Hecla Mining Company HL has closed the previously announced acquisition of Alexco Resource Corp. HL is the largest primary silver producer in the United States and the third-largest in the world.
With this buyout, Hecla Mining has the scope to become Canada's largest silver producer. Considering Alexco's Keno Hill contribution and continued production growth at HL’s Greens Creek and Lucky Friday mines, Hecla Mining’s annual production is estimated at 17-20 million ounces, which is 30-55% higher than the 2021 levels.
Hecla Mining had announced the acquisition in July. Alexco is a Canadian primary silver company that owns and operates the majority of the historic Keno Hill Silver District in Canada's Yukon Territory, one of the highest-grade silver districts in the world. With this takeover, Hecla Mining gains access to a fully permitted property in a premier mining jurisdiction with infrastructure that includes a 400-ton per day mill, on-site camp facility, all-season highway access and connection to the hydropower grid.
It adds to Hecla Mining's significant silver reserves. HL’s silver resources increased to 200 million ounces in 2021, the second highest silver assets in its 130-year history. With the Alexco buyout, HL will increase proven and probable silver reserves by 19% to 237 million ounces, measured and indicated resources by 24% to 257 million ounces and inferred resources by 7% to 523.7 million ounces.
Alexco had fallen behind its Keno Hill development and production plan and its original estimate of achieving commercial production in early 2022. HL already has plans in place to invest in development, infrastructure and equipment to ramp up Keno Hill’s production capacity to its optimum by the end of 2023. Being a much larger business and given its organizational expertise and financial strength, Hecla Mining is likely to achieve full potential of Keno Hill while investing in exploring the entire district.
As part of the deal, Hecla Mining issued 17,992,875 million shares of its common stock to Alexco shareholders for a total consideration of approximately $69 million. This is based on a share exchange ratio of 0.116 of one Hecla Mining share for each Alexco common share.
Hecla Mining entered into an agreement with Wheaton Precious Metals Corporation WPM whereby the latter terminated its silver streaming interest in Alexco's Keno Hill property. For this, HL issued $135 million of its common stock to WPM. HL also provided Alexco with a $30-million secured loan facility, of which $25 million was drawn when the transaction closed.
Per the Silver Institute, the global silver market realized growth in every demand category in 2021. Total global silver demand was at its highest level since 2015, gaining 19% to 1.05 billion ounces last year. Gains are also expected this year across all key demand components, which will take global silver demand to a record high of 1.112 billion ounces. Demand is expected to be 5% higher than the year-ago number on the back of upsides in industrial fabrication and a constant post-pandemic rebound in jewelry and silverware.
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Shares of Hecla Mining have dropped 17.8% in the past year compared with the industry's decline of 30.6%.
Stocks to Consider
Hecla Mining currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the basic materials space include Daqo New Energy Corp. DQ and Albemarle Corporation ALB.
Daqo New Energy, currently sporting a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 177.5% for the ongoing year. The Zacks Consensus Estimate for DQ's current-year earnings has been revised 9.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing in one quarter, the average beat being 10.8%. DQ has gained around 5% over a year.
Albemarle has a projected earnings growth rate of 425.7% for the current year. The consensus estimate for ALB's current-year earnings has been revised 67.9% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. ALB has a trailing four-quarter earnings surprise of 24.2%, on average. The stock has gained around 29% in a year and currently flaunts a Zacks Rank of 1.
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