(HL) Hecla Cuts Nevada Spending, Trims Gold-Output Guidance

Allen Sykora – Thursday June 06, 2019

“Hecla Mining Co. (NYSE: HL) is reducing spending and laying off personnel at its Nevada operations in order to improve cash flow, the company said Thursday.”

“Officials also revised down the gold-production outlook for Hecla’s Nevada mines. When issuing its first-quarter earnings report in May, Hecla had suspended its 2019 guidance and said it was reviewing its Nevada operations.”

“Hecla said Thursday that the company has significantly curtailed planned development investment in Nevada while production continues. Officials trimmed expectations for company-wide capital spending by $12 million, with exploration reduced by $9 million, and general and administrative/other costs cut by $4 million. ”

https://www.kitco.com/news/2019-06-06/Hecla-Cuts-Nevada-Spending-Trims-Gold-Output-Guidance.html

Best Post of the Day…. 🙂

Thanks 👍

Agreed. JAG has had financial issues for years, but I’ve been following them since 2010, and have been swing-trading them since they came out of their bankruptcy restructuring a few years back.

The operation improvements and investments they’ve made at their 2 active mining complexes last year and this year were long overdue, and will really help them ramp up production moving forward.

In addition, they’ve done far better than they’ve been getting credit for in their share-price with their last 2 years of exploration campaigns on replacing and now expanding reserves.

There were 2 times last year where it seemed the fishing line down was not justified, as 2 funds liquidated their holdings, but the stock never recovered back to where it was trading before those institutions hit sell at any price. There have not been buyers that have come back to support it, because smaller producers have largely been ignored across the sector, just like stagnant developers, so the only life has been in discovery exploration narratives.

When the gold pricing improves, and large funds start combing through the survivors ball, there are many unloved and forgotten smaller explorers.

I consider small gold producers like Jaguar, Alio, Mandalay, Troy, Comstock, etc…. to be “optionality plays” but unlike really out of the money developers or explorers, these smaller producers will be able to quickly monetize jumps in the metals prices and it will have a huge impact on their margins.

For now I’m just holding JAG, and averaged down last year and earlier this year, but I have been concerned that they may get too deep into financial trouble if the metals prices don’t bail them out soon. If Gold gets back up over $1400 they should be solid though, and can produce roughly 90K-100K ounces per year.

They also have that 3rd mining complex on care & maintenance that can be dusted off and come back into production in less than a year, should metals prices go into the mid $1400s. That is another layer of optionality that they are getting 0 credit for. It is tough to build a mine and permit it, and all the heavy lifting is already done for their 3rd mining complex.

It’s only a little over 2% of my trading portfolio, so not a huge position, but big enough that I keep tabs on JAG, and think it could easily triple or more when the sector wakes back up.