If I were an investor interested in increasing my holding of Hecla Mining Co. (HL, Financial) I would wait for further dips in the company's stock price in order to have a more convenient entry point.
Hecla Mining lost 1.3% on the New York Stock Exchange and is now trading at $3.92 per share, after the company released first-quarter results. The miner beat consensus on earnings by 2 cents per share for a net profit of 2 cents per share. But it missed on revenues by $2.54 million. The top line came in at $140 million and the market seemed to react negatively to that.
The stock is currently trading underneath the 200-SMA line. The share price is profoundly below the 52-week high of $6.16 and only 67 cents above the 52-week low of $3.25 per share. Therefore, the stock is already cheap. However, in order to take the highest profit off the table, I suggest buying shares on any weakness that might occur in upcoming days.
Buying shares of Hecla Mining at levels below the 100 and 50 SMA lines could have a 40% to 50% upside impact. And if the commodity stays supportive, the appreciation can be even higher. The average target price of $4.97 per share already represents a nearly 30% from the current market valuation. The average target price is a mean of 10 estimates that range between a low of $3.90 per share and a high of $7.50 per share.
In May, there were 11 analysts who were surveyed. Three of them are for a Buy to Strong Buy approach, while seven analysts are for a Hold approach. Only one analyst foresees an underperforming stock within the next 52-weeks of trading.
Over the next quarters, I foresee a strengthening in the balance sheet of the company, thanks to solid operations. Hecla Mining can now deliver a higher output of gold, silver and base metals at a lower cost per ounce.
Thanks to first-quarter economics, the liquidity available in cash and securities increased by $27 million from the previous quarter to almost $247 million on March 31. Operations provided the miner with a cash inflow of $16.4 million. Furthermore, with adjusted earnings before interest, taxes, amortization and depreciation of $58.4 million, the net debt to adjusted Ebitda ratio now stands at 1.2 times. The ratio has been computed over the last 12 months of trading.
Operations at Hecla Mining have also improved in a way that the depletion of mineral reserves, which is a normal consequence of mining, didn’t scratch the value of fixed assets at all. At $2 billion the total value of properties, plants, equipment and mineral interests in the balance sheet of Hecla Mining Company is about unaltered after the first quarter of operations.
In the first quarter of 2017, Hecla Mining achieved a record at Casa Berardi with a gold production of 40,177 ounces or 69.5% of total gold output. It also achieved a near-record at Greens Creek with 1,913,232 ounces of silver production or 75.5% of silver output.
Investors also will benefit from the improved payment terms that Hecla Mining has arranged with its smelters. The agreements will create a prolonged period of lower costs.
Hecla Mining Company has a market capitalization of $1.57 billion and an enterprise value of $1.87 billion. The company has 400.6 million shares outstanding. Approximately 64.3% of the total common stock is in the hands of institutions. The Van Eck Associates Corp. stands out with a 10.21% portion.
Chuck Royce (Trades, Portfolio) has increased his holding of Hecla Mining by adding 285.38% during the first quarter to its previous position for a total volume of 1,836,564 currently held shares.
(Disclosure: I have no positions in Hecla Mining Company.)
