Hecla Mining Company (HL) Boosts Its Assets With This Purchase

Page 2 of 2

Where did the money come from?

Hecla issued $500 million of 6.9% senior notes due 2021. Hecla estimates that it would have more than $300 million in cash at the close of the acquisition, which would give the company the power to continue to search for new assets. If we think about the current situation in silver mining, it is clear that Hecla has scored a very good deal by offering its notes. It had received long money for a reasonable price. More, it has not compromised its cash position, which would count if silver prices fell further.

Securing the deal now was important because there are other silver miners that have excellent cash positions and can go shopping as easily as Hecla. A good example is Pan American Silver Corp. (USA) (NASDAQ:PAAS), which has $490 million in cash and short-term investments. It is enough to start searching for depressed asset prices. Pan American Silver Corp. (USA) (NASDAQ:PAAS) has stated that it is interested in purchases while asset valuations are depressed. This company is almost debt free, so it can easily raise more cash by offering its debt like Hecla if it gets really greedy. Pan American Silver Corp. (USA) (NASDAQ:PAAS)’s strong cash position, 4.1% dividend and attractive 11.2 forward P/E make it a very interesting stock to consider.

Coeur d’Alene Mines Corporation (NYSE:CDE) is another example, with $331 million in cash and cash equivalents at the end of the first quarter. Coeur d’Alene Mines Corporation (NYSE:CDE) has $307 million in long-term debt and just $6 million in current debt, so this allows the company to search for attractive assets. Coeur d’Alene Mines Corporation (NYSE:CDE) trades at 10.5 forward P/E. The company states that it is primarily focused on existing operations and its share-repurchase program. It has completed $32.5 million of the $100 million repurchase program. Share buybacks always provide support for the stock, so this is good news. While the company says it’s cautious about purchases, it can always change its mind if it finds a tempting asset.

Bottom line

Hecla did the right thing. You should purchase assets when the prices are low. The purchase of Aurizon makes Hecla a diversified precious-metal company. Hecla trades at an attractive 10.4 forward P/E, although I would like to remind you that forward estimates are subject to change and hugely depend on the outlook for silver and gold prices.

The company pays a dividend which yields 0.3%, so small that it could be neglected. It is the growth of the asset base that is important. When the season of low precious-metal prices is over, Hecla will be perfectly ready.


Vladimir Zernov has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Hecla Boosts Its Assets With This Purchase originally appeared on Fool.com is written by Vladimir Zernov.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Page 2 of 2