E Hecla Mining: Impressive Even Without Lucky Friday

Hecla Mining (HL) is one of our favorite silver miners. The company recently made a decision to purchase Klondex Mining (KLDX). We believed that after the selloff the stock faced, there was an opportunity here. While we discussed the terms of the deal and what it meant for Hecla, we did not focus on performance of the name of late, not really go into detail on the ongoing strike at Lucky Friday.

In our opinion, the ongoing strike at the Lucky Friday mine is a double-edged sword. On the one hand, the lack of activity extends mine life, lowers expenses significantly, and could lead to leaner operations once back online. However, the revenue generation from the mine, as well as the fact that it is margin positive, is missed by the company.

For these reasons the stock had been falling for a year now. The strike has been ongoing that long. It also does not look like there will be a resolution too soon, as the miners’ union recently rejected any arbitration of the contract proceedings. Keeping in mind that Lucky Friday has been down since spring 2017, let us talk about production and finances for Hecla Mining.

The strike absolutely is weighing. At the Lucky Friday mine, 838,657 ounces of silver were produced for the year. This is a 77% decline in production compared to 2016. Of course, the strike is in the spotlight, but it overshadows other operations of the company that you need to be aware of.

There were declines at Greens Creek mine. Last quarter, 8.4 million ounces of silver and 50,855 ounces of gold were produced. These are 10% and 6% lower than last year. Lower output was due to lower grades at the mine.

At the San Sebastian mine, 3.3 million ounces of silver and 25,177 ounces of gold were produced. This was a decline of 24% and 26% respectively, mostly due to reduced tonnage and throughput. While these declines are palpable, the results were above expectations, so it is actually a positive.

Finally over at the Casa Berardi mine, 156,653 ounces of gold were produced, including 37,922 ounces from the East Mine Crown Pillar pit, where expansion is underway. This was an increase of nearly 11,000 ounces compared to 2016, a very positive piece of news for production.