Hecla Mining: A Turnaround Is in Progress

Hecla Mining [stock_market_widget type="inline" template="generic" color="default" assets="HL" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock had started recovering going into the company’s second-quarter earnings report thanks to the tough measures it announced to keep costs under check. But the rally came to an end as soon as the company released its actual earnings report.

Hecla missed Wall Street estimates on both revenue and earnings during the quarter. Its loss was wider than expected despite an increase in the company’s silver output. Let’s take a closer look at what plagued Hecla last quarter.

A Closer Look at the Problem

Hecla’s second-quarter performance was affected by several factors, the most important among them being lower grades and recoveries in Nevada that led to an increase in costs. According to CEO Phillips Baker:

“Our financial performance in the second quarter was impacted by several items, including lower by-product credits and the timing of lead shipments at Greens Creek, and higher depreciation expense, which more than offset the positive impact of higher grades at Greens Creek.”

So, Hecla did well at the Greens Creek mine, but that was offset by its operating performance in Nevada. More specifically, Hecla produced 2.4 million ounces of silver and 13,257 ounces of gold at Greens Creek. This was better than the year-ago period’s output of 2 million ounces of silver, while gold production was almost flat as compared to the year-ago period’s number.

Thanks to the strength at the Greens Creek mine, Hecla’s overall silver production increased to more than 3 million ounces during the quarter as compared to almost 2.6 million ounces a year ago. Gold production, meanwhile, remained flat.

Now, one of the biggest reasons why Hecla’s performance took a beating was the lower silver price. The company said that its average realized price of silver during the quarter came in at $15.01 an ounce, down 10% as compared to the year-ago period.

The average realized prices of zinc and lead also fell substantially, causing a 9% annual revenue decline at Hecla. All-in sustaining costs also rose 14% annually to $11.97 an ounce.

As a result of these two factors, Hecla swung to a loss during the quarter. It posted a total net loss of $46.5 million as compared to a profit of $12 million a year ago.

However, Hecla shares have started inching up once again of late thanks to the company’s production outlook and the rally in silver prices.

A Sign of Better Things to Come

Weak silver prices dented Hecla last quarter, but the good news is that the price of the metal is now at nearly $18.50 an ounce thanks to the macroeconomic uncertainty. If silver prices keep rising or at least hold this level in the coming months, don’t be surprised to see Hecla witness a turnaround in its financial performance.

That’s because the company has substantially raised its full-year silver production outlook to 11.7 million ounces as compared to the prior forecast of 10 million ounces. So there’s a chance that Hecla could be able to turn its fortunes around and deliver more upside as the year progresses thanks to its upgraded guidance and the silver price rally.

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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