Hecla Mining Will Increase Its Silver Production By 10% And Gold Production By 50% In 2014

Feb. 19, 2014 11:51 AM ETHecla Mining Company (HL)11 Comments

Introduction

In this article I'll have a closer look at Hecla Mining (NYSE:HL) which has just released its results for 2013 and an outlook for 2014. I'll start with providing my view on the company's financial results and its balance sheet. Thereafter I will briefly discuss the outlook for 2014 which will result in my conclusion at the end of this article.

All images in this article were directly sourced from the company's press release.

My view on the financial results

During 2013, Hecla Mining produced 8.9 million ounces of silver (which is the upper end of the provided range of 8-9 million ounces) and almost 120,000 ounces of gold for a total revenue of $382.6M. This was actually an increase compared to last year thanks to buying Aurizon Mines which operated the Casa Berardi gold mine. However, the direct costs also increased (and at a faster rate than the revenue) which caused the gross profit to fall by 54% to $66.1M. Unfortunately the company's G&A bill increased and there were also additional costs related to the acquisition of Aurizon Mines which resulted in a loss from operations of approximately $32.4M net loss of $25.1M.

As most of my readers know, I also like to have a look at the cash flow statements of a company, as I'm convinced these statements offer a better indication of the quality of the underlying business.

According to the cash flow statements, Hecla Mining had an operating cash flow (before changes in working capital) of approximately $60M. This wasn't sufficient to cover the more than $150M in capital expenditures, and as there also was the non-recurring acquisition cost of Aurizon Mines, Hecla Mining was definitely cash flow and free cash flow negative. The funding shortfall was solved by issuing $500M worth of notes with a coupon of 6.875% maturing in 2021.

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