Hecla Mining’s Q3 2024 Earnings Drop Disappoints Despite Revenue Boost
Hecla Mining (NYSE: HL) recently announced its third-quarter financial results, headlined by total revenues of $245.1 million, exceeding the consensus estimate of $229.4 million and representing a 34.7% increase compared to $181.9 million in the same quarter last year. However, earnings per share lagged behind expectations at $0.03, falling short of the analyst consensus of $0.039, which raises concerns about the cost dynamics affecting Hecla’s profitability.
Revenue growth is largely attributable to increased silver production volumes, particularly from the company’s Keno Hill and Lucky Friday operations. This gain contrasts sharply with Q2 2024, where revenues stood at $245.7 million, a slight decrease due to ongoing cost pressures. Although the quarter’s revenue marks the second highest in Hecla’s history, the increase in operational expenses—especially at Greens Creek and Lucky Friday—reveals deeper challenges in Hecla’s cost management strategies.
Net income came in at $1.6 million, a sharp decline from $27.7 million in the previous quarter. This steep 94% drop signals considerable strain on profit margins and highlights the vulnerability of the company’s earnings in the face of operational setbacks. This quarter’s adjusted net income of $19.7 million, an improvement from last year’s loss of $3.5 million.
On the production side, Hecla’s silver output for Q3 reached 3.6 million ounces, up from 3.5 million ounces in Q3 2023 but down by 18% compared to the previous quarter’s 4.5 million ounces. Greens Creek, Hecla’s flagship mine in Alaska, saw reduced production due to unplanned maintenance on the SAG mill, which hindered silver output. The mill’s downtime exacerbated already high cash costs, which jumped to $4.46 per ounce from $2.08 in Q2, a substantial 114% increase.
Looking at Lucky Friday, the mine also experienced operational issues, contributing $51.1 million in revenue this quarter, a 14% decrease from Q2. The mine’s cash cost per ounce increased to $9.98, nearly double the $5.32 seen in the previous quarter, driven by heightened equipment maintenance and contractor costs. Furthermore, Lucky Friday’s production of 1.2 million ounces of silver this quarter represents a 9% drop from Q2, compounding the financial strain from lower sales volumes and increasing costs.
Keno Hill’s contribution of $19.8 million in revenue marks a decline from Q2’s $28.9 million, a result of delayed permitting and construction setbacks that limited mill throughput. Notably, Keno Hill’s free cash flow for the quarter was negative $18.6 million, significantly worse than Q2’s negative $13 million, reflecting the ongoing challenges Hecla faces in bringing this asset fully online.
Debt reduction remains a bright spot in Hecla’s financials, as the company managed to lower its total debt by $50.6 million this quarter, bringing the net leverage ratio down to 1.8 from 2.2 in Q2. However, operating cash flow slid down to $55 million from $78.7 million in Q2.
Free cash flow turned negative at $0.7 million this quarter, down from $28.3 million in Q2, signaling a shift from cash-generating operations to cash-consuming activities, largely due to increased capital expenditures at Lucky Friday and Greens Creek.
Furthermore, Hecla’s costs on a per-ounce basis have escalated across the board. The all-in sustaining cost per silver ounce rose to $15.29 from $12.54 last quarter, reflecting increased maintenance and ramp-up expenses, particularly at Keno Hill and Greens Creek. The gold segment also faced elevated costs, with the AISC for Casa Berardi climbing to $2,059 per ounce from $1,825 in Q2, due to both lower production volumes and the impact of increased capital investment in tailings construction.
Looking forward, Hecla’s decision to revise its 2024 production guidance down for both Greens Creek and Lucky Friday is indicative of the company’s cautious approach given the current production challenges. The company now estimates total silver production between 16 and 17 million ounces for the year, down from the prior range of 16.5 to 17.5 million ounces, with gold production targets at Casa Berardi held steady.
Hecla Mining last traded at $6.20 on the NYSE.
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