Hecla Mining Company
HL
recently announced that it would acquire all of the remaining outstanding common shares in
Alexco Resource Corp.
AXU
. HL is currently the largest primary silver producer in the United States and the third-largest in the world. Following this buyout, there’s a possibility of it becoming Canada’s largest silver producer as well.
Alexco is a Canadian primary silver company that owns and operates the majority of the historic Keno Hill Silver District in Canada’s Yukon Territory — one of the highest-grade silver districts in the world.
With this buyout, Hecla gains access to a fully permitted property in a premier mining jurisdiction with infrastructure that includes a 400-ton per day mill, on-site camp facility, all-season highway access, and connection to the hydropower grid. It adds to Hecla’s significant silver reserves. The company recently reported that its silver reserves increased to 200 million ounces in 2021 — the second highest silver reserves in its 130-year history. The Alexco buyout will increase proven and probable silver reserves by 19% to 237 million ounces, measured and indicated resources by 24% to 257 million ounces and inferred resources by 7% to 523.7 million ounces.
Alexco had fallen behind its Keno Hill development and production plan and its original estimate of achieving commercial production in early 2022. Being a much larger business and given its organizational expertise and financial strength, Hecla is likely to achieve the full potential of Keno Hill while investing in exploration across the district.
Each outstanding common share of Alexco will be exchanged for 0.116 of a share of Hecla common stock. This implies a consideration of 47 cents per Alexco common share and a premium of 23% based on the companies’ five-day volume-weighted average price on the New York Stock Exchange on Jul 1, 2022. Per the deal, Hecla will provide interim financing to provide working capital and ensure the development and exploration at Keno Hill and subscribe for additional common shares, taking its stake to 9.9%.
Hecla has entered into a deal with
Wheaton Precious Metals Corporation
WPM
. According to the deal, Wheaton Precious Metals will terminate its silver streaming interest in Alexco’s Keno Hill property. For this, WPM will receive $135 million of Hecla’s common stock. However, this is subject to the completion of Hecla’s acquisition of Alexco, which is expected in September 2022.
Per the Silver Institute, the global silver market realized growth in every demand category in 2021. Total global silver demand peaked at its highest level since 2015, gaining 19% to 1.05 billion ounces last year. Gains are expected this year as well across all key demand components, which will take global silver demand to a record high of 1.112 billion ounces. The increase will primarily be driven by record silver industrial fabrication, which is anticipated to be up 5% on account of higher demand in both traditional and critical green technologies. With the addition of Keno Hill, Hecla is poised well to meet this growing demand for silver.
Price Performance
Image Source: Zacks Investment Research
Shares of Hecla Mining have plunged 50.5% in the past year compared with the
industry
‘s decline of 41.1%.
Zacks Rank & a Stock to Consider
Hecla Mining currently carries a Zacks Rank #5 (Strong Sell).
A better-ranked stock in the basic materials space is
Albemarle Corporation
ALB
, which flaunts a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Albemarle has a projected earnings growth rate of 231.7% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised upward by 112.4% in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 20%. ALB has rallied roughly 18% in a year.
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