Lots of interesting things in the latest 10-Q. Not much stuff sold forward, but some is. They seem to get pretty good prices for what they sell forward. I think a lot of the mining industry has reduced the amounts of precious metals that they are short recently.
Hecla is still expanding by buying new shafts, and they seem to be getting reasonably good prices for what they are buying. They are using both cash and stock.
Their kaolin clay (clay is an ingredient of pepto bismal, by the way,) business had a little trouble: In 1997, K-T Clay terminated shipments of 1% of annual ball clay production, sold to animal feed producers, when the Food and Drug Administration determined trace elements of dioxin were present in poultry. Dioxin is inherently present in ball clays generally.
They've sold some silver and gold forward, and have, in addition, written some silver calls. The total amount of production sold forward is quite small compared to the company's total production per year, though:
Gold sold forward = 2 weeks of production.
Silver sold forward = 6 months of production (includes sold call options).
(Of course, my figures are subject to error, do your own due diligence, please. I'd love for someone to check my work for me.)
Annual production figures, approximate:
Gold 83,000 oz
Silver 7200M oz
Number of shares = 55,000,000.
Gold production per share = .0015 oz per year.
Silver production per share = .13 oz per year.
Multiplying the above together gives the bottom line improvement (before taking into account increases in production) of:
Gold price move of $100 per oz means yearly earnings improvement of 15 cents per share. (Note that the 10-Q I looked at was when gold was $279 per ounce. So calculate price moves based on that.)
Silver price move $1 per oz gives 13 cents per share.
Earnings are around -22 cents per share, so she could turn profitable, just based on current price action.
In a wild environment, with gold at $400 per ounce and silver at $10 per ounce, this baby would make something like 50 cents per share profit. Means a stock price of around $10 or so for 20x earnings, and a pretty good return for investors (gamblers) willing to pick up shares now.
-- Carl |
