Just last week, when asked, Federal Reserve Chair Janet Yellen said that she “would not completely rule out the use of negative interest rates in some future very adverse scenario.” The use of negative interest rates are already being utilized in Japan, and Central banks in Europe. Currently Europe has a -0.4% interest rate, and Japan has a -0.1% interest rate.
Further, Bank of Japan Governor Haruhiko Kuroda stated that they could match the -0.4% interest rate in Europe if conditions become worse.
Just imagine what people and Europe and Japan are facing; you have to pay to keep your money in the bank. Because of this, many people in Japan and Europe are buying gold and silver instead of putting their money in a bank with negative interest rates. This shift from putting money into the banks to buying precious metals has driven the demand for gold and silver, and that is why Hecla Mining Company (HL) is the Zacks Bull of the Day.
This Zacks Rank #1 (Strong Buy) is a leading low-cost U.S. silver producer with operating mines in Alaska and Idaho, and is a growing gold producer with an operating mine in Quebec, Canada. The Company also has exploration and pre-development properties in five world-class silver and gold mining districts in the U.S., Canada, and Mexico, and an exploration office and investments in early-stage silver exploration projects in Canada.
In the company’s most recent earnings report, they saw year over year gains in sales +10%, adjusted EBITDA +33% (highest level in three years), and record silver production of 4.6 million ounces. Also, the company was able to decrease exploration and pre-development expenses by $1.7 million. Further, due to the strong performance, the Board of Directors elected to declare a quarterly cash dividend of 25 cents per common share.
According to Phillips Baker Jr., President and CEO, “Consistent with our strategy to grow despite price weakness, the first quarter production was the highest in our 500 quarter history. Our focus on high return growth like we have at San Sebastian gives Hecla leverage to increasing silver prices. And Casa Berardi’s growing production from the East Mine Crown Pillar pit should do the same for gold.”
As you can see in the Price and Consensus table below, recent increased demand has driven their price and future expectations upwards.
Hecla’s Increasing Estimates
Over the past 30 days, earnings estimates have risen for Q2 16, Q3 16, FY 16 and FY 17. Q2 16 improved from -1 cent per share to -0- cents per share, Q3 rose from -10 cents per share to -0- cents per share, FY 16 jumped up from -5 cents per share to 3 cents per share, while FY 17 was lifted from 1 cent per share to 6 cents per share.
The Bottom Line: HL Stock is a Buy
With many factors impacting the world’s markets, ranging from global growth worries, instability in the Middle East, fluctuating oil prices, negative interest rates in Japan and Europe, and now the potential of negative interest rates in the U.S., the demand for gold and silver’s security has begun to spike. With no sign of the above issues being fixed anytime soon, this demand should continue for many months to come.
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