Bullish Hecla Mining Co. Surges Outpaces Silver Prices
Hecla Mining Co.’s (NYSE:HL) stock is up sharply this week despite lower silver prices after being upgraded by BMO Capital Markets. Does this represent a bottom in HL stock? Maybe.
Following a three-year slide, silver prices have rallied as of late and are positive on the year. Since the beginning of October, silver prices has surged nearly eight percent—now closing in on $15.15 per ounce. While the 2.5% increase may not seem like much, analysts were calling for silver to touch a low of $13.00 in 2015. That would have represented a record fourth consecutive year of declines.
Hecla’s share price has been in the doldrums for the past month. At $2.22 per share, Hecla Mining has erased some of its summer losses and is seriously outpacing broader silver price gains. At the current level, Hecla Mining has a market cap of $809.7 million.
Granted, there are still a few weeks left in 2015 and a lot can happen over that time. But there are more than enough factors to keep silver bugs optimistic. There is also enough time for precious metal investors to start looking at excellent silver stocks that have been beaten down.
Is This Good News for Hecla Stockholders?
After dumping $3.5 trillion into the U.S. to kick-start the economy, the Federal Reserve might be wondering what’s going on. We may be doing better than Europe, Japan, and Russia, but the world’s largest economy isn’t exactly a beacon of economic light everyone is turning to in a time of darkness.
Fewer and fewer jobs have been created since May. In fact, only 142,000 jobs were added in September, down from projections of around 201,000. Retail sales climbed less than forecast in September and actually fell when you remove August car sales. It also doesn’t help that wages remain stagnant. (Source: “Employment Situation Summary,” bls.gov, October 8, 2015.)
With the NASDAQ, NYSE, S&P 500, and Dow Jones Industrial Average all breaking uptrends, it shouldn’t be a total surprise to see more and more companies on Wall Street revising their growth downward for the year.
Blended earnings growth for the third quarter is projected to decline 5.5%. At the start of the third quarter, the estimated decline was just 0.1%. Should the S&P 500 experience a decline in the third quarter, it will mark the first back-to-back quarters of earnings declines since 2009. (Source: “Factset Key Metrics,” Factset.com, October 9, 2015.)
The fourth quarter isn’t shaping up any better. At the start of the third quarter, analysts forecasted fourth-quarter earnings growth of 4.3%. At the start of the fourth quarter, growth forecasts had been reduced to just 0.2%. Over the last few weeks, that number has been revised lower, to just -0.4%.
Weak economic data is also hobbling the chances of a Federal Reserve interest rate hike this year. After years and years of easy money, the U.S. continues to underwhelm.
Hecla Mining is the largest primary silver producer in the U.S., one of the lowest-cost producers, and a growing gold producer. The company owns two primary silver mines in Alaska and Idaho and one gold mine in Quebec, Canada. It also has a number of exploration properties and pre-development projects in six world-class precious metal districts in North America. (Source: “Hecla Mining Company,” Hecla Mining website, last accessed October 16, 2015.)
Over the years, Hecla Mining has consistently grown its reserve base, with 2015 reserves totaling 173 million ounces of silver and 2.1 million ounces of gold reserves. In 2015, the company expects silver production of 10.5 million ounces with expected gold production of 185,000 ounces.
Despite lower silver prices, Hecla Mining continues to advance growth projects, including San Sebastian and #4 shaft at Lucky Friday. Because of its assets, the company has been able to reduce costs and programs and continue to do so even if silver prices go lower. (Source: “Hecla Reports Second Quarter 2015 Results,” Hecla Mining web site, August 6, 2015.)
With expected mining at San Sebastian early in 2016, combined with the deeper Lucky Friday in three years, Hecla Mining anticipates the addition of significant additional cash flow, further strengthening its bottom line.
Here’s the Bottom Line for Hecla Stockholders
With continued weakness in the U.S. and global economies, Hecla stock price remains bullish while its outlook is solid. As an economic hedge, silver producers like Hecla Mining Co. will continue to be an attractive option for investors.
At the same time, silver is an industrial metal. Should the U.S. economy gain steam or the global economy turn a corner in 2016, financially solid silver producers like Hecla stock will be able to capitalize on the growing demand.
Stay in the loop. Follow John on Facebook and Twitter.