Insiders of Hecla Mining Co. (HL, Financial) disclosed their indirect ownership on July 6 via the company's website.
Following the company’s stock plan for non-employee directors, Hecla allocated – as shown in the chart below – a volume of 152,439 shares to its directors at a share price of $4.59 per share.
Source: Hecla Mining’s website
Of this total, 10.7% refers to George R. Nethercutt Jr.'s direct ownership of the company while the remaining 89.3% refers to the overall indirect ownership.
Indirect insider trading is different from direct, but it should not be neglected since it usually implies the insider will purchase shares for one of his family members.
What is a better benchmark to the company’s value than the share price at which the company has allocated shares to its directors?
Hecla is a mining company engaged in the production and sale of gold and silver. It is also committed to enhancing shareholders’ long-term value through acquisitions of mineral resources and other mining-related activities.
Hecla Mining is currently trading at $4.84 per share, down 10 cents or 1.92% from the previous trading day. The stock is downtrending and has lost 7.63% year to date. The stock has a price-sales (P/S) ratio of 2.92 and a price-book (P/B) ratio of 1.27. The forward price-earnings (P/E) ratio is 23.59 while the EV/EBITDA ratio is 9.33.
As of today, analysts recommend holding shares of Hecla with an average rating of 2.9 out of 5. The average target price per share is $6.28, which represents a nearly 29.8% upside from the current share price and 37% upside from the value at which shares were allocated to the directors.
When I screen for gold mining stocks, I like to look at another ratio: the EVO metric, which is the company’s enterprise value divided by the total volume of proven and probable mineral reserves.
Hecla Mining's current enterprise value is $2.23 billion. The company has 328.03 million ounces of silver equivalent in its reserves (or 4.5 million ounces of gold equivalent). One ounce of gold equates to approximately 72.87 ounces of silver. As a result, we obtain either an EVO of $495.56 based on gold reserves or $6.80 based on silver reserves.
The ratio 1:72.87 is effective for the second quarter of fiscal 2017. Based on the average spot price of the two commodities over the quarter in question, the price was $1,256.963 per ounce of gold and $17.25 per ounce of silver.
When the EVO of $495.56 is compared to the average from the biggest Canadian gold stocks listed on the U.S. exchanges, it is approximately 98.22% higher. Hecla Mining, however, should be compared to its most direct peers in terms of the EVO metric.
As of Dec. 31,2016, Hecla Mining had reserves of 2.1 million ounces of gold and 175 million ounces of silver.
Disclosure: I have no positions in Hecla Mining Co.
