What happened

Hecla Mining Company (NYSE:HL) shares continued their free fall in August to end the month down 11.3%, according to data provided by S&P Global Market Intelligence. That brings the silver miner's year-to-date losses to nearly 29%.

Ironically, Hecla was on its way to deliver what could've been its best month so far this year when its shares soared by double digits on Aug. 9. Unfortunately, bears were back in attack sooner than expected, beating the bulls handily by the time the month ended. Why did that happen?

So what

After shocking investors with flailing production and a labor union strike at a key mine, Hecla Mining stirred up hopes of a turnaround when it reported surprisingly strong numbers for the second quarter on Aug. 9. Its sales jumped 10%, net income came in at $11.9 million versus a loss of $24 million in the year-ago quarter, and operating cash flow quadrupled to $30 million.

That's not all. Hecla also boosted its fiscal 2018 gold production outlook to 262,000-284,000 ounces compared with 233,000 ounces in 2017, thanks primarily to its acquisition of Nevada-based gold miner Klondex Mines, whose Fire Creek deposit is being touted as Hecla Mining's cornerstone asset. Going by those numbers, Hecla's sharp post-earnings jump wasn't surprising.

But what went wrong thereafter?

A man looking confusedly at a falling stock chart.

Image source: Getty Images.

It seems the market isn't sure if it can call the bottom for Hecla Mining just yet. Silver production is one reason. So while Hecla increased its gold forecast, it expects silver production to drop almost 18% this year. Silver makes up roughly 35% of the miner's production right now. The drop can largely be attributed to the ongoing strike at Lucky Friday mine, which is into its 17th month now and rapidly decelerating production from San Sebastian mine that's nearing the end of its life.

Now what

Contrarian investors may find reasons to remain hopeful. To start, Hecla's Klondex acquisition holds promise as it's in a high-potential, geographically stable region of Nevada and will help boost Hecla's exposure to gold by nearly 11 percentage points to 50%.

Meanwhile, Hecla is investing in advanced and autonomous machinery, including a mechanized mining machine at Lucky Friday that could make the mine safer by eliminating blasting methods that can trigger seismic pressure. Just days ago, Hecla also received exploration approval from the U.S. Forest Service for its silver and copper mine, Rock Creek at Montana. It's likely the miner will now strive to settle an ongoing legal dispute with the state to start work at Rock Creek in the near future.

Long story short, you might want to put Hecla stock on your radar as you watch the miner's progress with Klondex integration and exploration programs.

Neha Chamaria 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.