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Here's Why Hecla Mining Stock Rose as Much as 11.8% Today

By Maxx Chatsko – Aug 9, 2018 at 2:31PM

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The silver and gold miner reported second-quarter 2018 earnings results.

What happened

Shares of Hecla Mining (HL 0.24%) rose nearly 12% today after the company reported second-quarter and first-half 2018 results. The silver and gold miner delivered a significant surge in operating profits, net income, and operating cash flow in the first six months of the year thanks to a healthy increase in gold production and strong selling prices during the most recent quarter. Lower income tax expense also played a big role in driving net income and cash flow higher. 

The company also said that its previously announced acquisition of assets from Klondex Mines has closed, with the high-grade mines now being integrated into the company's production portfolio. Hecla Mining has prioritized operations at Fire Creek, which boasts the best operating margin of the three acquired mines.

As of 2:53 p.m. EDT, the stock had settled to a 10.8% gain.

A polished gold bullion next to tiny gold fragments.

Image source: Getty Images.

So what

Hecla Mining stock has fallen in the last year and is down nearly 20% since the beginning of 2018 as operations have continued to struggle, with the all-important Lucky Friday silver mine still offline due to an ongoing labor dispute with unionized workers. Making matters worse, the company's remaining mines all underperformed in recent periods, which compounded the loss of production from Lucky Friday.

Operations aren't quite back to historical levels, but investors were happy to see that expenses were held in check during the second quarter of 2018. While total revenue only grew by $10 million in the first half of the year compared to 2017, the business delivered an $18 million increase in both operating income and net income during the comparison periods. Operating cash flow was about the same, but very strong in the three months ended June 30.

Most of the gains were driven by strong gold production and sales growth. Whereas Hecla Mining produced and sold 1 million ounces less of silver in the first half of 2018 compared to the year-ago period, it managed to boost gold output and sales by 10,000 ounces, or nearly 10%, in that span.

Now what

Investors are now waiting to see how quickly the recently acquired mining assets can be integrated into operations and whether or not they'll perform as expected. The recent strength of legacy operations helps to take some pressure off of Hecla Mining during the integration. Meanwhile, after exiting June with $245 million in cash on hand, the company has ample financial flexibility to expand production at its latest growth projects and to continue to invest in novel cost-saving technologies, such as autonomous mining. There's a long way to go before Hecla returns to its former level of operational strength, but the business appears to be headed in the right direction.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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