Why Shares of Hecla Mining, MAG Silver, and Sibanye Stillwater Are Plummeting This Week

What happened

It's been a relatively uneventful few days for the S&P 500 overall. Since the end of trading last Friday, the index has fallen less than 0.1%. Precious metals stocks, on the other hand, have experienced a much wilder ride. Between earnings reports and the market price of silver falling, shares of Hecla Mining (HL 1.19%), MAG Silver (MAG -0.08%), and Sibanye Stillwater (SBSW 1.65%) have all suffered steep declines over the past week.  

From the close of trading last Friday to 11:28 a.m. ET today, shares of Hecla Mining have fallen 13.4%, while MAG Silver and Sibanye Stillwater have dropped 13.2% and 18.7%, respectively.

So what

Narrowly beating analysts' estimate of $198.4 million, Hecla Mining reported first-quarter 2023 revenue of $199.5 million on Wednesday. Investors were likely more fixated on the bottom of the income statement, where the company reported adjusted earnings per share of $0.01 -- lower than the $0.02 that analysts had expected.

The cash-flow statement provided another source of concern for investors. Whereas Hecla Mining generated free cash flow of $16.4 million in Q1 2022, it reported negative free cash flow of $13.8 million in Q1 2023. Hecla Mining's failure to generate positive free cash flow was especially frustrating for investors considering the company's successes during the quarter: record throughput and record gold production at Greens Creek.

Unlike Hecla Mining, which has several metals-producing assets in its portfolio, MAG Silver has several assets in development and a 44% equity interest in one: Juanicipio, a high-grade silver project located in Mexico. On Wednesday, MAG Silver reported first-quarter 2023 results, and investors were disappointed to find less-than-glittering results from Juanicipio. In Q1 2023, MAG Silver reported net income of $7.9 million from its equity investment in Juanicipio, notably lower than the $13.8 million that the company reported during the same period last year.

Providing an update on its Q1 2023 operations on Tuesday, Sibanye Stillwater has failed to shine in investors' eyes in the following days. The company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $441 million, a 51% decrease from the same period last year.

Of further concern is the company's outlook for 2023. While management expects gold production to rise from 19,301 kilograms in 2022 to approximately 24,000 kilograms in 2023, costs are expected to rise considerably. In 2022, Sibanye Stillwater reported all-in sustaining costs (AISC) per ounce of $1,180, and it projects AISC per ounce of $1,882 to $1,940 in 2023. According to management, the elevated AISC costs this year are attributable to "operational and power constraints as well as sustained high levels of inflation."

In addition to the disappointing financial updates, the declining price of silver through the week contributed to investors' interest in selling shares of Hecla Mining and MAG Silver. The spot price of silver has fallen steadily throughout the week, closing at $25.84 per ounce last Friday and now changing hands at about $23.87 per ounce. 

Now what

Considering the uninspiring financial results that the companies reported, the sell-offs in Hecla Mining, MAG Silver, and Sibanye Stillwater are unsurprising. And with the price of silver tumbling lower recently, the declines in Hecla Mining and MAG Silver were not shocking since there's a high correlation between the movements in the price of silver and silver-related stocks.