Good day, ladies and gentlemen, and welcome to the third quarter 2006 Hecla Mining Earnings Conference Call. My name is Lauren and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Vicki Veltkamp, Vice President of Investor Relations.

Thank you all for joining us today. I am Vicki Veltkamp, as the operator said, Vice President of Investor and Public Relations for Hecla Mining Company and this is our third quarter 2006 conference call. The call is also being webcast live today so you can access the replay of it also if you wish at our website, and that website is www.hecla-mining.com. On the website you can find the financial results and today's news release, and at the end of that news release is a quantitative reconciliation to GAAP of cash cost per ounce, which is an SEC requirement. Today's presentation will be made by Phil Baker, Hecla's President and CEO. And he will be joined by Lew Walde, our Chief Financial Officer; Ron Clayton, our Senior Vice President of operations; Mike Callahan, who is our President of Venezuelan operations, and Dean McDonald, our Vice President of Explorations. And then, following their presentations, we'll have a question-and-answer period. Before we start, I need to let you know that any forward-looking statements made today by our management comes under the Private Securities Litigation Reform Act. It involves a number of risks that could cause actual results to differ from projections. In addition in our filings with the SEC, we are allowed to disclose mineral deposits that we can economically and legally extract or produce and investors are cautioned about our use of terms such as measured, indicated and inferred resources. We urge you to consider those disclosures in our SEC filings available on our website. Now I'm very happy to turn the call over to Hecla Mining Company's President and Chief Executive Officer, Phil Baker.

Thanks Vicki. Let me add my welcome to Vicki's on today's conference call. I think we've had a comprehensive news release and my colleagues have some interesting things to add. So I'm going to keep my comments short. Speaking of colleagues, we've added a couple of new executives, Dean McDonald as VP Exploration and Jay Layman, VP Corporate Development. Both men have more than 25 years of international experience and will be focused on the growth aspects of our business. Dean's going to split his time between our existing exploration programs and generative ones in the Silver Valley in Mexico. And he'll be officed in Vancouver where we expect to add another corporate development person next year. We're doing this because after 20 years of low silver price, there has been in the last three years finally silver exploration that's establishing deposits where we think we might be able to add value to them. This has been a great quarter for us. Because the earnings were only a penny a share, Vicki elected not to put grade in the headline. But that's how we feel. We see the sell-off of the stock today is inexplicable. And why do I say that? Why do I say the quarter was great and sell-off is inexplicable? Well, this quarter really provides tangible evidence of how our strategy to grow the company is paying off. Exploration, predevelopment and depreciation, which are the drivers of our earnings, had $48 million of expense year-to-date, but they're really providing us with the base for the future at the cost of current earnings. And that's pretty clear on the exploration front. We announced a 20% increase in our total silver resource just from the work we've done so far on the Lucky Friday and San Sebastian. And of…

All right, Phil. Thank you. As Phil has already indicated, we continue to invest heavily in our exploration and predevelopment program during the third quarter. And this is, obviously, delivering excellent results in increasing value to our shareholders. But in addition to it -- in addition to the exploration and predevelopment works, Hecla is generating impressive increases in sales, gross profit and cash flow during the quarter as compared to the same time a year ago. So despite the increased investment in exploration, $5 million more in depreciation, and a foreign exchange loss of $1.3 million, which is included in other operating expenses, Hecla generated income of $900,000 or a penny per share, which compares very favorably to a loss of $8.7 million or $0.07 per share in the same period last year. Overall, sales increase 66% or $20 million quarter-on-quarter as gold production increased 19% and metal prices increased significantly compared to last year. Hecla's operations performed excellent during the quarter, as our gross profit increased 446% to $14.4 million from $2.6 million last year. This increased gross profit was driven by the higher gold production and more importantly the lower silver cash cost, which decreased 84% quarter-on-quarter from $3.76 to just $0.59 per ounce this quarter. Hecla silver cash costs, as Phil has indicated, benefit from the higher average lead and zinc prices. You'll realize that these prices have risen further at the start of the fourth quarter. So what does this mean on a cash flow basis for the quarter, Hecla generated $19.3 million in cash before exploration and predevelopment, which again is an increase of 384% compared to the same period last year. Now, if we turn to the year-to-date results, our net income has totaled nearly $48 million or $0.40 per share, which included a…

