E Hecla Mining: This Dividend Paying Silver Stock Could Generate Strong Returns

We believe Hecla Mining (HL) is one of the most attractive silver stocks available today due to its heavy geographic weighting in the low-risk North American continent, hedging practices meant to mitigate risks, aggressive cost-cutting program, and cheap valuation.

Hecla’s portfolio consists of 7 operating mines, 2 development sites, and multiple exploration projects, most of which are in North America and the remainder in South America. It’s main silver mine (Greens Creek) reported 19% year-over-year production growth in the second quarter. However, its main gold mine (Casa Berardi) reported a 32% year-over-year production decline.

That said, Hecla could generate strong returns for shareholders going forward, through earnings growth and dividends.

Recent Downturn Could Be Short-Lived

Its productivity decline is one of the reasons that has led to the stock’s overall underperformance relative to the broader mining sector. Another reason is that the company’s Mexican operations at San Sebastian are hurting its overall results. The San Sebastian mine’s silver productivity declined by 17% and its gold productivity declined by 8% year-over-year in the second-quarter results.

The third reason is that the company’s investments in three different Nevada mines have all fallen short of expectations thus far, moving management to cut operational expenditures there.

Fourth, is the continuing two-year-old labor union wage disagreement strike at its Lucky Friday mine in Idaho, which has significantly impaired production at the site. This strike is especially significant because the mine is the company’s second-best silver asset.

The final reason that the stock is underperforming is due to the balance sheet. They have over $530 million of long term debt on the books and just $10 million in cash on hand. The debt to current assets ratio is 3.7 times; a very high burden for a company with so many issues. Most dangerous of all, its debt is due at the end of 2021.

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