Shares of gold and silver miner Hecla Mining (NYSE:HL) gained nearly 10% in early trading Friday before subsiding to about a 2.1% gain in the waning minutes of trading. The leap may have something to do with a pair of analyst reports that have come out on Hecla over the past two days.
This morning, Merrill Lynch reiterated an underperform rating on Hecla stock, and cut its price target to just $1.55 per share. This followed a price target cut to $1.75 per share from Cantor Fitzgerald on Thursday.
With less than $12 million in cash weighed against nearly $550 million in long-term debt, and free cash flow now negative and becoming more so by the hour, Cantor called Hecla's financial situation "dire" -- although at recent prices, the analyst is maintaining a neutral rating on the stock.
For its part, Hecla says it is taking steps to remedy its poor financial state, cutting $25 million in expenses this year, and curtailing investments in its Nevada operations that "have not generated the cash flow we had hoped for."
Capital expenditures for the year are still expected to be about $138 million, however, and that's more than the amount of operating cash currently flowing into the business. So getting back to free cash flow this year could be difficult. This means debt problems will linger, weighing on the stock.
That being said, both analysts -- negative on the stock though they might be -- seem to think that Hecla stock is worth more than the $1.50 or so it currently costs. If that's the worst the bears can say about Hecla, it's no wonder investors are getting optimistic.