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« Silver Producers: Set to Outperform the PM Sector! | Main | Hecla Mining Company: MACD Makes a Crossover »

Hecla Mining Company bombs on news release!

The following news release was received like a lead balloon by investors today taking the stock price down 15.67% . The average volume of trades is 4.39 million however today that number rose to 19.95 million which tells us that the stock holders decided to dump the stock. First we will take a look at this news release:

Hecla Announces $65 Million Underwritten Public Offering
COEUR D’ALENE, Idaho--(BUSINESS WIRE)-- Hecla Mining Company (NYSE:HL) announced today that it has entered into an underwriting agreement with Canaccord Capital Corporation and Canaccord Adams to purchase 32 million units of Hecla Mining Company at a price of $2.05 per unit for aggregate proceeds of $65.6 million. Each unit will consist of one common share of Hecla and one-half common share purchase warrant. Each whole w arrant will entitle the holder to purchase one common share of the company, exercisable at a price of $2.50 per share, beginning on or about August 10, 2009 until on or about August 10, 2014.

Hecla will use the net proceeds from the offering to repay in full the $40 million bridge loan facility as outlined in the company’s press release dated February 3, 2009, and for general working capital requirements including debt amortization.

Hecla Mining Company President and Chief Executive Officer Phillips S. Baker, Jr., said, “This transaction makes the amendment to the credit facility effective with the repayment of the $40 million bridge loan. With no principal amortization payment dates in 2009, we will focus on driving our costs down and growing our production and reserve base.”

It makes sense to us to get rid of a bridging loan facility however the initial cost is reflected in the dilution of the stock price as there is more stock on the market thus diluting the stock price and the other ratios that relate to the stock price. Another factor to consider is that investors looking at silver, up today $0.36, will be gutted when they check their investment in Hecla Mining, we know that we are and they may well dump the stock without bothering to find out why.

We also draw your attention to the comment above that we will focus on driving our costs down and growing our production and reserve base, thats good to see but it should be a given, shouldn't it?

We now need a few days to allow the dust to settle and then we will re-evaluate Hecla as todays loss and drop in price could well represent a buying opportunity to be added to the core position for the long term. But we will understand if for you enough is enough. We have also contacted Hecla for an explanation and will publish their response as soon as they get back to us.

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stocks, silver stocks and uranium stocks, just click on the links.

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Reader Comments (12)

To change the subject, here is something on HL that may be of interest:

Hecla management delayed in getting the bridge loan taken out by permanent financing when the debt markets were friendly; then got backed into a corner by the bankers, and as the deadline of Feb 16th approached, took a huge haircut in the process. Basically, to win approval for a loan amendment which rescheduled all term debt payments to 2010 and 2011, HL agreed to do a stock sale at $2.05 a share so that it could repay the $40 million it still owed on the bridge loan.

The terms were onerous – Hecla sold 32 million shares to Canaccord (CCDPF.PK), plus threw in 16 million warrants with a $2.50 strike, exercisable until August 2014! That means potential dilution is as much as 48 million shares, and at bargain prices, effectively killing a lot of the upside in HL. Before this one-sided “deal” Hecla had just 136MM shares outstanding (end of Q3) and a book value of $5.00.

Silver is on the rebound, and the U.S. dollar is threatened with a serious collapse, which could send silver soaring in price. Hecla has two very productive major mines, but got caught in the grip of lower silver prices in Q4, as well as a real collapse in lead and zinc, two important byproducts at the mines that help to offset rising costs. It also paid a lot for diesel, but that has dropped sharply in price over the past three months, so going forward HL will save some money. But there is no excuse for giving away that much equity at less than half the Q3-08 book price – this is a huge blunder, and seems to have been done at the worst terms money could buy.

To ice the cake, HL announced a very poor fourth quarter update, saying it would lose over $40 million, and it is squandering some deferred tax assets to boot. Part of the reason for owning HL was the quality of the mines, and the fact that if it MADE money it would have a nice tax shield – totaling $47 million in taxes as of Q3 - for years for most of the income. This resulted from losses many years ago that created tax loss carryforwards (CFs). However, these are beginning to expire, and with the outlook now not clear for profits that would utilize the CFs, the accounting rules force a writedown of those assets. Nice, eh?

The only saving grace to me is the very strong outlook for silver, plus the hope of a rebound in lead and zinc, and possibly a benign diesel price for a year or two – this would return HL to the profit column, and begin to suck up those tax CFs. I still like the outlook for the company, despite the bungling of this finance deal, and I will buy more next week, especially if it dips lower. I see very little BK risk, and some considerable upside with rising silver. I’m glad this was put on as only a 2.4% position – I knew a deal was coming, but didn’t expect a debacle. Oh well, you can’t always trust managements to get the best end of a deal – especially in difficult markets like this.

