Hecla Mining Increases Reserves
- By Alberto Abaterusso
We can expect a decisive surge in the value of Hecla Mining Co. (HL) after a report that the miner has reached its highest level of silver, gold and lead reserves in its 127-year history.
Hecla Mining also reported that its level of zinc reserves have reached their highest in five years.Compared to 2016 levels, gold reserves have increased by 12% to 2.3 million ounces, silver reserves by 3% to 177 million ounces, lead reserves by 8% to 737,290 tons and zinc reserves by 15% to 840,870 tons.
Warning! GuruFocus has detected 2 Warning Sign with HL. Click here to check it out.
The intrinsic value of HL
The news is appealing for investors because the boost in reserves will not only cause immediate appreciation of the stock but will also be a major driver for year ahead. The increase in reserves prompts a production boost. Of course, it is helped by a favorable commodity environment.
Hecla Mining is currently trading at $3.59 per share on the New York Stock Exchange and with a predicted $5.26 per share average target price, the 46% appreciation of the stock within the ensuing 52 weeks of trading is likely.
Some indicators on Hecla Mining: The stock has lost more than 45% for the 52-weeks through Feb. 8 and underperformed the VanEck Vectors Gold Miners ETF (GDX) by 31.13%. Hecla Mining is below the simple moving average lines computed over the last 200, 100 and 50 days of trading, and the current share price is only 16 cents over the 52-week low of $3.43 and 87.2% below the 52-week high of $6.72.
Source: Yahoo Finance
Further proof the stock is trading cheaply is highlighted by a price-book (P/B) ratio of 0.90 times, which is well below the industry median of 2.01 times. The EV-to-Ebitda (ttm) ratio of 10.59 times is approximately on par with the industry average.
Phillips S. Baker, Jr., president and chief executive officer of Hecla Mining commented: "As we grow our reserves and increase our already long mine lives, we can improve productivity by increasing throughput or lowering costs so the mines can generate returns regardless of the metals price."
In addition, Hecla Mining has a projects capital of $30 to $37 million for expiration activities in 2018. This is a 27.7% to 57.4% increase from 2017 level and reflects the "continued growth in targets at Hecla's properties," the company reports.
(Disclosure:I have no positions in any security mentioned in this article.)
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 2 Warning Sign with HL. Click here to check it out.
The intrinsic value of HL
