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« Gold set to rally in September? | Main | Taseko Mines Limited »
Thursday
Jul062006

Hecla Mining Company

HeclaLogo

This company is a miner of both gold and silver and I guess it is thought of by the investing community as more of a silver producer. However, having produced 140 000 plus ounces of gold in 2005 we think it qualifies for a spot in our portfolio.

Hecla Mining is a low cost primary silver producer in North America, producing 6 million ounces of silver at an average total cash cost of $2.96 per ounce in 2005. Hecla also produced gold at an average total cash cost of $337 per ounce. So from this we can glean that as a company they are solvent and are generating good cash flow. This is very important as it provides a solid financial basis on which exploration activity can be founded. And it is the possibility of a new major strike that is attractive to us as investors. This precious metals mining company has exploration properties and operating mines in superb mining areas worldwide. Hecla’s excellent exploration prospects, management ability, minimal debt and good cash position make this an excellent precious metals prospect as an investment. In putting our money on the table we are mind full of an exit strategy in all cases. With this particular mining stock we are thinking long term and intend to buy and hold. We may have to eat our words though if it rockets and presents us with an opportunity to take some profits off the table. We will inform if that opportunity appears to be developing and also if and when we sell.
From a geopolitical standpoint Hecla is active in the United States, Mexico, Venezuela and Alaska. We are quit comfortable being in these areas although mining gold at the La Camorra Unit in Venezuela will need to be watched. The La Camorra Unit in Venezuela produced just over 100,000 ounces of gold in 2005.

Hecla’s common stock has been traded on the New York Stock Exchange for approximately 40 years under the symbol “HL.” This company increased their gold production by 51% in the first quarter of 2006 and recorded earnings in excess of $38 million.

From the chart we can see the stock has recovered from the market sell off and is sitting just on its 200 day moving average. To us this is a good place to shop in the life cycle of a stock.

At the time of writing this mining stock has a Market Capitalisation of $628 and a P/E ratio of 35 and closed at $5.27. It may indeed move down from here and provide you with a better buying opportunity later in the summer. However, we think that the downside for this gold and silver mining stock is limited compared to the upside potential, which we believe to be explosive in the very near future along with the rise in gold prices.

05 July 2006.

HeclaChart

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