Hot commodity stock to watch: Hecla Mining Company (NYSE: HL)

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Hecla Mining Company (NYSE: HL) stock rose 6.50% on 22nd June, 2020 (Source: Google finance) due to rise in international price of the silver as the uncertainty aroused by spread of COVID-19 support the price of precious metals as gold and silver tend to be thought of as safe-haven investments, at least relative to the unsecured U.S. dollar and other currencies. Hecla Mining has maintained roughly 95% of its output throughout the health crisis to date. The miners with relatively high production costs and all-in sustaining costs (AISC) might find a reprieve in current market conditions, but well-run businesses with lower operating expenses will perform even better. In the first quarter of 2020, Hecla Mining had reported AISC of $11.06 per ounce of silver across all of its mines. Investors are expecting that the current economic uncertainty will continue for the foreseeable future. The coronavirus pandemic is expected to remain a global factor for at least the next year, while major governments are likely to take additional action like providing stimulus to preserve and restore economic activity. Both factors are projected to support higher prices of gold and silver.

On the other hand, HL through its wholly owned subsidiary, Hecla Canada Ltd., has recently acquired an aggregate of 2,424,335 common shares of Dolly Varden Silver Corporation in two tranches. The first tranche was comprised of 1,311,989 Shares and the second tranche was comprised of 1,112,346 Shares. The agreements for these share subscriptions were signed very recently and are further to the Ancillary Rights Agreement which Hecla has with Dolly Varden, allowing it to maintain its pro rata shareholding in Dolly Varden.

Moreover, at the end of the first quarter, the company had over $200 million in cash, no near-term debt maturities and no large capital projects planned for the next several years. The company had reduced 2020 capital and exploration expenditures by 25%. The Company has reaffirmed its prior estimates for 2020 silver production of 8.9 to 9.3 million ounces of silver and 46 to 48 thousand ounces of gold. The estimate for cost of sales is $205 million, cash cost, after by-product credits, AISC after by-product credits, per silver ounce is $6.00-$6.75 and $9.50-$10.00, respectively, with the cost increase a function of higher treatment charges, lower base metals price expectations as well as COVID-related expenses.

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