Note 2 - Sale of Hecla Quebec Inc. and Discontinued Operations

3 Months Ended

Mar. 31, 2026

Discontinued Operation, Additional Disclosures [Abstract]

Sale of Hecla Quebec Inc. and Discontinued Operations

Note 2. Sale of Hecla Quebec Inc. and Discontinued Operations

The sale of Hecla Quebec represents a disciplined portfolio optimization and focuses capital allocation on our silver assets, which we believe to represent significant growth and value creation opportunities. We have solidified revenue exposure to silver and we are focused on operating in what we view to be the most favorable jurisdictions. Subsequent to March 31, 2026, we used the cash proceeds from the transaction for debt reduction and balance sheet strengthening, enhancing our financial flexibility and capacity to invest in strategic growth investment opportunities.

As part of the sale of Hecla Quebec, we received total consideration with a fair value of $385.7 million comprised of the following:

•

Cash of $170.0 million upon closing on March 25, 2026

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Accounts receivable related to working capital adjustments of $16.6 million of which $15.6 million was received during April and the remaining $1.0 million is expected to be received in May

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65,757,265 Orezone common shares valued at $106.1 million at closing

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Deferred cash consideration ("Deferred Cash Consideration") with a fair value of $57.1 million for the cash payments of $30 million and $50 million to be paid by Orezone 18 months and 30 months after closing, respectively

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Contingent cash consideration ("Contingent Cash Consideration") with a fair value of $35.9 million for a total of up to $241 million of undiscounted payments consisting of:

A fair value of $3.3 million for two annual gold-price related payments of $5 million each should the average gold price exceed $4,200/oz for the first and second years following closing

A fair value of $9.9 million for two contingent payments of $10 million each due upon issuance of certain permits to open pit mine two additional identified orebodies

A fair value of $22.7 million for certain future gold production-based royalty payments with an undiscounted value of up to $211 million ($80/ounce for the first 500,000 ounces, then $180/ounce thereafter from future open pit operations)

Orezone has a set-off right to reduce the unpaid balance of the Deferred Contingent Cash or the Contingent Cash Consideration payments by 50% of the amount by which the financial assurance required by the Quebec government under the updated Casa Berardi closure plan exceeds $150 million, excluding increases caused by Orezone's post-closing actions. Our current estimate of that excess has been included in determining the fair values of the Deferred Cash consideration and Contingent Cash Consideration for the first gold-priced payment.

The fair value of the Deferred Cash Consideration was determined using a present value model by reference to Orezone's estimated credit rating and considering the expected closure excess amount to be withheld from the first payment. The Deferred Cash Consideration payments have been classified as non-current receivables, which is included in other non-current assets on the unaudited interim Condensed Consolidated Balance Sheet, due to being contractual rights to receive cash at 18 and 30 months, and have been recorded at amortized cost. The discount will be unwound in line with the effective interest method and recognized as interest income over the respective payment periods for each payment.

The fair value of each Contingent Cash Consideration payment to be received was determined by using an option pricing model, with significant assumptions including the following: expected success and timing of permitting, the timing of when production would commence, forward gold prices and Orezone's estimated credit rating. The Company concluded that each contingent consideration payment to be received is a financial asset as it will be settled in cash. The Company next evaluated whether each contingent consideration payment is within the scope of ASC 815 "Derivatives and Hedging" or not. For the contingent consideration payment to be received linked to future gold prices, we concluded that the underlying being the gold price is a market rate, and that the fair value of this contingent consideration payment is assessed at each reporting date, with changes in fair value recorded in earnings. The contingent consideration payments linked to future assets have been classified as current and non-current receivables, which is included in other current and non-current assets on the Condensed Consolidated Balance Sheet, due to being contractual rights to receive cash at 12 and 24 months, and have been recorded at fair value.

For the contingent consideration payments linked to permitting success and future production following permitting success, we concluded these contingent consideration payments are not within the scope of ASC 815, "Derivatives and Hedging" as the receipt of the permits and future production are operational and/or regulatory factors. The Company elected to follow the guidance in ASC 450, Contingencies which requires subsequent assessment for indicators of impairment. Additionally, payment received in excess of initial fair value recorded will be recognized as gains in the period received. The contingent consideration payments linked to permitting success and future production following permitting success, have been classified as non-current receivables, which is included in other non-current assets on the Condensed Consolidated Balance Sheet.

We recognized a loss of $192.5 million, upon the sale of Hecla Quebec Inc. which is reported within loss from discontinued operations, net of income and mining taxes on our Condensed Consolidated Statements of Operations and Comprehensive Loss.

Below is a summary of Hecla Quebec's results from discontinued operations for the first quarters of 2026 and 2025 and statement of financial position as of December 31, 2025.

Hecla Quebec Inc.

Results of Discontinued Operations

(Dollars are in Thousands)


	Three Months Ended
	March 31, 2026			March 31, 2025
Sales	$	70,284		$	56,005
Cost of sales and other direct production costs		37,629			42,113
Depreciation, depletion and amortization		932			8,569
Total cost of sales		38,561			50,682
Gross profit		31,723			5,323
Other operating expenses:
Exploration and pre-development		1,051			188
Other operating expense, net		—			185
Total other operating expenses		1,051			373
Income from discontinued operations		30,672			4,950
Other expense:
Interest expense		(91	)		(159	)
Fair value adjustments, net		(2,231	)		239
Net foreign exchange loss		—			11
Total other expense		(2,322	)		91
Income of discontinued operations		28,350			5,041
Loss on disposal of Hecla Quebec Inc.		(192,482	)		—
Income and mining tax provision		(19,549	)		(508	)
Net (loss) income from discontinued operations	$	(183,681	)	$	4,533

Hecla Quebec Inc.

Reconciliation of Assets and Liabilities of Discontinued Operations to Balance Sheet

(Dollars are in Thousands)


	December 31, 2025
ASSETS
Accounts receivable	$	5,091
Inventories:
Product inventories		11,615
Materials and supplies		21,483
Prepaid expenses		2,596
Total current assets		40,785
Property, plants, equipment and mine development, net		710,246
Other non-current assets		698
Total assets	$	751,729
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities	$	24,690
Accrued payroll and related benefits		7,891
Accrued taxes		4,866
Finance leases		2,911
Total current liabilities		40,358
Accrued reclamation and closure costs		75,980
Deferred tax liabilities		88,840
Other non-current liabilities		5,456
Total liabilities	$	210,634