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Surging silver price helps narrow Hecla's Q2 loss

USA-based silver producer Hecla Mining has narrowed its June-quarter loss as surging metals prices buoyed the top line and all operations reported improved production.
Surging silver price helps narrow Hecla's Q2 loss Surging silver price helps narrow Hecla's Q2 loss Surging silver price helps narrow Hecla's Q2 loss Surging silver price helps narrow Hecla's Q2 loss Surging silver price helps narrow Hecla's Q2 loss

Hecla expects more silver exposure for the rest of 2020

The Coeur d'Alene, Idaho-based company reported a net loss of US$14 million, or 3c per share, better than the $46.5 million, or 10c per share loss a year earlier.

Higher output and realised sales prices helped push the gross profit from the company's Greens Creek, Casa Berardi and Nevada operations $53.3 million higher than the prior-year period, but were partially offset by a loss on metals derivative contracts, and higher ramp-up and asset suspension costs.

Revenues rose 24% year-on-year to $166.4 million.

Adjusted EBITDA was $61.3 million compared to $17.7 million in the second quarter of 2019, reflecting the improved gross profit of $34 million.

Hecla generated about $27 million of free cash flow.

The average realised silver and gold prices were respectively $18.44/oz and $1,736/oz, up 23% and 31% year-on-year. However, average realised lead and zinc prices fell 7% and 24%, respectively.

Silver output rose 13% in the quarter to 3.4 million ounces, the highest level since 2016, after it gradually focused more on gold over the past few years while silver prices remained dull.  

President and CEO Phillips Baker Jr said Hecla currently produced about one-third of all the silver mined in the USA, almost three-times more than the next primary producer.

"That number is expected to grow as Lucky Friday ramps up. As the US' largest and oldest silver producer with America's largest silver reserve and resource, Hecla gives investors unique exposure to higher silver prices," he said.

RBC Wealth Management managing director George Gero said Thursday the gold-silver ratio had fallen to a new low at 73.9 (compared with the June-quarter average at 104:1), given silver's meteoric rise to $28/oz. The bank expects silver to top $30 and gold $2,100 by year end, but the analyst flagged potential for increased volatility in these high-price brackets.

Hecla expects to produce 10.9-11.9Moz silver and 195,000-208,000oz gold in 2020, somewhat lower than initially planned because of the coronavirus impact, at respective AISC of $12.25-$13.25 and $1,150-$1,250/oz.

Shares (NYSE:HL) have surged 96% in the year to date to $6.65, and have more than tripled in the past 12 months. The company has a market value of $3.5 billion.