This Mining Stock Could Thrive During A Recession
Hecla Mining Company (NYSE: HL) is a leading low-cost U.S. silver producer with operating mines in Alaska, Idaho and Mexico, and is a growing gold producer with an operating mine in Quebec, Canada.
The Company also has exploration and pre-development properties in seven world-class silver and gold mining districts in the U.S., Canada, and Mexico, and an exploration office and investments in early-stage silver exploration projects in Canada.
The company recently announced preliminary silver and gold production results for the first quarter of 2019.
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- Silver production of 2.9 million ounces, and gold production of 60,021 ounces.
- Silver equivalent production of 10.8 million ounces or gold equivalent production of 129,378 ounces.2
- Lead production of 5,785 tons; zinc production of 13,943 tons.
- Cash, cash equivalents and short-term investments of approximately $12 million at March 31, 2019.
Phillips S. Baker, Jr., Hecla’s President and CEO, commented on the production results: “Silver production was higher in the quarter due to the standout performance from our most important mine, Greens Creek, with higher gold and silver grades and recoveries than the first quarter of 2018.”
He continued, “As we indicated with our technical report we expected higher grades at Greens Creek. The Lucky Friday also contributed with more silver production in the quarter than was achieved all of last year.
San Sebastian production was about the same as last year’s fourth quarter. Quarterly gold production was higher than last year, but we expect significant production increases from Casa and the Nevada assets in the second half of the year.”
“At approximately current prices and based only on reserves, the mine is expected to generate $535 million (CAN$712 million) of free cash flow over the LOM with an after-tax NPV of $325 million (CAN$432 million) at a 5% discount rate.”
Baker said: “The economic engine and two largest mines of Hecla, Greens Creek (50% of Hecla’s revenues) and Casa Berardi (35% of Hecla’s revenues), have made a remarkable achievement in materially increasing reserves in mines that have operated for decades.”
“These Technical Reports highlight the thoughtful work that has gone into documenting the resources, building the mine plans, optimizing each mine’s reserves and providing strong cash flow.
The analysis of capital and operating costs shows these mines are very robust, and that a 15% increase in metals prices could mean about 60% higher Life of Mine cash flow based on reserves at conservative assumptions.
We have substantial resources, which, when combined with the exploration potential outlined in the report, highlight significant opportunities to further improve and extend the reserve LOM at both mines.”
After months of lagging, gold mining stocks could be indicating that a turnaround is on the horizon.
HL should be considered a buy if momentum increases.
Look for an entry at $2.17 with a price target of at least $3.36 based on the pattern in the chart.