

Age: 61

Director since: 2001

Other Directorships: None

 

 

Hecla Committees:

•  Executive (Chair)

Mr. Baker has been our Chief Executive Officer since May 2003 and has served as our President since November 2001. 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 served as a Director of QEP Resources, Inc. from May 2010 to March 2021. 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 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.

 

 

LOGO

 

   George R. Johnson
   Former Senior Vice President of Operations with B2Gold Corporation
  

Age: 72

Director since: 2016

Other Directorships: B2Gold Corporation

 

 

Hecla Committees:

•  Health, Safety, Environmental and Technical (Chair)

•  Audit

•  Governance and Social Responsibility

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.

 

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Proposal 1 — Election of Class II Directors

 

 

LOGO

 

   Alice Wong, ICD.D
   Senior Vice President and Chief Corporate Officer Cameco Corporation
  

Age: 61

Director since: 2021

Other Directorships: SaskEnergy Incorporated

 

 

Hecla Committees:

•  Audit

•  Health, Safety, Environmental and Technical

Ms. Wong has served as Senior Vice President and Chief Corporate Officer of Cameco Corporation since 2011. She was Cameco’s Vice President of Safety, Health, Environment, Quality and Regulatory Relations from 2008 to 2011, and Vice President of Investor, Corporate and Government Relations from 2005 to 2008. She has been a Board member of SaskEnergy Incorporated since December 2016, as well as a member of the Mining Association of Canada since June 2016, Canadian Nuclear Association since January 2013, and Saskatchewan Mining Association since January 2013. In 2012, Ms. Wong was named as one of SaskBusinesses 2012 Women of Influence. She is a former mentee in Catalyst’s Women on Board Mentoring Program. In 2018, she was named a Diversity 50 Board Ready Candidate by the Canadian Board Diversity Council and an Alumni of Influence by the University of Saskatchewan’s College of Arts and Science.

Board Qualification and Skills: Ms. Wong has been with Cameco for more than 30 years in increasingly senior leadership roles and has gained a wealth of experience from her diverse responsibilities. In her current role as Senior Vice President and Chief Corporate Officer, she provides executive oversight for human resources, safety, health, environment, quality, regulatory relations, business technology services, supply chain management, internal audit, and corporate ethics. She obtained her Corporate Directors Designation (ICD.D) from the ICD Rotman Director’s Education Program.

 

 

 

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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 an 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 52 for a list of these companies). In 2020, 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 2020.

Components of Non-Management Director Compensation

 

Compensation Element

   Current
Value
 

Annual Board Retainer

   $ 98,000  

Annual Board Chairman Retainer

   $ 120,000  

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” or “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 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.

 

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Compensation of Non-Management Directors

 

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, 2020, there were 2,476,644 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 2020.

Non-Management Director Compensation for 2020

 

Director

Fees Earned or
Paid in Cash
($)
Stock
Awards
(1)
($)
All Other
Compensation
(2)
($)
Total
($)

Catherine J. Boggs

  106,000   211,831   0   317,831

Ted Crumley, Chairman

  218,000   211,831   0   429,831

George R. Johnson

  110,000   211,831   7,500   329,331

George R. Nethercutt, Jr.

  98,000   211,831   0   309,831

Stephen F. Ralbovsky

  110,000   211,831   0   321,831

Terry V. Rogers

  110,000   211,831   3,750   325,581

Charles B. Stanley

  98,000   211,831   0   309,831
(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, 2020. 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 2020 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 ($2.147) ($120,000 ÷ 2.147 = 55,892). On July 9, 2020, each non-management director received 55,892 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 July 9, 2020 ($3.79), the grant date fair value for each grant of 55,892 shares was $211,831. (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     .

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 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, 2020. See Stock Ownership Guidelines on page 70 for further discussion. As of December 31, 2020, all non-management directors met the guidelines.

