Hecla Mining (HL, Financial) reported improved numbers for the third quarter with reduced losses and year-over-year growth in revenue. Although analysts were expecting it to break even during the quarter, investors can take consolation in the fact that, its result has improved from last year. Perhaps it is because of this reason; the stock has rallied since its third-quarter numbers and continues to do so. Let’s see if Hecla will be able continue its strong momentum in the coming months.
Growth across the board
The company reported strong growth in all areas including silver, gold, lead and zinc. And some of its mines such as Greens Creek and Lucky Friday reported solid results with silver production increasing 103% compared to last year. Although this production is at a time when the silver prices are very volatile, the company has various measures to face this volatility and deal with the low silver prices.
Even as on one side the company is challenged by the falling silver and gold prices it is has a solid revenue hedge on account of strong lead and zinc prices. In fact, it has even hedged a portion of its lead and zinc production, protecting it further against the price volatility. For the next fiscal Hecla intends to reduce its capital spending as the company has high quality assets with long mine lives, which reduces the need for exploring new reserves.
Going forward, the management is counting on the Lucky Friday mine and all its efforts are focused to access the richer ore in these mines. It plans to increase its production from this mine in the range of 3 to 3.2 million ounces. Overall it will enable Hecla to reach at the high end of its guidance, which is anticipated to be in the range of 9.5 to 10 million ounce.
San Sebastian is yet another mine for which Hecla has high expectations and eventually could yield more than 100 million silver equivalent ounces.
Even though it intends to spend less capital in 2015, Hecla will continue to make several high grade discoveries at San Sebastian. It will convert these resources to reserves, extending mine life even when metal prices are lower. Talking about greens creek it will continue to deliver high-grade drill intersections that will add resources along the southwest bench.
Conclusion
These are significant developments that should bolster its growth in the days ahead. Yet the numbers are not very supportive as the company does not have any signs of trailing or forward P/E reflecting bleak prospects of earnings growth. The stock had touched its 52-week low few months and since then rose considerably. However, there seems to be a paradox between its future prospects and the present numbers sending investors into a dilemma. But in the longer run the initiatives it has planned could yield a good return and further boost the stock price.
