Van Eck Associates Increases Stake in Hecla Mining
- By Alberto Abaterusso
Van Eck Associates Corp. disclosed it increased its stake in Hecla Mining Co. (HL) on Jan. 8.
According to a filing with the SEC, the firm now holds 41,784,297 common shares of Hecla Mining, which equates to 10.47% of its outstanding shares as of Dec. 29.
Warning! GuruFocus has detected 2 Warning Sign with HL. Click here to check it out.
The intrinsic value of HL
As Hecla"s top institutional shareholder, the firm"s add represents an 8.4% increase from the previous position of 38,531,381 shares as of Sept. 29.
Hecla Mining is currently trading around $3.97 on the New York Stock Exchange with a market capitalization of $1.584 billion.
Source: Yahoo Finance
With a nearly 30% loss on the stock market for the 52 weeks through Jan. 8, the stock is trading cheaply today. Hecla Mining"s share price is 1.05 times its book value, versus an industry median of 2.01 times, and is trading well below its 52-week high of $6.78. Its 52-week low is $3.43.
Hecla Mining is currently trading below the 100 and 200-SMA lines and nearby the 50-SMA line:
The RSI (14) is 52.16.
The company"s EV/EBITDA ratio is 11.43 times versus an industry median of 10.14. However, the EBITDA margin, which is calculated as earnings before interest, tax, depreciation and amortization (EBITDA) divided by total revenue, is 28.43%, compared to the industry has a margin of 22.8%.
The increase in Van Eck Associates" holding is not the only indication that the stock may be undervalued by the market. In addition, the company"s insiders recently purchased more of its stock, which is usually perceived by investors as a sign it may be a good buying opportunity at the current price.
Analysts foresee a 33% upside in Hecla"s current market value to $5.29 within the next 12 months. The recommendation rating is 2.5 out of 5.
The catalyst to watch here is the Lucky Friday silver mine. At Lucky Friday, operations have been suspended since mid-March after the unionized workers went on strike due to a labor dispute with management. To date, the parties have yet to reach an agreement. This issue caused a 90% year-over-year decline in the miner"s silver production to 88,298 ounces at Lucky Friday in the third quarter.
When the two parties settle the dispute, Lucky Friday will resume its operations at its normal capacity, contributing to the Hecla Mining"s quarterly silver production with approximately 885,000 to 890,000 ounces of silver, or about 3.5 million ounces per year. The company"s revenue, profits and cash flow will benefit as well.
This will trigger the appreciation of Hecla Mining on the New York Stock Exchange, further propelled by rising gold and silver prices.
Lucky Friday normally contributes 15% to the company"s total sales of metal concentrates and metal products.
The company"s other assets are Greens Creek, which is located in Alaska, the Casa Berardi mine, which is located in Quebec, and the San Sebastian unit, which is located in the Mexican state of Durango.
Greens Creek, Casa Berardi and San Sebastian contribute approximately 40%, 27% and 18% to Hecla Mining"s total revenue.
Hecla Mining sells gold and silver in bullion bars to precious metals traders. The miner also offers base metals such as lead and zinc, and bulk concentrates to brokers and custom smelters.
The company"s other top institutional holders include Dimensional Fund Advisors LP with 8.40% of outstanding shares, the Vanguard Group Inc. with 8.22% and Blackrock Inc. with 6.32%. These holdings are as of Sept. 29.
Disclosure: 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