Non-Management Director Stock Ownership as of December 31, 2020

 

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
($4.0506)
(2)
($)
Meets
Guidelines

Boggs

  98,000   3x   294,000   82,459   98,640   181,099   733,560   Yes

Crumley

  218,000   3x   654,000   126,536   220,431   346,967   1,405,425   Yes

Johnson

  98,000   3x   294,000   17,273   148,092   165,365   669,827   Yes

Nethercutt

  98,000   3x   294,000   31,686   162,080   193,766   784,869   Yes

Ralbovsky

  98,000   3x   294,000   17,273   148,092   165,365   669,827   Yes

Rogers

  98,000   3x   294,000   93,103   144,611   237,714   962,884   Yes

Stanley

  98,000   3x   294,000   100,536   189,478   290,014   1,174,731   Yes
(1)

As of December 31, 2020, 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 2020 was $4.0506.

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 102.

 

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PROPOSAL 2

 

RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021

 

The Audit Committee is directly responsible for the appointment, compensation, retention, evaluation, and termination, if necessary, 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, 2021. 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;

   

at least annually obtains and reviews a report from BDO describing all relationships between the independent auditor and Hecla; and

   

reviews data relating to audit quality and performance, including the most recent Public Company Accounting Oversight Board (“PCAOB”) reports on BDO and its peer firms.

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 and the committee are 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 its 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 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 2021 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 2021.

 

    
   LOGO      

 

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 2021.

 

 
    

 

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PROPOSAL 2 — Ratification of the Appointment of BDO USA, LLP as Our Independent Registered Public Accounting Firm for 2021

 

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, 2019 and December 31, 2020, and fees for other services rendered by BDO during those periods.

 

      2020      2019  

Audit Fees(1)

   $ 1,041,500      $ 960,160  

Audit Related Fees(2)

     93,000        88,000  

Tax Fees(3)

     10,000        48,000  

All Other Fees

             

Total

   $ 1,144,500      $ 1,096,160  
(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, including the $475 million debt refinancing in February 2020.

(2)

Consisted principally of fees for audits of financial statements of employee benefit plans.

(3)

Consisted of fees for tax assistance in preparation of the Scientific Research & Experimental Development Tax Credits Application of Hecla Quebec (one of our subsidiaries), submitted to Revenue Canada (2020 – fiscal year 2020, 2019 – fiscal years 2018 and 2019).

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, 2020; (2) discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of 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 2020, 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 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.

 

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PROPOSAL 2 — Ratification of the Appointment of BDO USA, LLP as Our Independent Registered Public Accounting Firm for 2021

 

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, 2020 be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, 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 2020 as set forth under the heading Compensation Discussion and Analysis (“CD&A”) on page 50 and in the accompanying compensation tables starting on page 79, 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- 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 (79.5%) of the CEO’s total compensation at-risk;

   

Targeting total direct compensation of our NEOs’ at approximately the 50th percentile;

   

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.

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

 

the performance-based shares awarded to our CEO and NEOs in 2018 vested on December 31, 2020 with a value of $0 for the second year in a row, due to the failure of the Company’s 3-year TSR to be above the 50th percentile of its peer group;

reduced NEO total direct compensation to the median of our peer group;

an LTIP that closely aligns payout with share performance by using a TSR positive or negative multiplier of performance depending on relative share performance, while capping payouts at target if absolute return is negative;

reduced the targeted value of the CEO’s 2020 performance-based units from $500,000 to $400,000; and

reduced the CEO’s Long-term Incentive Plan units from 10,000 to 8,000.

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 2021 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 2020, and the related compensation tables and narrative in the Proxy Statement for the Company’s 2021 Annual Shareholders’ Meeting, is hereby APPROVED.”

 

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

 

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.

 

    
   LOGO      

 

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

 

 
    

 

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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.

     61      President and CEO

Lindsay A. Hall*

     65      Senior Vice President and Chief Financial Officer

Lauren M. Roberts

     55      Senior Vice President and Chief Operating Officer

Robert D. Brown

     52      Vice President – Corporate Development

David C. Sienko

     52      Vice President and General Counsel
*

Resigned in February 2021.

Executive Summary

Hecla is the largest primary silver producer in the U.S. – and the oldest NYSE-listed precious metals mining company in North America. Its operating silver mines are located in Alaska (Greens Creek) and Idaho (Lucky Friday), and is a 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 operations and cash-flow generating assets, we have a number of exploration properties and pre-development projects in world-class silver and gold mining districts throughout North America.

