How Hecla Plans to Weather the Silver Storm

Tomorrow, Hecla Mining (HL 0.47%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

The plunge in gold prices last month also had a big impact on silver, and as a major producer of the white metal, Hecla's shares dropped substantially. But in the long run, the mining company seems to be squarely on a growth path. Let's take an early look at what's been happening with Hecla over the past quarter and what we're likely to see in its quarterly report.

Stats on Hecla

Source: Yahoo! Finance.

Will Hecla's earnings look a lot shinier this quarter?
In recent months, analysts have gotten a lot more pessimistic about Hecla's earnings prospects. They've slashed their first-quarter estimates in half, and they've reduced full-year 2013 earnings consensus by $0.15 per share in light of recent events. The stock has lost 35% of its value since early February.

Hecla has been dealing with tough conditions in the silver market for quite a while. Even before their most recent plunge, silver prices have been weak, with the iShares Silver Trust (SLV 1.57%) having fallen nearly 40% in the past two years.

But the poor environment hasn't kept Hecla from making an aggressive move. In early March, it made a roughly $760 million bid for Aurizon Gold (NYSEMKT: AZK), topping a previous hostile bid for the company from Alamos Gold (AGI 1.39%). Aurizon's management has recommended the Hecla bid as superior, with the special meeting of Aurizon shareholders due to take place later today to approve the deal. The deal will give Hecla exposure to Aurizon's Canadian gold-mine assets at the Casa Berardi site in Quebec, helping it diversify from its concentration on silver in favor of gold.

To finance that deal, Hecla was able to tap the credit markets successfully, offering $500 million in debt last month. The interest rate of 6.875% is fairly high for the current rate environment in the bond market, but it's much lower than Hecla would have had to pay under more normal economic circumstances in the absence of rate-depressing moves from the Federal Reserve.

Perhaps most importantly, Hecla got great news in March when the Mine Safety and Health Administration said that its Lucky Friday mine in Idaho won't get an official Potential Pattern of Violations notification. With Lucky Friday having resumed operations this quarter after a long hiatus due to fatal accidents to two miners at the site in 2011, Hecla should see its production figures rise substantially in 2013 compared to their depressed levels during the mine's closure last year.

In Hecla's quarterly report, watch for two things: exactly how much production Lucky Friday is able to bring on line, and what plans management has for the Aurizon acquisition going forward. Gold and silver prices look like they'll remain challenging for a while, but at least for now, the company potentially has more to celebrate from its operational recovery.

Click here to add Hecla to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.