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By-product credits were lower in 2012 compared to 2011 due to lower zinc and lead prices, lower zinc production due to lower ore grades, and lower gold production. By-product credits were lower in 2012 compared to 2010 due to lower zinc and lead prices and lower production for both metals due to lower ore grades. 

The difference between what we report as “production” and “payable metal quantities sold” is due to the difference between the quantities of metals contained in the concentrate we produce versus the portion of those metals actually paid for by our smelter customers according to the terms of the smelter contracts (not all of the metals contained in our concentrate shipments are physically recovered through the smelting process). Differences can also arise from inventory changes incidental to shipping schedules. 

While revenue from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product of the Greens Creek unit is appropriate because: 

y silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future; 

y we have historically presented Greens Creek as a producer primarily of silver, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year; 

y metallurgical treatment maximizes silver recovery; 

y the Greens Creek deposit is a massive sulfide deposit containing an unusually high proportion of silver; and 

y in most of its working areas, Greens Creek utilizes selective mining methods in which silver is the metal targeted for highest recovery. 

We periodically review our revenues to ensure that reporting of primary products and by-products is appropriate. Because we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset operating costs within our cost per ounce calculations. 

In the fourth quarter of 2012, we updated our asset retirement obligation (“ARO”) at Greens Creek to reflect a preliminary revised reclamation and closure plan having estimated undiscounted costs of approximately $73.9 million, an increase from the $53.4 million in the previous plan. See Note 4  of Notes to Consolidated Financial Statements  for more information on the ARO update. We expect to again update our ARO and revise our closure plan in 2013 for a tailings capacity expansion at Greens Creek which is currently under consideration by the government agencies. Adjustments to the ARO liability are recorded with corresponding changes to the ARO asset balance, which is included in properties, plants, equipment, and mineral interests, net on our Consolidated Balance Sheets. As a result, we do not anticipate future updates in the ARO for Greens Creek to have a material impact on our annual results of operations. As part of the revised closure plan, we may be required to increase our current $30 million reclamation bond for Greens Creek. Although we do not know the amount of such increase, it likely will be a material amount, and there can be no assurance that this bonding capacity will be available to us at that time. 

## The Lucky Friday Segment 

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(1) 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 below in Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP). 

The decrease in gross profit for 2012 compared to 2011 and 2010 resulted from the suspension of production at the Lucky Friday mine during 2012, as discussed below. Gross profit for 2011 increased compared to 2010 due to higher average prices for all metals produced at the Lucky Friday (further discussed in Results of Operations  above), partially offset by higher costs of sales and other direct production costs due primarily to increased employee profit sharing and taxes resulting from increased profitability. 

At the end of 2011, MSHA began a special impact inspection at the Lucky Friday mine which resulted in an order to remove built-up cementitious material from the Silver Shaft, as further discussed in Item 2. Property Descriptions, Operating Properties, The Lucky Friday Unit.  The Silver Shaft is an approximately one-mile deep, 18-foot diameter, concrete-lined shaft from surface. It is the primary access to the Lucky Friday mine’s underground workings. In response to the MSHA order, we submitted a plan to MSHA and received approval to remove the built-up cementitious material, and that work commenced in the first quarter of 2012. The plan also included removal of unused utilities, construction of a water ring to prevent ice from 

