In an Oct. 12, 2017 research report Kaip indicated that overall Q3/17 production was "strong" from three of Hecla Mining Co.'s (HL:NYSE) four mines: Greens Creek, Casa Berardi and San Sebastian.
This diversified company's Q3 production of silver, lead and zinc exceeded BMO's expectations, whereas that of gold reached the anticipated level, added Kaip. Actual versus estimated production was 3.3 versus 2.9 Moz for silver; 5.4 versus 5.1 Kt for lead; 14.5 versus 13.2 Kt for zinc; and 64 versus 63 Koz for gold.
The research note also detailed Q3/17 production for each of Hecla's producing mines:
Greens Creek in Alaska performed the best during the quarter, thanks to its silver production. When compared to Q2/17, it was up, from 1.9 to 2.3 Moz, while gold production of 12.6 Koz was flat. Kaip noted that "production benefited from the mill operating at 2,391 tons per day, which is a life-of-mine record."
Casa Berardi in Quebec produced 44.1 Koz gold, "slightly higher" than the 42.2 Koz estimate, wrote Kaip. He highlighted that "mining from the East Mine Crown Pillar pit continues to help supplement underground ore and fill the mill, which operated at 3.5 Ktpd in the quarter and set a monthly record in September at 3.9 Ktpd."
San Sebastian in Mexico met expectations, Kaip indicated, "producing 881 Koz of silver and 6.3 Koz of gold."
Lucky Friday in Idaho turned out "a nominal 88 Koz of silver," said Kaip, which was anticipated due to supervisory staff members making on-site capital improvements. "We currently assume the resumption of operations in Q1/18. . .the strike at Lucky Friday is still ongoing," he added.
As for Hecla's Q3/17 cash and cash equivalents, they "increased by $3 million ($3M) from Q2/17 to $205M," Kaip reported. The company will announce full Q3/17 financials on Nov. 7.
BMO Capital has a Market Perform rating and a $6 per share price target on Hecla Mining, whose stock is now trading at around $5.22 per share.
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BMO Capital Markets, Hecla Mining, Oct. 12, 2017
Analyst's Certification: I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to Hecla Mining within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Hecla Mining within the past 12 months.
Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to Hecla Mining within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Hecla Mining within the past 12 months.
Disclosure 6A: Hecla Mining is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
Disclosure 9: BMO Capital Markets makes a market in Hecla Mining.
Disclosure 16: A BMO Nesbitt Burns Inc. research analyst has extensively viewed the material operations of Hecla Mining.
Disclosure 17: Hecla Mining has paid or reimbursed some or all of the BMO Nesbitt Burns Inc. analysts travel expenses.
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