Bear Of The Day: Hecla Mining

Downturn in precious metals prices has badly impacted miners which are considered leveraged plays on the metals. While gold and silver prices are down about 7% this year, gold miners ETF is down more than 28% and silver miners ETF is down almost 32%.With the Fed expected to raise rates sometime soon, the outlook for miners remains negative.

About the Company

Established in 1891, and headquartered in Coeur d’Alene, Idaho, Hecla Mining (HL – Snapshot Report) is the largest primary silver producer in the U.S., #3 lead and zinc producer, and a growing gold producer. They own two primary silver mines in Alaska and Idaho and the Casa Berardi gold mine in Quebec. For 2015, their reserves total 173 million ounces of silver and 2.1 million ounces of gold reserves.
 
Disappointing Results

The company reported second quarter results on August 6. Revenue for the quarter declined by 11% to $104 million, while adjusted EBITDA decreased 26% to $30 million. During the quarter, 41% of revenue came from gold, 28% from silver, 20% from zinc and 11% from lead. The average realized silver price was down 17% year-over-year, gold 8% and lead 6%, respectively, while average realized for zinc price rose by 2%.

Adjusted loss for the quarter was $0.05 per share, worse than the Zacks Consensus Estimate for a loss of $0.02 per share.
 
Downward Revisions
 
Due to weak outlook, analysts have revised their estimates for the company sharply downwards. Zacks Consensus Estimates for the current and the next fiscal year are now ($0.12) per share and ($0.05) per share respectively, down from ($0.09) per share and $0.01 per share, before the results. Falling estimates sent the stock to a Zacks Rank #5 (Strong Sell).
 
The Bottom Line
 
With its diversified revenue stream and strong liquidity position, the company may be able to turn around in the longer-term, but the shorter-term, the outlook for the stock remains cloudy.