In summary, 2020 was a very strong year for Hecla, notwithstanding the difficulties we faced in dealing with COVID-19. During January 2020, we recognized the potential risk COVID-19 could have for our business and we took proactive measures to protect the health of our employees, the reliability of our supply chain, and our finances. The early planning and robust focus during the first quarter were instrumental in allowing us to maintain uninterrupted operations at our Greens Creek Mine. At the Lucky Friday Mine, we began ramping up to full production and rebuilding the relationship with the workforce and the community. Both our Casa Berardi and San Sebastian mines encountered brief government mandated shutdowns, but we worked to mitigate the effect on the employees and the Company. We ramped down our San Sebastian operation and are preparing our Nevada operations for a ramp down in 2021. While we did not achieve all of our goals in 2020, in many cases largely due to the difficulties imposed by COVID-19, the overall result was strong and a significant improvement over the past few years. Our balance sheet was significantly strengthened at the end of the year, employee retention and job satisfaction were very strong, and we reduced our AIFR to the lowest level in our history (2020 had an overall 24% reduction in the AIFR across all our operating mines, and from 2014 to 2020, we achieved a total AIFR reduction of 80%).

 

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Key Operating and Significant 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 2020, 2019 and 2018.

 

      As of and for the Year Ended December 31,

Key Results

   2020   2019   2018

Silver (ounces) produced

       13,542,957       12,605,234       10,369,503

Gold (ounces) produced

       208,962       272,873       262,103

Lead (tons) produced

       34,127       24,210       20,091

Zinc (tons) produced

       63,112       58,857       56,023

Silver-equivalent ounces produced5

       40,673,180       47,203,721       43,638,249

Gold-equivalent ounces produced5

       471,413       549,287       540,174

Sales of products (in thousands)5

     $ 691,873     $ 673,266     $ 567,137

Net loss (in thousands)

     $ (16,790 )     $ (99,557 )     $ (26,563 )

Basic loss per common share

     $ (0.03 )     $ (0.20 )     $ (0.06 )

EBITDA (in thousands)6

     $ 196,940     $ 129,264     $ 148,585

Cash from operating activities (in millions)

     $ 180.8     $ 120.9     $ 94.2

Cash and cash equivalents (in millions)

     $ 129.8     $ 62.5     $ 27.4

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 18, 2021. During the 2020 STIP period, some of our achievements are as follows:

 

   

best safety record in Hecla’s history that significantly exceeded the quantitative goal;

   

avoided operational disruptions due to COVID-19, with proactive steps taken before a pandemic was declared and with protocols that kept operations nearly COVID-19 free;

   

highest revenue in the Company’s history, third highest reserves and fourth highest free cash flow;

   

annual and two-year TSR was one of the best performers compared to peers;

   

maintained consistent level of debt with an increase of $6 million, from $517 million to $523 million;

   

year-end cash position of $130 million, an increase of $67 million from 2019, with the credit facility undrawn;

   

successfully ramping up the Lucky Friday Mine to full production while reintegrating former striking union members with the crossover and replacement workers and testing a new mining method;

   

our Casa Berardi Mine generated free cash flow exceeding $30 million while establishing lower costs and higher productivity to achieve significantly improved long-term plans;

   

established a new relationship with Investissement Québec with a $32 million long-term loan;

   

achieved significant tax refunds from most jurisdictions Hecla has operations;

   

improved resilience to cyber-risks;

   

all US managers received discrimination training, new employees have a meaningful onboarding process, and a new leadership training program was developed and implemented;

   

funded and strengthened our pensions;

   

drilling programs in Nevada and Mexico were implemented earlier than planned;

   

ESG reporting was increased;

   

improved development opportunities for female employees;

   

resolved a number of outstanding litigation matters;

   

added a new diverse director; and

   

completed a collaboration agreement with the First Nations at our Casa Berardi Mine.

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. The total direct compensation of our NEOs is

 

5 

Silver and gold equivalent production includes silver, gold, lead and zinc production converted to silver and gold ounces using average prices for each year.

6 

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 B under Reconciliation of Net (Loss) (GAAP) to Earnings Before Interest, Taxes, Depreciation, and Amortization (non-GAAP).

 

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Compensation Discussion and Analysis

 

targeted at approximately the 50th 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 2020, the committee removed from the peer group Detour Gold because it was acquired by Kirkland Lake Gold, and added Oceana Gold, Torex Gold, Pretium Resources and Novagold, as these companies are either similar to Hecla in total revenue, total assets and/or market capitalization.

