What happened
Shares of Hecla Mining (HL +1.98%) rose by as much as 16% at one point this week according to data from S&P Global Market Intelligence. Although it hasn't held on to all of that advance, by the open of trading on Jan. 21 the stock was still sitting with a roughly 9.5% gain. There was no news out of the gold and silver miner this week, but a business update on Jan. 13 may have set the stock up for this week's gains.
So what
Last week Hecla Mining provided an update on its 2021 production, which was mixed, but overall appears to bode well for the future. Notably, while gold and silver production fell 4% and 5%, respectively last year, there were positive trends at key mines. For example, the Lucky Friday mine increased silver production by a huge 75% in 2021 because it was fully operational for the year. But perhaps more notable was the 15% sequential production increase from the third quarter thanks partially to improved silver grades. The Greens Creek mine also saw a sequential quarterly increase in production. Sequential production was up at the Casa Berardi mine, as well, with the mill there operating at record levels helped by production coming from an expansion investment. While that's last week's news, it's an important backdrop.
Image source: Getty Images.
Essentially, Hecla Mining ended 2021 on a strong note, production-wise. That suggests production could be pretty good in the first quarter and, perhaps, for all of 2022, as well. So when gold and silver prices rose this week, investors were especially excited by what that might imply for Hecla Mining's financial results. Essentially, once a miner covers its mining costs, profits flow far more quickly to the bottom line. They are, basically, leveraged to gold and silver prices. Add in Hecla Mining's generally positive production results, and it makes sense that investors were happy to bid the shares up. Note, too, that Hecla Mining has linked its dividend payment to silver prices, so higher commodity prices can lead very directly to improved shareholder returns. That's another positive that investors probably had in mind, noting that silver is currently very close to a key dividend breakpoint.
Now what
Hecla Mining was not the only miner to get a boost from higher gold and silver prices this week. And, frankly, precious metals are often volatile commodities, so one day or week of price advances here shouldn't be the deciding factor for an investment commitment. Precious metals and precious metals miners are probably best viewed as a diversification tool. Hecla Mining may be the miner of choice for you, but you need to consider factors beyond short-term price moves. However, it is hard to deny, based on Hecla Mining's recent production results, that it appears to be in a good position to take advantage of rising commodity prices -- for those more inclined to speculation.
