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Hecla Mining Company Earnings: Can Silver Bounce Back?

By Dan Caplinger - Feb 18, 2014 at 7:25PM

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The reopening of a big mine last year has produced growth from temporarily depressed levels, but can Hecla's silver exposure pay off?

Image: Creative Commons/Armin Kubelbeck

Hecla Mining (HL -6.39%) will release its quarterly report on Wednesday, and in a very unusual situation for most of the mining industry, the silver miner expects to see substantial growth compared to year-ago levels. The bullion-market crash last spring sent precious-metals prices plunging, forcing silver-mining peer Coeur Mining (CDE -7.10%) and silver-streamer Silver Wheaton (WPM -3.69%) to suffer big drops in revenue. But for Hecla, the restoration of production at its key Lucky Friday mine helped the company see substantial growth in 2013, and the question is whether Hecla can keep moving forward even as silver prices struggle to find a bottom in a challenging market.

Fate hasn't been kind to Hecla in recent years, as the company has had to deal with a series of problems. A mine accident at Lucky Friday in 2011 forced the closure of the mine for more than a year. Shortly after the mine reopened in early 2013, silver prices plunged, ending the year down by more than a third. Let's take an early look at what's been happening with Hecla Mining over the past quarter and what we're likely to see in its report.

Stats on Hecla Mining

Analyst EPS Estimate

$0.00

Year-Ago EPS

$0.03

Revenue Estimate

$121.28 million

Change From Year-Ago Revenue

50%

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance

What's the next step for Hecla earnings?
Analysts have gotten less optimistic in recent months about Hecla earnings prospects, cutting their fourth-quarter estimates by a penny per share and slashing their full-year 2014 projections by more than half. The stock, though, has started to rebound, climbing 10% since mid-November.

Hecla's third-quarter earnings marked a milestone for the miner, even though the numbers themselves weren't as impressive as investors had hoped. The miner said that it has finally restored Lucky Friday to full production levels, resulting in a 42% jump in silver production and 164% greater gold production. Yet the miner still posted a net loss of $0.03 per share. Even relatively low cash costs of $7.40 per ounce and strong prospects for its Casa Berardi gold mine, which it acquired in its buyout of Aurizon Mines last year, weren't enough to get Hecla back into the black for the quarter.

Still, silver miners have had a tough time keeping costs down, even as it becomes more important than ever to do so. The reopening of Lucky Friday led to some high production costs upfront, but Hecla's overall costs have come down throughout 2013, and the company expects to see further drops. By comparison, Coeur has had difficulty with high overall production costs that exceed current bullion prices. Silver Wheaton has seen similar problems indirectly, as its streaming partners have cut back on production plans as a result of high costs and other obstacles that have led to reduced streams of silver and gold.

One advantage that Hecla has over its industry peers is that its major projects are all in the U.S. and Canada, avoiding some of the political strife that has hurt other miners. The threat of higher taxes, macroeconomic impacts, and opposition throughout much of Latin America is something that Hecla doesn't have to deal with, in contrast to Silver Wheaton's extensive indirect exposure to Latin America and Coeur's multiple projects in areas including Argentina and Mexico.

In the Hecla earnings report, watch to see how the comeback of Lucky Friday continues. With the Aurizon acquisition having made Hecla a hybrid gold and silver miner, Hecla is in prime position to benefit if gold and silver prices continue their modest climb so far in 2014.

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Dan Caplinger owns shares of Silver Wheaton. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Wheaton Precious Metals Corp. Stock Quote
Wheaton Precious Metals Corp.
WPM
$32.58 (-3.69%) $-1.25
Hecla Mining Company Stock Quote
Hecla Mining Company
HL
$4.25 (-6.39%) $0.29
Coeur Mining, Inc. Stock Quote
Coeur Mining, Inc.
CDE
$3.01 (-7.10%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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