Mining Stocks: Output boosts outlook for gold/silver miner

Hecla Mining Company used big increases in its gold and silver output to offset weak prices and expand its cash flow. Its new mine in Mexico is expected to bolster profit with its easily mined silver deposits.

HECLA MINING COMPANY (New York symbol HL; www.hecla-mining.com) explores for, mines and processes silver and gold in the U.S. and Mexico.

Most of the company’s silver output comes from three sites: the Greens Creek mine in Alaska; the Lucky Friday project in Idaho; and the San Sebastian mine in Mexico. Hecla’s Casa Berardi mine in Quebec, which it bought for $796 million in June 2013, supplies its gold.

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In the three months ended March 31, 2016, Hecla’s gold output rose 36.7%, to 55,688 ounces from 40,650. It produced 4.6 million ounces of silver—up 61.3% from 2.9 million a year earlier. The rise came from higher ore grades at its mines, as well as output from its new San Sebastian mine in Mexico.

Mining Stocks: New mine to add 8 million ounces of silver in 2 years

The company started up San Sebastian in December 2015. The facility is forecast to produce eight million ounces of silver equivalent in its first two years from easily mined surface deposits. The operation then has the potential to further expand its reserves.

Hecla’s cash flow rose 36.8% in the latest quarter, to $40.2 million, or $0.11 a share, from $29.4 million, or $0.08 a share, a year earlier. The higher production more than offset lower silver and gold prices.

Like most precious-metals firms, the company’s shares will be heavily influenced by silver and gold prices. Meanwhile, its positive cash flow and improving production outlook give it speculative appeal.

Recommendation in Stock Pickers Digest: BUY.

For our recent report on a gold stock we view as a buy now, read Yamana Gold set to expand production.

For our view on how to make the most of mining stocks in all markets, read 20 tips for successful investing in mining stocks.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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