Is Hecla Mining Great?

For every stock out there screaming "buy me," others simply give us a nudge and a nod. While all the attention might be focused on their five-star peers, we can sift through Motley Fool CAPS to find four-star stocks giving us the sign that they're on the path to greatness. 

These opportunities -- including familiar names and beaten down companies -- rank higher than most of the other 5,400 starred companies, and it pays to investigate their potential. This time out we'll take a look at silver miner Hecla Mining (NYSE: HL  ) , perhaps a less obvious source for tomorrow's great buys.

Hecla Mining snapshot

Market Cap

$1.8 billion

Revenues (TTM)

$382 million

1-Year Stock Return

8.6%

Return on Investment

7.2%

Estimated 5-Year EPS Growth

4.9%

Dividend & Yield

$0.01/1.6%

Recent Price

$6.43

CAPS Rating

****

Source: FinViz.com

Of course, just because the 180,000-member CAPS community has chosen this stock as one being on the road to greatness doesn't mean you should buy in too. Due diligence is still required, but let's see why they think it might merit your attention.

In the sight of greatness
Unemployment's below 8%, jobless claims fell to their lowest level in four years, and retail sales surged higher. If all of these trends keep playing out like this then there's hardly going to be any justification for the Federal Reserve to continue its quantitative easing policy. After all, the rationale behind it is to spur the economy, but with the country's economic engines humming almost like never before, the Fed can turn off the cash spigot.

And that has some precious metals traders worried, since free-wheeling spending by global central bankers has been allowing the price of gold and silver to soar. Hecla's stock is 24% higher in 2012, Coeur D'Alene Mines (NYSE: CDE  ) is up 20%, and Silver Wheaton (NYSE: SLW  ) is 36% more valuable than where it ended last year. Similarly Yamana Gold (NYSE: AUY  ) and Royal Gold (Nasdaq: RGLD  ) are up 30% or more.

Though, each of them has pulled back recently as the better economic news came out (Coeur D'Alene is actually up about half a percent). No need to worry, though, because those economic treatises are pure fiction. The unemployment rate at best showed gains because of surging part-time employment while ignoring the staggering drop in the labor participation rate. Jobless claims tumbled only because California neglected to send in complete data. And if you look at the retail sales numbers that aren't massaged, the non-seasonally adjusted variety, you see a huge plunge in sales. I suspect the euphoria over the good news will dissipate soon enough.

Hecla's shares probably have responded slower than some of its peers because it's suffered from the kinds of operational issues analysts feared could sink Coeur D'Alene, including regulators shutting down its lead Lucky Friday mine until 2013 and lower grades at Greens Creek amid lower base-metal prices as it had to shoulder the burden of carrying the company through.

But we're just a few months away from the new year and Hecla is likely to begin production early on. It expects when operations jump-start again, production will rise 50% over the next four years. With over $233 million in cash, no debt, and an undrawn $100 million credit facility, Hecla remains a financially secure miner that could become acquisitive once the Lucky Friday mine reopens.

A clear picture of growth
At the end of last year I rated Hecla on CAPS to outperform the broad market averages, believing it would recover from the string of mishaps that plagued it last year. While I didn't foresee the mine closure arising at the time, or the pummeling the stock would take as a result of it, I'm still convinced this silver miner has more than just a few silver linings ahead.

Because of the uncertainty still surrounding Europe's finances, our own economy running pell-mell toward a fiscal cliff, and the preference for silver as the poor man's gold, the short- and long-term outlooks for the precious metal remain more than favorable. But tell me in the comments box below whether you think Hecla Mining can be lucky enough to bring its mine back, boost production as much as it foresees, and capitalize on the trends moving its way.

A great opportunity for you
As rich as the opportunity might be for silver, it's hard to argue with gold still being the straw that stirs the precious metals drink. So if you're still looking for new commodity trades, download The Motley Fool's special free report, "The Tiny Gold Stock Digging Up Massive Profits." Our analysts have uncovered a little-known gold miner they believe is poised for greatness; find out which company it is and why its future looks bright -- for free!

Rich Duprey has no positions in the stocks mentioned above. The Motley Fool owns shares of Hecla Mining Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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