Will Hecla Mining Stock Get Better Thanks to Higher Production?

Hecla Mining [stock_market_widget type="inline" template="generic" color="default" assets="HL" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has disappointed investors so far this year. The mining company’s stock is down more than 10% in 2019 thanks to the production challenges it has been witnessing, but there was a glimmer of hope for investors when it released its preliminary first-quarter production results around mid-April.

How the Production Numbers Look

Hecla’s first-quarter silver production came in at 2.9 million ounces, while gold production stood at 60,021 ounces. In a silver equivalent basis, Hecla’s production for the quarter was 10.8 million ounces, while on a gold equivalent ounce basis, its production came in at 129,378 ounces.

The good news for investors is that Hecla’s preliminary silver production for the first quarter was up 15% year over year, while gold production increased 4%. Hecla attributes the increase in its first-quarter production to the impressive performance of the Greens Creek mine in Alaska, where production was up 17% annually to 2.2 million ounces of silver.

Greens Creek’s output growth was driven by the higher ore grades recorded by Hecla at the mine, along with an improvement in recoveries. This, however, was not the only mine that did well last quarter. Hecla’s output at the Lucky Friday mine in Idaho climbed 74% year over year to 173,627 ounces, as the company brought in full-time staff as a result of ongoing striking by unionized workers.

In all, it can be said that Hecla’s production numbers for the first quarter of 2019 look good. But will that translate into an improvement in its results?

Will Hecla’s Improved Production Lead to Financial Gains?

Investors can take heart from the fact that Hecla was earlier struggling on account of weak production, but it seems to be correcting that problem now.

Hecla is yet to release its complete results for the first quarter of 2019, but there’s a good chance that its performance could improve on a year-over-year basis thanks to the higher production.

Analysts expect Hecla’s revenue to jump around 7.4% from the prior-year period, but it is expected to slip to a loss of $0.02 per share as compared to a profit of the same figure a year ago. That’s probably because of the uncertainty surrounding silver prices.

Hecla’s average realized price of silver stood at $16.84 an ounce in the first quarter of 2018, but there’s a good chance that the price of the metal will be at a lower level in the first quarter of 2019. As such, the gains that Hecla records from its increased production will be offset by lower pricing this quarter.

So it isn’t surprising to see why Wall Street is expecting mixed results from the company. However, investors can take heart from the fact that Hecla was earlier struggling on account of weak production, but it seems to be correcting that problem now.

All that the company needs now is an uptick in silver prices to improve its financial performance. But it remains to be seen if the silver price catalyst will arrive or not this year as weak industrial demand is expected to keep prices at current levels. As such, Hecla Mining stock might not get into a rally anytime soon because of the end-market headwinds it faces.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


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