Why Hecla Mining Can Improve in the Long RunHL) has put in a weak performance on the stock market this year, but the company’s focus on improving production efficiency will allow it to improve its financial performance going forward.
A look at the positives
For instance, Hecla has three key operating mines, with the Greens Creek delivering improved margins, free cash flows and solid reserves. Additionally, Lucky Friday is expected to be a long life mine with enhanced production growth achieved through the installation of new shaft.
The company’s robust balance sheet and strong operations have enabled it to develop a superior growth profile. San Sebastian is forecasted to deliver notable returns, cash flow and production from third-party milling of improved-grade mineralization. Further, the Revett Rock Creek project is expected to deliver notable silver production in the forthcoming 10 to 15 years.
The continued significant key metals production from three major mines of Hecla along with a solid balance sheet with enhanced free cash flows highlight superior operating performance of the company.
Hecla’s mines have allowed it to achieve decent growth in production. However, the increase in gold and silver production has been somewhat offset by the decline in the average realized metal prices, negatively impacting the overall profitability of the mining major.
For instance, earlier this year, the Greens Creek mine produced 2 million ounces of silver, up 14% as compared to the same period last year with the mine achieving a growth of 11% in silver ore grades and improved recoveries.
Lucky Friday’s silver production of 0.84 million ounces earlier this year grew 20% as compared to the prior-year period. The growth in metal production at the mine is related to improved ore grades and significant recoveries, although the key ore production lowered due to mine sequencing operations.
Hecla recently acquired Revett Mining Company, Inc. which allows it to explore the Rock Creek Project which is believed to be major unexplored copper and silver deposits in North America that Hecla aims to continue to proceed its permitting. The well-planned acquisition of Revett Mining by Hecla signifies the focused growth strategy of the mining major, allowing it to return a significant part of its capital to the key stakeholders.
Though Hecla Mining’s stock price has declined over 18% in 2015, the company could recover due to a strong asset base. Hecla Mining will benefit from higher grades and lower costs, which will allow the company to get better in the long run.
Published on Nov 2, 2015By Harsh Singh Chauhan