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« Central Banks Print Another $167 bln: Will This Solve The Problem? | Main | SSRI and PAAS Buck the Trend in Silver Stocks »
Thursday
Aug092007

Hecla Mining: Very Good Results

Hecla Mining reported their quarterly results yesterday, which were very good in our opinion.

Hecla Mining: Very Good Results


Hecla has been marked as a BUY in our silver portfolio for over a year, since it was $5.27, but we signalled an additional BUY on this silver stock at around $7.93 a few days ago as we thought Hecla had gone through a significant correction and this presented us with an opportunity to add to our holdings in the stock.

Hecla has reported the lowest cash costs ever per ounce of silver, an average of $1.98/ounce, which is quite a statement since Hecla has been around for over 116 years! Hecla also reported their second highest quarterly revenue in the company's history.

A significant part of the cost cutting occurred at Hecla's Green's Creek joint venture in Alaska as cash cost fell to minus $4.04 per ounce for the first six months of this year as the mine experienced its single largest year of cash flow.

The main factor in this success was higher metals prices, as average prices increased 12%, zinc 29% and lead by 70%. Hecla Mining sells these by-products when extracting silver to lower their silver cash costs.

A shadow is cast over these great results by news from Hecla's Venezuelan gold project. Gold production was reported at 62,373 ounces, down from 84,653 ounces a year ago. Production was hit by a road being blocked and access to Mina Isidora being disrupted in early May. This was probably due to Hecla reducing their employees in the region from 900 to 550 which upset local communities. The project in Venezuela is the only thing that bothers us about this stock. We see Venezuela as a politically unstable country and we are concerned about Chavez and his policy towards the mining industry. However, since Hecla only have one project in Venezuela, we will be keeping this stock as a BUY in our silver portfolio.

Hecla's silver production was up 22%, at 3.05 million ounces for the first half of the year, up from 2.5 million ounces a year ago. We believe a large rally is coming in silver prices at the end of the summer, and in our opinion shares in Hecla Mining are one of the best investment vehicles in which to ride this bull market.

Hecla Mining trades as HL on NYSE

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