Thanks, Lew, and good morning, everyone. The overall performance of our operations improved during the third quarter. Some of the highlights are, a throughput at the Lucky Friday continues to increase as most of the stopes on the new 5,900 level are approaching their designed production rates. La Camorra's Mina Isidora in Venezuela has reached designed production levels and is performing well. Production at Greens Creek has returned to more normal levels. We continue to lower our silver cash cost to a very low $0.59 per ounce, and we were able to hold our cash cost at producing an ounce of gold to $380 despite the challenges in Venezuela and the increasing labor and cost of supplies experienced by the entire industry. Our very successful explorations programs are generating new resources and reserves, which is allowing us to again investigate ways to increase production and lower cost. Our silver exploration efforts have been extremely successful, resulting in the addition of over 25 million ounces at a discovery cost of less than $0.22 per ounce. We expect this to continue at both the Lucky Friday and San Sebastian. I'd like to cover a few specifics on each of our operations and projects. At the Greens Creek mines, a significant amount of effort and resources have been applied to rehabilitation of the main haulage drifts and increasing development of [mine reserve]. These efforts have affected production and resulted in lower than normal production rates. Greens creek, like all the other mining operations, has struggled with increasing costs and the ability to hire an unskilled labor. Despite these issues, the financial performance at Greens Creek has been outstanding, and we're able to return the mine to more normal production levels in the third quarter. In addition, silver grades improved as a result of…

The operations in Venezuela really had a strong third quarter. The production of the quarter was almost 39,000 ounces and you'd have to go back to the third quarter of 2002 when we had record production to find a quarter with higher gold production. So it's really a significant quarter for us. Venezuela is certainly on track to meet or exceed the production estimates that we've set for the year. And Mina Isidora is really the driver of this performance. It's still mentioned we made the decision to build Mina Isidora and invest in there in a lower price environment. And Isidora is now in full production and has proven that the acquisition of Block B was a very strategic acquisition. The other grades there for the quarter were over an ounce per ton and that's the second quarter in a row that we've seen that level of grade. Isidora is now our leading gold producer in Venezuela and we expect more strong performance from this mine in the quarters to come. We have a great team here on the ground and they really demonstrate Hecla's skill and the strength that we have in operating these type of deposits. On the exploration side, we continue to be excited about several additional exploration targets on Block B and Dean McDonald is going to talk about that in a moment. On the political side, the presidential elections in Venezuela are to take place on December 3rd and the race is actually much closer than one would have anticipated a few months ago. Although, we may see some political activities leading up to election date. We certainly don't expect that there's going to have any impact on the operations. The government at this point has delayed amending the new mining law and they've done that until they can further evaluate comments from the state and regional politicians and from the industry. You know we believe their willingness to take comments from the industry is a good signs, at least is their intent to consider all aspects of the issue. At this point, it's really not clear when they will revisit the amendment or what direction they may take. And with that, I'm going to turn it over the Dean to talk about exploration.

