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Alberto Abaterusso
Alberto Abaterusso
Articles (1382) 

Hecla Mining Soars on 2nd Quarter Results

Hecla Mining beat consensus on 2nd quarter revenue and adjusted earnings

August 10, 2018 | About:

Hecla Mining Co. (NYSE:HL) soared 8.4% to $3.11 per share on the New York Stock Exchange after the release of financial figures for the second quarter of 2018.

Hecla Mining invoiced precious metal customers for $147.26 million, which is a 9.7% increase on a year-over-year basis. The miner beat consensus on revenue by $610,000.

The company dropped an adjusted net profit of one penny per share from the top line, which was a positive reversal from a loss of 3 cents per share that was reported in the same quarter of 2017.

Hecla Mining performed strongly as a result of a 3% growth in the realized gold price per ounce, a significant decrease in treatment costs, a higher throughput at the Canadian Casa Berardi in Quebec and successful exploration activities. A lower silver price per ounce and a decline in the production of silver were completely counterbalanced.

The company sold 2,313,753 ounces of silver or 89.1% of silver production. It sold 59,643 ounces of gold or 98.9% of gold production. It sold 4,745 tons of lead or 85.9% of lead production and it sold 10,686 tons of zinc or 74.7% of zinc production.

The production of the grey metal went down 7.1% from the comparable of 2017. The production of gold grew 14.7%, the production of lead went up nearly 25% and the production of zinc increased 10.3% year-over-year.

Hecla Mining closed the second quarter of 2018 with a 19.1% growth in the adjusted Ebitda to $57.7 million and a cash inflow from operations of $30.6 million. The operating cash flow more than tripled compared to the prior-year quarter level.

The balance sheet reported $245 million in cash on hand and securities, and a total long-term debt of $533.23 million.

Despite yesterday’s upside, the share price is still underneath the 200, 100 and 50-SMA lines because the stock lost 38% for the 52-week through Aug. 9. The market capitalization is $1.48 billion and the 52-week range is $2.85 to $5.54 per share.

The price-book ratio is 0.99 times versus an industry median of 2.06 times.

Hecla Mining is still cheap and I would consider buying shares. Investors can expect one thing from this miner over the next several quarters. The stock could undergo a substantial appreciation if the company increases margins and profitability at its high-grade mines and mill at the Nevadan. Of course, gold and silver must be supportive. Now, the company must work to integrate the Nevadan assets acquired from Klondex Mines Ltd. (KLDX) into its assets base.

In Nevada, Hecla Mining acquired the Fire Creek mine, The Hollister mine and the Midas property from Klondex Mines Ltd. Fire Creek is located in the county of Lander, approximately 63 miles west of Elko. Fire Creek extends for about 17,000 acres. The ore deposit hosts 229,000 ounces of gold equivalent in proven and probable reserves at underground. Hollister Mine is located in the county of Elko, about 18 miles southeast of the Midas mine and approximately 80 miles northeast of the town of Winnemucca. The deposit nestles about 116,100 ounces of gold equivalent in proven and probable reserves. The Hollister mine covers an area of approximately 18,000 acres. The Midas property is also located in Elko County about 58 miles northeast of Winnemucca and covers about 30,000 acres. The area hosts 174,000 ounces of equivalent gold in proven and probable reserves.

The Fire Creek mine, the Hollister mine and the Midas property offer a good exploration potential.

In August, there were three analysts who recommended acquiring the stock in Hecla Mining. There were a total of seven analysts who suggested a 'hold' on the stock. Only one analyst predicted an underperforming stock over the next weeks of trading.

The average target price is $4.34 per share. It represents a 39.5% growth from the current share price. The average target price is a mean of nine estimates that range between a low of $3.50 and a high of $5.25.

(Disclosure: I have no positions in any securities mentioned in this article.)

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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