Hecla’s Best Quarter Met Cooling Sentiment

Hecla’s Best Quarter Met Cooling Sentiment

On August 4, Hecla Mining (HL) reported the best financial position in its nearly 135-year history. The company retired $263 million of senior notes and ended the quarter effectively debt free. They hold $483 million in cash and still have an undrawn $225 million credit facility available to them. Free cash flow more than doubled year over year to $136 million. And cash flow from continuing operations was up 61% to $175 million. The list continues.

Lucky Friday set a quarterly silver production record at 1.5 million ounces. Revenue came in at $334 million, up 52% from the quarter a year ago. Earnings came in at $0.17 per share. Management even lowered its cost guidance for the year. 

By those numbers, wouldn’t it seem logical that the stock would be at relative highs? In fact, it fell from that recent high above $34 to the $14 area. 

That is something worth pondering. The operational picture improved through a quarter in which the share price did the mirror opposite, and the reason is not complicated once you stop examining the financials. So, what really happened here? 

Silver. It corrected from the $122 an ounce high down to $60 in a massive reset of sentiment. And since miners are leveraged to the metal, when sentiment turns, it takes the producers with it, regardless of what any individual balance sheet is doing. Price targets from analysts came down. The consensus rating stayed at hold. 

However, if we look at this through the lens of crowd behavior rather than assets versus liabilities, there may just be an opportunity here. Sentiment has not yet absorbed the distance between what the metal did and what this company built while it was happening. Hecla used the last run in silver well. 

There is more coming that sentiment has not yet reached. At Greens Creek, the dry-stack tailings facility holds an estimated 10.6 million tons of material containing roughly 51 million ounces of silver and nearly 600,000 ounces of gold. That raw materials stack has an estimated value of $6.1 billion at the moment.

There is much more we could report regarding their pyrite concentrates and Keno Hill. Suffice it to say, the fundamentals appear favorable here. 

However, none of that is why the stock is down so much from the $34 high earlier. The fundamentals do explain why the company deserved a floor at the $14 area. This was a key support level that we had identified and it has held. Now, let’s look at the structure of price itself on the chart since this holds the answer to what is most likely next. 

Sentiment Speaks

There was a key price confluence just below the $14 level. That has held and price is beginning to show strong signs of an lasting low forming. This is important for this chart since a wave (5) rally could be substantial for HL — that is the fifth wave of the advance that began in early 2024.

First, price must hold that last low. Next, ideally this forms a smaller 5 wave rally. Currently, it is close to doing so. Then a corrective 3 wave pullback would set up a lesser degree wave 3 inside the wave (5). 

All of this technical talk to say that for as long as the $14 level holds, the most probable path is to new highs for Hecla. Above the $34 prior high opens up potential targets in the $40+ area. It will be the smaller degree wave structure that assists us in tightening this projection.

Conclusion

The balance sheet did not cause this pullback in price and it will not end it. This was sentiment in silver.

What the quarter established is that Hecla arrived at the bottom of this correction stronger than it entered the top of the last rally. Debt retired. Cash accumulated. Costs lowered. A production record set at Lucky Friday while the metal itself corrected more than 50%. That is a company that used the run rather than being used by it.

Sentiment will absorb this eventually. It always does, though rarely on the schedule most would prefer. The $14 price confluence has held, price has recovered to the $18 area, and the structure suggests that the low is behind us rather than ahead.

We are not predicting where sentiment turns. We are watching where it already did. Right now, price is arguing against the consensus, and we would rather be positioned with the chart than the rating.