Will Hecla Earnings Survive Silver's Plunge?

Hecla Mining (NYSE: HL  ) will release its quarterly report on Thursday, and like most companies in the mining industry, the silver producer has seen terrible performance from its stock so far this year. But Hecla earnings have held up relatively well, and if the company can stay profitable even with silver prices at their current weak levels, it should bode well for Hecla's long-term prospects once the metal starts to recover.

Hecla has had to deal with its own particular problems in addition to the general troubles plaguing the silver-mining market, as a long closure of a major mine weighed on production. With Hecla having completed a key acquisition, though, better times could be ahead if the company can execute on its long-term strategic plans. Let's take an early look at what's been happening with Hecla Mining over the past quarter and what we're likely to see in its quarterly report.

Stats on Hecla Mining

Analyst EPS Estimate

$0.01

Change From Year-Ago EPS

(50%)

Revenue Estimate

$110.24 million

Change From Year-Ago Revenue

65%

Earnings Beats in Past Four Quarters

0

Source: Yahoo! Finance.

How well can Hecla earnings hold up under lower silver prices?
As you'd expect, analysts have reined back on their projections for Hecla earnings in recent months, cutting $0.04 per share from their June-quarter estimates and $0.22 per share from full-year 2013 predictions. The stock has continued its slide, falling another 14% since early May even after the worst of the silver-induced tumble had already occurred.

Falling silver prices certainly haven't helped Hecla's prospects. Not only have Hecla's margins suffered, but the company had to slash its dividend by 80% in May, as it was linked to the prevailing price of silver. The double hit to dividend investors has crushed confidence in the company, and as results start coming in from other silver miners, investors are starting to question whether the rise in silver to nearly $50 per ounce was merely an unsustainable short-term move above the metal's longer-term range below $20. ETFs like Global X Silver Miners (NYSEMKT: SIL  ) have therefore sunk more sharply than the metal's price over the past six months.

But weakness in precious metals hasn't stopped Hecla from moving forward with ambitious acquisition plans. The company completed its $760 million buyout of Aurizon in early June, adding a potential 125,000-130,000 ounces of gold production from the Casa Berardi mine in Quebec during 2013. In addition, Hecla bought an additional interest in Typhoon Exploration, a Canadian company in which Aurizon had already invested a substantial amount.

Still, competition in the industry is fierce. Both Coeur d'Alene Mines (NYSE: CDE  ) and Endeavour Silver (NYSE: EXK  ) have kept silver production levels high, with Endeavour actually hitting a new record on a nearly 50% surge in production to 1.5 million ounces. With the return of Hecla's Lucky Friday mine also adding new metal onto the market, plentiful supplies could keep silver prices from rising substantially in the near future.

In the Hecla earnings report, watch to see how the company's production figures compare to those of its peers. Investors need to see evidence that Hecla is operationally sound, even if prices hurt results somewhat. In the long run, Hecla needs to be well-positioned for when silver prices start to rise once more.

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