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Hecla Mining: Why We Bought At $1.50 And Will Buy More

Date: Thursday, July 18, 2019 12:30 AM EDT

 

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The precious metals sector is once again under siege in the last few months, and it has led to the start of some really great sales in the precious metal miners and streamers. While we are not quite "bullish" yet, we definitely believe it is time to consider doing some longer-term position initiation once again. Even our more short-term traders should be watching the action in this space. John recently highlighted it in his "words from the chartist piece". You,may recall that two of our most rewarding plays were in this sector last year, both with Endeavour Silver (EXK) and Hecla Mining (HL). These trades garnered us 30-40% returns in just a few weeks. Then we pyramided into HL again and sold as the stock approached $3. Well, we believe gains like this, or more, will be had again in coming months. We are at the height of risk on, and precious metal prices have suffered, leading to quality miners being crushed.

Today we want to highlight Hecla Mining once again. We were once again buyers at $1.50 and now again at $1.75 here. Sure, if things deteriorate, we could get a better price. We are prepped to ride this from $2 back to $3 (that would be a 50% gain). Let us build a nice position here. Can it fall further? That will depend on the price of precious metals. As it stands now, we still contend that Hecla Mining is stronger than ever with its purchase of Klondex Mining. We believe the market is highly discounting the new and larger company here in 2019, which has focused on lowering costs, improving margins, and developing new assets. To be clear, a $1-$2 rebound in silver, or a $100 move in gold higher from present levels will translate to at minimum a 20% gain from present levels of $1.75. In this column we assess the company which we have traded many times as a bit of a longer-term investment.

Technical picture

Let us have a look at some of the recent charts. Both the three months and the 5-day charts are pretty ugly:

Three month:

5-day:

There could be some bottoming action occurring soon, but you have to go all the 

Here our chartist sees the price converging and suggesting that anything under $2.10 is a real opportunity in the medium-term. This could bounce in two weeks, or two months. It may take all of 2019. We do not have the kind of read but we are definitely in accumulation mode, provided of course the metals market does not entirely collapse. Again, we want shares to come down more to get a full position, but if we buy in and shares go up, that is a high quality problem.

The play

Target entry: $2.10

Second tranche: $1.85

Complete position $1.50

Target exits: If trading $2.30-$2.50, if investing and holding longer, $3-$4.

Timeframe: Month to Month

Comment: Buy in a pyramid fashion (eg. 500 shares, 1000 shares, 2000 shares) on the way down.

Discussion

Okay, even though the pressure is on now, we are looking at a good company at a fair price. We believe there is upside again, and in this column, we will specifically hone in on the most recent production numbers and financial performance in the just reported quarter.

Production numbers

It was not surprising to see a decline in production in Q1 2018 versus Q1 2017, at least for silver, thanks to the ongoing strike at the Lucky Friday mine, in addition to planned declines at San Sebastian:

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