Hecla Mining Is a Winning Investment

Hecla Mining (HL) is now getting better as the stock has delivered impressive gains on the market this year.

Hecla is consistently illustrating strong year-over-year liquidity position with long-term debts including senior notes at 6.875% and not due till 2021 which is believed to be the company’s only major indebtedness, extremely limited debt covenants with no off the balance sheet agreements, robust credit metrics with consolidated net debt-to-EBITDA of below 3.1x and overall net debt-to-total capitalization ratio of 20% with $100 million of strategic revolving credit facility which is believed to somewhat fulfill the company’s growing capital requirements while delivering attractive shareholder returns.

 Smart moves    

The metals exploration company has strategically diversified its metal production portfolio that includes mining of silver, gold, lead and zinc which is estimated to drive sustainable long-term operational stability for the company.
Further, Hecla is the biggest silver mining company in the US with second position in the gold production and being the 3rd major zinc and lead producer in the US. The metal mining company has occasionally hedged nearly 60% of the estimated key zinc and lead production in the forthcoming 3 years with no extended hedging positions of silver and gold that drives the company’s superior top line stability.

The continued solid liquidity position of Hecla in addition to a robust well-diversified metals production profile is believed to drive sustainable long-term company growth and enable it to emerge strongly from the current global meltdown.

Going forward, Hecla has provided silver and gold production guidance at each of its key mines for the fiscal year 2016 along with their cash cost after by-product credits, per gold/silver ounce. For 2016, Hecla projects capital expenditure for San Sebastian at about $2 million, Casa Berardi spending at $61 million, Lucky Friday to be approximately $37 million and capital spending for Greens Creek of nearly $48 million with production cash cost at each of the mines being optimized uniquely.

Importantly, the Board of Directors at Hecla Mining Co. recently announced a dividend for the quarter of about $0.0025 per common share, payable March 30, 2016 to all the key stakeholders as of March 18, 2016. In addition, the company also announced a regular dividend for the quarter of $0.875 per share on its convertible preferred stock payable April 1, 2016, to stakeholders as of March 15, 2016 and in line with the company’s continued commitment to deliver attractive shareholder returns.

Moving ahead, Hecla is focused on growing high-quality key metals production at each of its strategic mines at notably optimized cost of production by implementing superior technological advancements. This production technique is believed to drive significant cost-saving for the company while, encouraging it to return a majority of the invested capital to the key shareholders in form of dividends and share repurchases.

Improving end-market environment      

The metals mining company recorded fourth quarter of 2015 average realized silver price of $14.26 per ounce, representing 11 percent year-over-year decline compared to the fourth quarter of 2014. Similarly, the identified gold prices for fourth quarter of 2015 was $1,089 per ounce, depicting 9% fall compared to the same period last year. Also, the prices realized for zinc and lead were weaker for fiscal 2015 compared to 2014.

The long-term growth outlook for strategic investments into metals and mining related stocks seems well-established with silver and gold forecasted to continue to be seen as counter-cyclical hedges in addition to the investor feelings for these metals which are looked upon as safest commodities during recession times, doubtful monetary policy or significant inflation.

The long-term growth prospects of the metals and mining industry seems robust with the gradually picking-up metals demand from both the developed and developing nations which is believed to have a positive impact on the key metals prices and thus, enable the metal mining companies to realize attractive margins.
Published on Jun 23, 2016
By Vinay Singh

Copyrighted 2020. Content published with author's permission.

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