March 1, 2009 | Unregistered CommenterJohn

Hecla had to give a lot away to say in the game. I think that is great. It shows how strong a corporation it is. For the last two weeks Hecla has closed over $2.00 a share. You have to ask yourself, Will the price drop back below $1.00 share in this weak economy???? Silver is in a up trend. Its in the over bought area. Will it continue up before it retreats back down in the over sold arena?? When it does become over sold again I think that this will be a great buy at what ever price it is. Dollar cost average this stock till the end of the year and get a good position. I dare you....LOL!!!!!!!! You can just buy this company Hecla for the next three years. From the price where it is now up or down. You will be very happy with your securities account. Hecla is a bell weather to the movement of the silver price. Hecla minning co. is over 100 years old. So, Hecla has be in existence since before the last depression. Hecla is located in Idaho. This stock is a winner ladies and gentlemen. Buy it, or cry in your empty soup bowl while standing in the soup line. Where ever you live on this Global Economy.

March 28, 2009 | Unregistered Commenterjerrold minyard

From its 52week low of $0.99 its nice to see Hecla close at $2.13, however longevity may be comforting but the banking sector had companies that had been in existence even longer than Hecla and they are no more. We need to close eye on this one.

March 29, 2009 | Unregistered CommenterSilver Prices

Silver Prices. You speak of longevity. Yes everything must come to an end. Right now, Babylon has fallen. To eliminate greed and fear, you must educate yourself. In the short term. I don't see Hecla mine going anywhere. I feel that, Hecla made a good move on eliminating their debt. Remember, or if you you have not heard. We are headed for the biggest metals boooom in the history of man. The Perfect Storm, When all currency will fail, your worthless paper money. The metals sector will skyrocket to prices not heard of. Silver Prices. Maybe you know something that I don't know. ?????

March 29, 2009 | Unregistered Commenterjerrold minyard

Anyway, Mr. Silver Prices. What does longevity have to do with a stockmarket trend?????????? We are dealing with trends. Trends come and go. Nothing is for ever. The message here is to get in on a trend which is in the metals sector, or commodities. ride it up and make money. With a options account ride it either up or down.

March 29, 2009 | Unregistered Commenterjerrold minyard


We were merely pointing out that longevity is not a reason to invest in any company. We do hold Hecla stock and will be keeping a close eye on it and yes we are expecting a boom in precious metals.

The question always remains though, which stocks will give us the greatest % increase in value, something that we need to continually evaluate.

March 30, 2009 | Unregistered CommenterSilver Prices

HL added another 6% today to close at $2.00.

April 1, 2009 | Unregistered CommenterSilver Prices

This G20 meeting is not going to help the precious metals sector. I'm looking for these characters to come together. They have to keep strong manipulation going, so the the currency market can remain strong. There is no way on Gods green earth that these leaders will not cooperate in this meeting. There is too much at stake. So look out for a good SLAM!!!!!!!!!

April 1, 2009 | Unregistered Commenterjerrold minyard

Hello?? Hello????!!!!!! Did the metals get SLAMMED!!!!!! Can an anyone hear me?? Yes, the metals did get slammed after the fake everything is go to be alright Global G20 meeting(trilateral people reunion). Give me a break! Now that, that was said. What ever kind of news that will be manipulated, and sent out in the coming week to suppress the commodities market. Your guess is as good as mine. We had bad unemployment figures yesterday, but some economist are saying we should see a turn around. I know that is a pig pen of crap. Its just a matter of time before we see more break down in our global economy. Down and more down.

April 4, 2009 | Unregistered Commenterjerrold minyard

Well, its April 17,2009. Gold closed at $868.70 today. Silver dropped to $11.89. At the begining of the week the technicals were very strong. The head and shoulders for gold have developed, and the cup and handle for silver. With this break down in price today it looks like that we are in a bullish trend. I have one question,"how high will the equities market move with bad paper?"

April 18, 2009 | Unregistered Commenterjerrold minyard

Correction for comment #10: With the break down in price we're in a bearish trend.

April 18, 2009 | Unregistered Commenterjerrold minyard

On top of the huge increase in number of shares, due to the sellout to Canaccord, take a look at the options deals the administrators have cut for themselves. One has to conclude they are more interested in mining the market, than mining for silver.

If you don't believe me, google MSN Money, then HL and open up "Insider transactions" The otions and warrants are listed, along with the names of the leeches. You can bet as soon as the stock rises a bit, the insiders will hit the market with a several hundred thousand shares, for which the insiders paid not one dime!

Not only does the President appear to be helping himself to free stock, apparently all the Directors are in on the deal.

What chance do ordinary folk have, who put in their hard-earned savings into the stock? As a retired hard-money broker, I would advise you investors to look to other quality silver issues such as PAAS and SLW.

Oh yes, not only is Hecla guilty, the greedy administrators at Couer D;Alene seem to be just as bad, if not worse!

Despite that, when inflation drives silver prices up towards it's Bunker Hunt high, HL will commence rising --complete with spurts and bigtime drops as the insiders unload.

As Blackjack McLeod, one of my stockbroker friends and heroes used to say: "I hope the stock rises to 100. And if it does, it will go there without me!"

Cheers-------------friend Henry

June 16, 2009 | Unregistered CommenterHenry Bendinelli

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