the Coeur d’Alene Basin environmental litigation and the State of Idaho on the financial terms of settlement of the litigation and related claims. The settlement was finalized in September 2011.  (7) As a result of an order from MSHA to remove built-up cementitious material from the Silver Shaft, production was temporarily suspended at the Lucky Friday unit during all of 2012. Limited production  resumed in early 2013. See Item 7. Management’s Discussion and Analysis of Financial Condition and  Results of Operations, The Lucky Friday Segment  for more information. ITEM 7. MANAgEMENT’S DISCuSSIoN AND ANAlySIS oF FINANCIAl CoNDITIoN AND rESulTS oF opErATIoNS Overview Established in 1891 in northern Idaho’s Silver Valley, we believe we are the oldest still-operating precious metals mining company in the United  States and the largest silver producer in the U.S. Our corporate offices are in Coeur d’Alene, Idaho and Vancouver, British Columbia. Our production  profile includes:  y silver, gold, lead, and zinc contained in concentrates shipped to various smelters; and y gold doré. Our operating properties comprise our two business segments for financial reporting purposes: the Greens Creek operating unit on Admiralty  Island in Alaska and the Lucky Friday operating unit in Idaho. Since both of our mines are located in the U.S., we believe they have low political risk,  and less economic risk than mines located in other parts of the world. Our exploration interests are located in the United States and Mexico,  jurisdictions with low and relatively moderate political and economic risk, respectively, and are located in historically successful mining districts. Our operating and strategic framework is based on expanding our production and locating and developing new resource potential. In 2012, we y Generated positive cash flows from operations of $69.0 million in spite of the temporary suspension of production at the Lucky Friday mine  during 2012, as discussed in  The Lucky Friday Segment  section below. y Completed the work to address the order from MSHA to remove built-up cementitious material from the Silver Shaft (discussed below) and  other orders, resulting in MSHA’s approval to commence production at the Lucky Friday mine in early 2013.  y Committed a record level of capital expenditures (including non-cash lease additions) of approximately $129.9 million, including $62.2 million  at Greens Creek and $56.0 million at Lucky Friday, which includes $28.2 million for the work to rehabilitate and improve the Silver Shaft.  y Increased overall proven and probable silver reserves at December 31, 2012 compared to 2011, with higher silver reserves at Lucky Friday due  to inclusion of additional areas into the mine plan brought about by additional drilling and higher metals prices used for planning. The increase  in silver reserves at Lucky Friday was partially offset by a slight decrease in silver reserves at Greens Creek in 2012 due to depletion of the  deposit through production, partially offset by an increase in reserves through development drilling and as a result of higher metals prices used  for planning. y Continued our investment in other mining properties and companies through our acquisition of the Monte Cristo property in Nevada and  investments in Dolly Varden Silver Corporation and Canamex Resources Corp. y Increased our exploration and pre-development spending during the year by 58% and 130% compared to 2011 and 2010, respectively, drilling  targets at each of our four land packages in Alaska, Idaho, Colorado, and Mexico, and advancing pre-development projects at the historic  Equity and Bulldog mines in Creede, Colorado, the Star mine in Idaho’s Silver Valley, and the San Sebastian mine in Mexico. y Paid common stock dividends totaling $17.1 million, or $0.06 per share, under the our recently-adopted common dividend policy. See  Note 9  of  Notes to Consolidated Financial Statements. y Reduced our balances for accrued reclamation and closure costs by $40.6 million, primarily as a result of making the scheduled $25.0 million  payment pursuant to the terms of settlement of the Coeur d’Alene Basin litigation and advancement of reclamation work at the Grouse Creek  site (a non-operating property located in Idaho). y Achieved the above milestones utilizing cash flows generated from operations with no external financing required, while maintaining a cash  balance of $191.0 million and substantially no debt as of December 31, 2012. Silver prices continued to be relatively strong, with an annual average of $31.15 for 2012. Although this is down from the average price of $35.11 per  ounce for 2011, the two year trend is still positive compared to the average price of $20.16 for 2010. The price of gold, a significant by-product at our  Greens Creek mine, has continued on an upward trend over the last three years, with the annual average gold price increasing from $1,225 in 2010 to  $1,569 in 2011, and to $1,669 in 2012. Average prices of lead increased by 12% in 2011 compared 2010, and then decreased by 14% during 2012. The  prices of zinc remained substantially level during 2011, but then decreased by 12% during 2012. Lead and zinc represent important by-products at both  of our operations. The positive performance in precious metals prices allowed us to achieve the milestones discussed above in spite of the temporary  suspension of production at Lucky Friday during all of 2012, which resulted in decreased production of silver, lead, and zinc in 2012 compared to 2011. The factors driving metals prices are beyond our control and are difficult to predict. As noted above, prices have been highly volatile in the last three  years and could be so in the future. Average prices in 2012 compared to those in 2011 and 2010 are illustrated in the  Results of Operations  section  below. Moreover, variations in the metal grades of ore mined are impacted by geology and mine planning efficiencies and operations, potentially  creating constraints on metals produced. Ore transportation and smelting schedules also impact the timing of sales and final settlement. See the  Results of Operations  section below for a discussion of the factors impacting income applicable to common shareholders for the three  years ended December 31, 2012, 2011 and 2010. Key Issues We intend to achieve our long-term strategy of increasing production and expanding our proven and probable reserves through development and  exploration, as well as by future acquisitions. Our strategic plan requires that we manage several challenges and risks inherent in conducting mining,  development, exploration and metal sales at multiple locations. One such risk involves metals prices, over which we have no control except through derivative and other contracts. As discussed in the  Critical  Accounting Estimates  section below, metals prices are influenced by a number of factors beyond our control. Average market prices of silver, zinc and  lead in 2012 were lower than their levels in 2011, while gold prices were higher, as illustrated by the table in  Results of Operations  below. We believe  current global economic and industrial trends could result in continued demand growth for the metals we produce. However, prices have been volatile  over the last five years and there can be no assurance that higher prices will continue.  We make our strategic plans in the context of significant uncertainty about future operational capacity, which may impact new opportunities that  require many years and substantial cost from discovery to production. We approach this challenge by investing in exploration and capital in districts  [ HL:10-K ] 21