Why Hecla Mining Stock rose 15% in February

What happened

Silver and gold miner stocks Hecla mining (NYSE: HL) rose just under 15% in February, according to data from S&P Global Market Intelligence. The price increase has not been smooth, with big spikes towards the start and end of the month which were followed by a drop in the share price. The notable monthly gain was largely the result of the second big price hike, which came towards the end of February.

So what

At the core level, Hecla’s results are determined by the price of the raw materials it produces. And since the results of precious metal miners are leverage on these commodity prices, their stocks tend to rise more than the metals they produce (and may also fall more). So, in some ways, Hecla’s price moves this month were really driven by the price moves of silver, which is a big part of its production mix. Silver prices jumped at the start of the month and again at the end of the month. Hecla share followed this trend, but with a more pronounced price increase. Although both the metal and Hecla’s shares quickly turned after each price spike, the second hike came at the end of the month. The month of February essentially ended when the price was still noticeably higher, even though it had not peaked. The stock continued to follow the gain in early March.

Image source: Getty Images.

That said, Hecla reported profit in February and their reading was pretty good. Part of this is directly linked to the notable increases in the price of silver and gold over the past year. This enabled Hecla to generate nearly $ 90 million in free cash flow in 2020 after spending cash in 2019. However, there was also good news from an operational standpoint, with strong performance on assets. keys. Equally important, Hecla expects 2021 to be a good year in terms of production as well. So while silver and gold prices are big performance drivers, there is still a solid underlying story here at the operational level.

Now what

The highs and lows of Hecla Mining stock in February underscore the inherent volatility of the precious metals sector. It is not a good idea to try to time these often extreme price movements. It’s probably best for long term investors consider precious metals and the companies that mine for them as diversification tools. The goal is to hold a small amount of these assets at all times to help stabilize the performance of your overall portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Kevin Strickland

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