Well, thank you, Mike. Good morning. This is my first quarterly conference call with Hecla and I'm excited about presenting our exploration results and future exploration potential in the current mines and projects. I'd also like to take a moment to touch a bit on our strategy to enhance genitive exploration side of our business. But to sum the highlights, as outlined in the third quarter release, there's a 27% growth at the Lucky silver resource with significant lead and zinc by-product. Primarily that growth in the resource took place at depth to the 6900 level. The western continuation of this mineralized zone will be added to the resource as drilling continues in 2007. So there remains opportunity for near-term resource gains at the Lucky Friday. Even deeper drilling this year to the 7900 level has confirmed the continuation of mineralization in high-grade silver-base metal rich veins and structures. Drilling in the next few years has the potential to bring 20 million ounces to 40 million ounces of silver depending on the continuity of some of the new structures we've identified. While still on the Lucky Friday, I'd like to mention what I call the gap zone. Below the old gold hunter workings near surface is a 300-foot untested, 3,000 foot untested down dip gap that is along the structural trend of the current workings. Based on reevaluation of the geology, we plan to put a series of holes into this structure in early 2007. If successful, I think we may have opened up a huge window for resource expansion in the Lucky Friday or near the Lucky Friday infrastructure. In a nutshell, there will continue to be significant gains in the resource at Lucky Friday over the coming years. A project I'm particularly excited about is a regional generative…

Just a couple of short comments before we open it up to questions. You know, the bottomline is we think Hecla, is in a very unique position at four of our five districts we operate in. We have both near term growth in resources and ultimately production. You know, what you're seeing at the 5250 Zone at Greens Creek. What you're seeing at the Lucky Friday with the resource growth that we've announced this year and what we're expecting to see happen over the next couple of years. And we have the potential for this exponential growth around the operations, but separate from the current activities. In a lot of ways, we're like a junior exploration company in that each of these districts has the ability to dramatically change Hecla. You've seen what we think is a small way with the resource growth that we've announced earlier this quarter. And we see it happening in even a bigger way at the Lucky Friday, Greens Creek and San Sebastian. And of course all of this is happening in North America. And it's being done by a company that's going to generate more than $100 million of cash from our properties that can go into this Company changing exploration. So we couldn't be anymore excited about the quarter, the year, or our future. And with that, Vicki, I think we're ready for questions.

All right. Operator, if you could give the instructions for the question-and-answer period, please.

[Operator Instructions]. Your first question comes from the line of Anthony Sorrentino with Sorrentino Metals.

Hello, everyone.

Hi, Anthony.

Hi. I believe that Hecla expects to produce about 6 million ounces of silver in 2006. Would you break this down by mine?

I'm sure, we'll be glad to do that. And Ron, I'll let you do that. But just one comment that I'd like to make is -- one of the things that we are seeing with this higher zinc price is the ability to generate more economic benefit to us by going after some of that zinc. So we'll produce about 6 million ounces. There's a possibility it will be somewhat less than that. But with that, Ron, what's the --

Yes, and Anthony, it's broke down pretty close to even. It's going be -- Lucky Friday is going to do a little bit more than Greens Creek. But I mean we put our share, but it's going to be within 100,000 ounces. So we figure roughly, you know, three and three, or maybe slightly lower than that depending on how we shift to the zinc.

Okay. Fine. And how does the grade of the anticipated additional resource at Lucky Friday compare to the existing resource?

It is lower in silver grade and a little bit higher in zinc grade, and the level -- the lead numbers are pretty close, maybe a tad lower. But the strike length is significantly longer and the widths are a little bit wider. So that's what's causing that grade change. If you bring it back to that same core, the grades would be very similar. So we've just expanded along strike length and depth and width a little bit. Does that make sense?

Yes, yes.

Okay.

Fine. And also, what are the grades of the new total resource at San Sebastian?

Well, you know, there it gets a little complicated, because it's broken into five metals. Do you have it --

I have it if you want to give it.

Okay. Go ahead.

Let's see, the silver -- or gold is about 0.4 grams per ton, silver is about 240 grams per ton, lead's about 2.7%, copper about 2%, zinc about 4%.

Okay. Very good. That answers my questions, and congratulations on a great quarter.

Thanks, Anthony.

There are no further questions in queue.

All right. Thank you for joining us today. This has been the Hecla Mining Company's third quarter 2006 conference call. I am Vicki Veltkamp, Vice President for Investor and Public Relations. If you have other questions, you can give me a call at 208-769-4144. You have a good day.

Thank you.

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