In 2020, our peer group was made up of the following 15 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

  

TSR    

Peer(2)     

IAMGOLD Corporation

     1,065             1,775             3,862           Canada        

Centerra Gold Inc.

     1,375             2,353             2,702           Canada        

Pan American Silver Corporation

     1,351             4,979             3,462           Canada        

Novagold

     0             2,964             246           Canada        

Coeur Mining Inc.

     712             1,968             1,379           United States        

Torex Gold

     641             1,353             1,230           Canada        

B2Gold Corp.

     1,156             4,216             2,683           Canada        

Alamos Gold Inc.

     683             2,368             3,397           Canada        

SSR Mining

     607             4,225             1,750           Canada        

Royal Gold, Inc.

     423             8,020             2,555           United States        

Eldorado Gold

     618             1,405             4,649           Canada        

New Gold Inc.

     631             602             2,159           Canada        

First Majestic Silver Corp.

     364             2,729             1,028           Canada        

Pretium Resources

     485             2,089             1,573           Canada        

Oceana Gold

     651             1,382             2,072           Canada        

Median

     641             2,353             2,159          

 

  

 

Hecla Mining Company

     673             1,814             2,637           United States   

 

(1)

In $US millions for and as of year-end 2019.

(2)

These companies are also part of the Company’s TSR peer group.

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 11 of our 13 selected peers. The peer group selected by Institutional Shareholder Services (“ISS”) included only one of our 13 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 11 of our peers) and require that Hecla be compared to

 

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Compensation Discussion and Analysis

 

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 mining companies.

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 short-term 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 target direct compensation at the median level and deliver compensation above or below these levels when warranted by performance.

In 2020, total direct compensation (base salary, short- and long-term incentives) for our NEOs was targeted at the approximate median percentile of the peer group.

In 2020, the committee also approved a separate peer group to be used specifically with regard to TSR, which consisted of the following companies/funds:

IAMGOLD Corporation

Pan American Silver Corporation

First Majestic Silver

Eldorado Gold

Fresnillo

Pretium Resources

GDX Vectors Gold Miner ETF

  

Alamos Gold

B2Gold Corp.

Centerra Gold

Equinox Gold

Hochschild Mining

Torex Gold

GDXJ Vectors Junior Gold Miners ETF

  

SSR Mining

Coeur Mining

New Gold Inc.

Endeavour Silver

Oceana Gold

GLD Gold Share

SLV Silver Trust

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 is decided by the full Board). In 2020, the committee did not receive assistance from an independent executive compensation consultant. 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. In past years, the committee has used Mercer to perform executive compensation services solely on behalf of the committee. Since our shareholder outreach confirmed no concerns by shareholders and proxy advisory firms, the committee decided not to use a compensation consultant, but instead have the Company’s human resources department review executive compensation. In 2020, the human resources department performed the following services:

 

   

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

   

reviewed 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;

   

reviewed 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;

   

collected and analyzed compensation data from the most recent proxy filings of the peer group and summarized the market pay data and compared Hecla’s executive compensation levels to the peer group proxies;

   

analyzed the year-over-year change in compensation levels for Hecla compared to each market data source;

   

analyzed Hecla’s long-term incentive and equity practices compared to peers;

   

prepared a report to the committee summarizing the methodology used and findings; and

   

assisted the committee in meeting its obligation to issue a Compensation Committee Report recommending inclusion of the CD&A in the Proxy Statement.

 

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Compensation Discussion and Analysis

 

In June 2020, Hecla’s human resources department 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. The committee compared this information to the executives’ compensation by similarity of position. The committee also reviewed the Company’s 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.

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 the other NEOs 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 Vice President – Human Resources also make recommendations to the committee regarding the Company’s 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 the Company’s stock-based compensation plans and amendments to the plans, as necessary.

Compensation Philosophy and Objectives

Management and the Board 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.

