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Hecla Mining: Caution, Not Exuberance, Should Be Our Trading Rule

Mar. 01, 2021 11:43 AM ETHecla Mining Company (HL)14 Comments


  • Revenues were $188.89 million in 4Q 2020, down 16% from a year ago and down 5.4% sequentially.
  • Lucky Friday returned to full production levels in the fourth quarter of 2020.
  • The recent silver rally makes me very cautious here.
  • Looking for a helping hand in the market? Members of The Gold And Oil Corner get exclusive ideas and guidance to navigate any climate. Get started today »

Lucky Friday | Hecla Mining Company

Source: Hecla Mining Presentation

Investment Thesis

Idaho-based Hecla Mining (NYSE: NYSE:HL) can be considered a "silver" stock, and, in fact, the company produces about one third of all silver produced in the US.

However, gold production is still the miner's primary component now, with 49,014K Au Oz this quarter.

The company released its fourth quarter 2020 results on Feb. 18, 2021. The results matched analysts' expectations.

One positive development that has deeply influenced Hecla Mining is the recent rally in the silver price, which contrasts quite radically with the bearish trend that gold price suffered until last week.

We can see that HL still outperforms the VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) and the iShares Silver Trust (NYSEARCA:SLV) on a one-year basis. HL is up 113% now.

ChartData by YCharts

The investment thesis is difficult to formulate with certainty. I'm tempted to consider HL as a decent long-term investment looking at the balance sheet. The recent silver rally made me very cautious in this category because of the rally's suspect nature that I consider more like manipulation than anything fundamentally sustainable.

Hence, I believe it's not good to hold a large long-term HL position but a small speculative one until this enthusiasm quiets down. Conversely, HL could be considered as the perfect trading vehicle due to this unusual volatility.

CEO Philippe Baker said in the conference call:

You all recognize the challenges of operating mines in pandemic. Our fast response, and our industry being considered essential in the U.S., allowed us to produce significantly more silver than we guided at the beginning of the year, so 1.4 million more ounces we produced than what we had guided.

Company Balance Sheet And Production In 4Q 2020 - The Raw Numbers

Hecla Mining 4Q '19 1Q '20 2Q '20 3Q'20 4Q'20

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This article was written by

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As an experienced investor, I will help you stay on task more efficiently.

I am a former test & measurement doctor engineer (geodetic metrology). I was interested in quantum metrology for a while.

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I have also managed an old and broad private family Portfolio successfully -- now officially retired but still active -- and trade personally a medium-size portfolio for over 40 years.

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Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I trade HL short term occasionally.

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