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« Gold, Silver and Uranium: Traffic Trends | Main | The USD Bounces As Gold and Silver Tumble: That’s what we want! »
Thursday
Aug022007

Hecla Mining: BUY

We are giving a BUY signal on Hecla Mining. It is has been marked as a BUY for a long time in our silver portfolio, but we are issuing an additional BUY signal as we think at this point one should add to any holdings in Hecla that one may have and if one has not yet established a position in this stock, now is the time to build that position.

Hecla Mining BUY

Considering that the RSI and STO are looking bullish, as well as the fact that Hecla has gone through a significant pullback, we think now is a good time to buy some more Hecla. Hecla has broken its support level at around $9.00 and therefore has taken a sharp fall back to around $7.85.

The last BUY signal we have was on our gold website, www.gold-prices.biz, where we signalled a BUY on Kinross Gold, which went on to go on a great run, as we saw Kinross rising over 22% in the 22 days following our BUY signal.

From its recent high of $9.38, Hecla has fallen over 16% in just a few trading sessions, sparked mainly by the recent drop in silver prices. The slip in silver prices has halted at around $12.65 and now looks to consolidate in preparation for the next leg up. If silver prices can hold this level, it will be a significant technical signal as it represents the first higher low that silver has made in a number of months. If this higher low is followed by a rise significantly above $13.59, a higher high would have been made and so a new short term uptrend in silver would be confirmed.


Higher silver prices should make for a higher Hecla share price and as we are predicting a major rally in silver at the end of the summer, this correction appears to be a good opportunity to buy Hecla.

Hecla certainly has been benefiting from higher silver price. In the first quarter of this year, their gross profit was US $16.42 million, US $1.91 million higher than the total profit for the whole year in 2006 where Hecla made a gross profit of US $14.51 million. In 2006, Hecla made an annual gross profit of US $73.42 million, their GP increased over 405% on the year before, helped by higher silver prices. However it is not just profits that are rising, we are also seeing Hecla’s Net Profit Margin increasing as well, being 31.79% last year up from 16.84%. When our target of $20/ounce for silver is realised, we will see Hecla’s profits going through the roof and the same thing will happen with the stock. With a market capitalisation of US $944.07 million, Hecla is large enough to offer us sufficient liquidity, but at the same time the company is not so large that it will respond sluggishly to rising silver prices.

Other silver stocks are also approaching entry points, but we are waiting for technical confirmation that their run down is coming to an end. We will keep our readers fully informed of any opportunities that we see in the silver market and silver stocks.

Hecla Mining trades as HL on the NYSE. (For the record we bought today at $7.93)


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