 

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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

 

Incentive award metrics that are generally objective and tied to Company performance

79.5% of CEO and 68.3% of NEO pay is at-risk

Over 66.5% of total compensation for the CEO is performance-based

55.9% 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 benefits for NEOs

Double-trigger change in control vesting acceleration in 2010 Stock Incentive Plan

Time-based equity awards that generally vest over a three-year period to promote retention

Equity awards that are performance-based depend on relative share performance (as well as certain time-based service requirements)

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

We DO NOT Have these Practices

 

×

Repricing of stock options

×

Perquisites

×

Excise tax gross-ups

 

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Elements of Total Compensation

We have a multifaceted compensation program. For the year ended December 31, 2020, our executive compensation program consisted of the following elements:

 

Pay Element

   Metrics / Objective
 

Base Salary

  

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

Key Feature: Designed to be at or below 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 that reflect strategic objectives and tactical activities. Weighting of the corporate performance is targeted at 50% quantitative corporate performance goals, 25% qualitative/other goals (although many qualitative goals also have quantitative aspects), and 25% that is determined at the discretion of the committee. 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 a 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, generating 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 cases of death, disability, or in some cases retirement. 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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Pay Element

   Metrics / Objective
    

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 death, disability, or in some cases retirement, 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 death, disability, or in some cases retirement, 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 equity award 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.

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.

 

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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

 

LOGO

Other NEO Mix of Target Pay

 

LOGO

2020 Target Compensation Structure. The following table lists total 2020 target compensation for the NEOs.

 

NEO

   Base
Salary
($)
     Short-term
Incentive
Target Award
($)
     Long-term
Incentive Plan
Target Award
($)
     Equity(1)
($)
     Total
($)
 

Baker

     635,000        635,000        800,000        800,000        2,870,000  

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

     265,000        185,500        300,000        250,000        1,000,500  
(1)

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        400,000        800,000

Hall

       225,000        150,000        375,000

Roberts

       225,000        150,000        375,000

Brown

       160,000        105,000        265,000

Sienko

       150,000        100,000        250,000

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.

 

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Overview of our Compensation Decisions and Results for 2020

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 2020:

 

   

Base salaries of our NEOs were unchanged, except for our Vice President – General Counsel, who received a 6% increase;

   

The assessment of short-term corporate performance was 158% of target with quantitative factors contributing 83% (target of 50%), qualitative factors contributing 35% (target of 25%) and discretionary factors contributing 40% (target of 25%);

   

The 2018-2020 LTIP payout was $67.00 per unit resulting from the performance of the long-term value drivers: reserve growth (71% of target); production growth (98% of target); and TSR (100% of target). The other metric, cash flow, resulted in no payout; and

   

Because share performance against the compensation peer group did not meet the threshold for the three-year period 2018-2020, the performance-based shares awarded in 2018 were not issued to our NEOs (i.e., there was zero payout for the second year in a row).

Base Salary

Design. The committee targets base salaries between the 25th to 50th percentile Hecla’s peer group for our NEOs. An individual NEO’s base salary may be set above or below this 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 2020, the committee reviewed an analysis prepared by the Vice President – Human Resources. The CEO and other NEO base salaries were not adjusted in 2020, except for Mr. Sienko, whose base salary was increased by 6% based on the factors described above.

The following table shows annual base salaries for all NEOs from July 1, 2019 through December 31, 2020:

Base Salary for NEOs July 1, 2019 through December 31, 2020

 

NEO

  

7/1/19 thru

6/30/2020

Salary
($)

  

7/1/2020 thru  

12/31/2020  

Salary  

($)  

Baker

       635,000        635,000  

Hall

       380,000        380,000  

Roberts

       380,000        380,000  

Brown

       264,000        264,000  

Sienko

       250,000        265,000  

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 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

 

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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 2020, 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 %    

 

 

 

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 February 2020 to February 2021) comprising 25% of the targeted award; and

   

a discretionary factor (measured from February 2020 to February 2021) 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 2020, 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 (“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 was 43.0 million silver equivalent ounces. Maximum payout would be attained if production achieved 45.5 million equivalent ounces. The threshold for minimum payout was slightly below budgeted production of 41.0 million equivalent ounces. Actual equivalent production was 43.3 million ounces. The production goals resulted in a 23% value.

