(1) Includes by-product credits from lead and zinc production. Cash costs per ounce of silver represents a measurement that is not in accordance with GAAP that management uses to monitor and evaluate  the performance of our mining operations. We believe cash costs per ounce of silver provides an indicator of economic performance and efficiency at each location and on a consolidated basis, as well  as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other  direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found in Item 7. – Management’s Discussion and Analysis of Financial Condition and  Results of Operations, under Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP). (2) Proven and probable ore reserves are calculated and reviewed in-house and are subject to periodic audit by others, although audits are not performed on an annual basis. Cutoff grade assumptions vary  by ore body and are developed based on reserve prices, anticipated mill recoveries and smelter payables and cash operating costs. Due to multiple ore metals, and complex combinations of ore types,  metal ratios and metallurgical performances at the Lucky Friday, the cutoff grade is expressed in terms of net smelter return (“NSR”), rather than metal grade. The cutoff grade at the Lucky Friday  ranges from $76 per ton NSR to $89 per ton NSR. Our estimates of proven and probable reserves are based on the following metals prices: December 31, 2012 2011 2010 Silver (per ounce) $ 26.50 $ 20.00 $ 16.00 Lead (per pound) $ 0.85 $ 0.85 $ 0.80 Zinc (per pound) $ 0.85 $ 0.85 $ 0.80 (3) Reserves are in-place materials that incorporate estimates of the amount of waste that must be mined along with the ore and expected mining recovery. Mill recoveries are expected to be 93% for silver,  93% for lead and 87% for zinc.  (4) The changes in reserves in 2012 versus 2011 are primarily due to inclusion of additional areas into the mine plan as a result of additional drilling and higher metals prices used for planning. The changes  in reserves in 2011 versus 2010 are due to addition of data from new drill holes and development work, an increase in mining widths in areas utilizing mechanized mining, and increases in forecasted  metals prices, which has resulted in the addition of new reserves based on updated estimates, partially offset by depletion due to production.  (5) Lucky Friday ore reserve estimates were prepared by Terry DeVoe, Chief Geologist at the Lucky Friday unit and reviewed by John Taylor, Senior Resource Geologist at Hecla Limited.  A number of accidents and other events have recently impacted operations at the Lucky Friday. In April 2011, a fall of ground caused the fatality of  one employee, resulting in cessation of operations for approximately 10 days. In November 2011, an accident occurred as part of the construction of  #4 Shaft and resulted in the fatality of one contractor employee. In an unrelated incident, in December 2011, a rock burst occurring in a primary access  way at the Lucky Friday injured seven employees. At the end of 2011, MSHA began a special impact inspection at the Lucky Friday which resulted in an  order to remove built-up cementitious material from the Silver Shaft, the primary access way from surface at the Lucky Friday mine. In response, we  submitted a plan to MSHA and received approval to remove the built-up cementitious material. In addition, the plan included removal of unused  utilities, construction of a water ring to prevent ice from forming in the winter, the installation of a metal brattice, repair of shaft steel, and installation of  a new power and fiber optic cable, all of which should improve the shaft’s functionality and possibly improve the shaft’s hoisting capacity. Once the  shaft cleanup was complete down to the 4900 level, work on a haulage way bypassing the area at 5900 level impacted by the December 2011 rock  burst commenced. Work on the Silver Shaft and the haulage way was completed in the first quarter of 2013. Underground access was temporarily  limited as this work was being performed, and production at the Lucky Friday mine was suspended from late 2011 until early 2013 as a result. Limited  production commenced in the first quarter of 2013, and we anticipate a ramp-up of mine output during the year as we perform additional  rehabilitation and get necessary clearance from MSHA until we return to full production levels at the Lucky Friday by approximately mid-2013.  During 2008, we initiated engineering, procurement and development activities relating to construction of #4 Shaft at the Lucky Friday mine, which,  upon completion, would provide access from the 4900 level down to the 8800 level of the mine. The project was temporarily placed on hold in the  fourth quarter of 2008 due to then prevailing metals prices. However, detailed engineering, long lead time procurement, and other early-stage  activities for the internal shaft project resumed in 2009. Activities in 2010 and 2011 relating to #4 Shaft included engineering, erection of a surface  concrete batch plant, detailed shaft design, excavation of the hoist room and off shaft development access to shaft facilities, installation of the hoist  and head works, placement and receipt of orders for major equipment purchases, advancement of a geotechnical drill hole, 367 feet of vertical  excavation, shaft-sinking set-up, and other construction activities. Upon completion, #4 Shaft should allow us to mine mineralized material below our  current workings and provide deeper platforms for exploration. Construction of #4 Shaft is expected to take approximately three more years to  complete after re-commencement, and capital expenditures for the project are forecast to total approximately $200 million, including approximately  $92 million spent on the project through December 31, 2012. As a result of the requirement to remove built-up cementitious material from the Silver  Shaft (discussed above), work on the #4 Shaft project was suspended until completion of the Silver Shaft rehabilitation. Work on #4 Shaft has re- commenced, and we believe that our current capital resources will allow us to complete the #4 Shaft project as designed. However, there are a number  of factors that could affect completion of the project, including a significant decline in metals prices or a significant increase in operating or capital  costs. An increase in the capital cost could potentially require us to suspend the project or access additional capital though debt financing, the sale of  securities, or other external sources. This additional financing could be costly or unavailable.  Reclamation activities are anticipated to include stabilization of tailings ponds and waste rock areas. Reclamation of one of the idle tailings ponds  was performed at Lucky Friday in 2012, and at December 31, 2012, an asset retirement obligation of approximately $1.5 million had been recorded for  reclamation and closure costs.  The net book value of the Lucky Friday unit property and its associated plant, equipment and mineral interests was approximately $253.0 million as  of December 31, 2012. The age of the facilities at Lucky Friday ranges from the 1950s to 2012. The plant is maintained by our employees with  assistance from outside contractors as needed. At December 31, 2012, there were 239 employees at the Lucky Friday unit. The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,  Allied Industrial, and Service Workers International Union is the bargaining agent for the Lucky Friday’s 180 hourly employees. The current labor  agreement expires on April 30, 2016. As a result of the requirement to remove built-up cementitious material from the Silver Shaft, which limited  underground access and temporarily suspended production at the Lucky Friday, Hecla Limited laid off 121 employees in January 2012, with  approximately 25 of those employees accepting temporary positions at other Hecla operations. The employment level at the Lucky Friday has returned  roughly to where it was prior to the suspension of production, with most of the laid off employees returning.  Avista Corporation supplies electrical power to the Lucky Friday unit. For a discussion of our legal proceedings, see  Note 7  of  Notes to Consolidated Financial Statements. ITEM 3. lEgAl proCEEDINgS [ HL:10-K ] 17