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  • Hecla Mining Company shares: a high-risk gold investment with a 63% potential
Max Manturov

Max Manturov

Head of investment research regulated by CySec 21.03.2022

Hecla Mining Company shares: a high-risk gold investment with a 63% potential

Ticker: HL.US
Entry price: $6.72
Target price: $11
Growth potential: 63,69%
Time horizon: 12 months
Risk: High
Position size: 2%

What's the idea?

Hecla Mining's shares, which could rise thanks to the increased investor demand for gold worldwide, are set to make money. The company mines precious metals, has operating mines, and could increase production and sales in the near term.

This high-risk investment has a potential return of 57%. If you are a more conservative investor, explore the idea of buying VanEck Gold Miners ETF units (expected return of 20%) or Wheaton Precious Metals Corp. (25% upside potential).

The Company

Hecla Mining acquires and develops mines and sells gold, silver, lead and zinc. The company and its subsidiaries supply precious metals to the US and around the world.

Over the past year, Hecla Mining has derived a large proportion of its revenue from gold and silver sales in the following percentages:

Source: Company presentation (page 7)

Buy shares Hecla Mining Company >>

Why should you look at Hecla Mining?

1.Gold and silver reserves accumulate

Silver reserves increased between 2020 and 2021 from 188 million ounces to 200 million ounces. The company increased proven and probable reserves by 6%, or 11.5 million ounces, compared to 2020. Proven and probable gold reserves increased from 2.4 million ounces by 14% to 2.7 million ounces. This ensures the long-term sustainability of the company.

2.Business and financial health are growing

  • For 2018-2021, the company showed significant business growth. Revenue growth for the period was 42.5%. In 2021, it stood at $808 million.
  • From 2020, the gold miner has entered a positive free cash flow. In 2021, it was $113 million.
  • In 2021, for the first time in recent years, Hecla Mining posted a net profit of $35 million.

In 2022, the growth rate of these indicators is expected to maintain its momentum.

Source: Thomson Reuters Eikon

3.Building up cash volumes

Since 2018, the company has increased its cash flows from $27.4 in 2018 to $210 in 2021. However, Hecla Mining maintained debt levels at existing levels of $521 million.

The company has access to additional liquidity of $233m of revolving credit. This policy helped reduce net debt from $513m to $306m and lower the Net Debt/EBITDA ratio from 5x to 1.2x.

Source: Thomson Reuters Eikon

The company currently trades at a small premium in comparison to its competitors in some market multiples:

  • EV/Sales (TTM) 5.04x | Industry Avg - 3.11x
  • EV/Sales (FWD) 5.07x | Industry Avg - 2.73x
  • EV/EBITDA (TTM) 12.17x | Industry Avg - 9.51x
  • EV/EBITDA (FWD) 13.61x | Industry Avg - 8.02x
  • PE (TTM) 109.28x | Industry Avg - 75.95x/p>
  • PE (FWD) 50.50x | Industry Avg - 26.93x

Source: Thomson Reuters Eikon

Ratings of investment houses

2/23/2022 // HC Wainwright // Target - $7.75

The bottom line

If the tensions against the backdrop of the war, rising inflation and a possible commodity crisis increase, gold will continue to rise in price. In such circumstances, Hecla Mining today is a low-cost, high-margin, high-growth company with a healthy balance sheet.

How to take advantage of the idea?

  1. Buy shares at a price of $6.72.
  2. Allocate no more than 2% of your portfolio for purchase. To compile a balanced portfolio, you can use the recommendations of our analysts.
  3. Sell when the price reaches $11.

How to Buy shares Hecla Mining Company?

If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.

After opening an account, you can buy shares in either of the following ways:

Freedom24 Web Platform: In the Web Terminal section, type HL.US (Hecla Mining Company ticker in the NYSE) in the search box, and select Hecla Mining Company in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.

Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type HL.US (Hecla Mining Company ticker in the NYSE) and select Hecla Mining Company in the search results. You will then see the stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.

Buy shares Hecla Mining Company >>

*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Europe Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance Europe Ltd. do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance Europe Ltd. and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.

  • Sources of information

  • Recommendation evaluation methodology according to Market Research Terms of Use
    Freedom Finance analysts perform a three-stage analysis. They select a promising industry based on the latest news, statistics and industry-specific metrics. They assess the supply and demand situation and its future development dynamics. Industry’s investment attractiveness is mostly affected by the forecasted market growth rates; total addressable market, player concentration level and likeliness of a monopoly formation, as well as the level of regulation by various entities or associations.

    The assessment is followed by the comparative analysis based on the selected sample. The sample comprises companies with a market capitalization of over USD 1 billion, but there is space for exceptions (when the suitable level of liquidity for company’s securities is available on the stock exchange). The selected companies (peers) are being compared against each other based on multipliers (EV/S, EV/EBITDA, PE, P/FCF, P/B), revenue growth rates, marginality and profitability (operating income margin, net income margin, ROE, ROA), and business performance.

    Having completed the comparative analysis, the analysts carry out a more in-depth research of the news about the selected company. They review company’s development policy, information about its current and potential mergers and acquisitions (M&A activity), and assess the efficiency of company's inorganic growth and other news about it over the past year. The main objective at this stage is to identify the growth drivers and evaluate their stability, as well as the extent of impact they have on the business.

    Based on all the data collected, the analysts determine the weighted forecasted figures of company’s growth rates and proposed business marginality, which are used to calculate the company’s multiplier-based estimated value. The said value enables setting the stock price target and stock value growth potential.

    The expected timing of the idea implementation is set depending on the current market situation, volatility level and available forecasting horizon for industry and company development. The forecasting period is normally set between 3 and 12 months.