2020 Production Metrics

 

2020 Production in Silver Equivalent Ounces (includes all metals)

    

 

 

 

    

 

   % Performance Value    

 

45.5 mm

       Maximum        40 %    

 

 

 

43.0 mm

       Target        20 %    

 

 

 

<41.0 mm

    

 

 

 

       0 %    

 

 

 

The Adjusted EBITDA less capital7 target was $70 million. Maximum payout was achieved if Adjusted EBITDA less capital was $90 million. There was no payout if Adjusted EBITDA less capital was less than $50 million. Actual

 

7 

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 Adjusted EBITDA less capital to the most comparable GAAP measure of net loss for the year ended December 31, 2020, is included in Appendix B of this Proxy Statement.

 

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adjusted EBITDA less capital was $124 million, which exceeded the maximum. The Adjusted EBITDA less capital metric resulted in a 40% value.

2020 Adjusted EBITDA Less Capital Metrics

 

 

 

    

 

   % Performance Value    

 

$90 mm

       Maximum        40 %    

 

 

 

$70 mm

       Target        20 %    

 

 

 

<$50 mm

    

 

 

 

       0 %    

 

 

 

The AIFR target was a 5% reduction from the 2019 AIFR. Maximum payout was achieved if our AIFR reduction was 10%. The threshold payout level is a 0% reduction, below which no payout is earned. The actual 2020 AIFR was 1.22, which was a reduction of 24% from the 2019 rate, and resulted in a 20% value for that metric.

AIFR Metric

 

 

 

    

 

   Factor Value    

 

10%

       Maximum        20 %    

 

 

 

5%

       Target        10 %    

 

 

 

<0%

    

 

 

 

       0 %    

 

 

 

2020 STIP Quantitative Measure Results

 

 

 

   Maximum   Target   Minimum   Actual   Performance
Value
   

 

Production
Silver equivalent ounces

       45.5 mm ozs.       43.0 mm ozs.       41.0 mm ozs.       43.3 mm ozs. (1)        23 %    

 

 

 

Adjusted EBITDA less capital

       $90 mm       $70 mm       $50 mm       $124.4 mm       40 %    

 

 

 

Work-related injury reduction

       10 %       5 %       0 %       24 %       20 %    

 

 

 

Total Quantitative

    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      83 %    

 

 

 

(1) 

The STIP uses fixed budgeted prices, while actual prices for financial reporting are used in our year-end reporting.

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.

Qualitative objectives for NEOs are over one hundred initiatives and tasks related to most aspects of Hecla’s business including, but not limited to: (i) safety and health, (ii) environmental, (iii) technology and innovation, (iv) continuous improvement, (v) operations, (vi) finance/accounting/IT, (vii) employee development, (viii) mine life extension, exploration and reserve growth, (ix) investor relations, (x) government and community affairs, and (xi) legal.

The committee assessed qualitative performance at 35%. The committee based its assessment on more than a hundred goals and the following are some of the goals that were achieved:

 

   

successfully ramping up the Lucky Friday Mine to full production while reintegrating former striking union members with the crossover and replacement workers and testing a new mining method;

   

maintained consistent level of debt with an increase of $6 million from $517 million to $523 million;

   

year-end cash position of $130 million, an increase of $67 million from 2019, with the credit facility withdrawn;

   

improved long-term capital program across all operations that reduces operating risk and improves returns;

   

our Casa Berardi Mine generated free cash flow exceeding $30 million, while establishing lower costs and higher productivity to achieve significantly improved long-term plans;

   

established a new relationship with Investissement Québec with a $32 million long-term loan;

   

achieved significant tax refunds from most jurisdictions Hecla has operations;

   

improved resilience to cyber-risks;

 

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all US managers received discrimination training, new employees have a meaningful onboarding process, and a new leadership training program was developed and implemented;

   

funded and strengthened our pensions;

   

drilling programs in Nevada and Mexico were implemented earlier than planned;

   

ESG reporting was increased;

   

improved development opportunities for female employees;

   

resolved a number of outstanding litigation matters; and

   

completed a collaboration agreement with the First Nations at our Casa Berardi Mine.

Discretionary Factor. The final component of our STIP is at the discretion of the committee (based on Company and individual performance) 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 2020, the committee determined the discretionary factor performance value to be at 40%. The committee based its assessment primarily on the following significant performance results by Hecla in 2020:

 

   

Proactively prepared for the pandemic, including by protecting the supply chain, fortifying the balance sheet, and procuring PPE for employees. Pandemic responses inc