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XMFSinchiruna (27.75)

Skeletons Emerge from Hecla's Closet

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35

February 28, 2011 – Comments (37) | RELATED TICKERS: HL , SLW , EXK

It feels unjust for a company to burden its shareholders in 2011 with liabilities resulting from mining activity in the 1960s.

 

http://www.fool.com/investing/general/2011/02/28/skeletons-emerge-from-heclas-closet.aspx

 

At $262 million, this settlement = >9% of Hecla's market cap,m >90% of its cash position, and a major hindrance to its forward growth outlook.

 

I know Hecla is a very popular stock here at the Fool, and I own some shares myself, but after this slap in the face I am inclined to consider moving that position into a superior silver vehicle. That's not to say it won't continue rising, as all silver stocks are bound to in this environment, but it does suggest that more attractive vehicles exist.

 

Thank you, as always, for reading, reccing, and replying.

37 Comments – Post Your Own

#1) On February 28, 2011 at 10:54 AM, outoffocus (22.81) wrote:

Hey Sinchi,

Did you see what happened to CDE today?  Makes me kick myself for not taking better advantage of it. 

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#2) On February 28, 2011 at 11:00 AM, XMFSinchiruna (27.75) wrote:

outoffocus

You mean my #3 largest holding? Why yes, yes I did see that. :)

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#3) On February 28, 2011 at 11:08 AM, outoffocus (22.81) wrote:

You know, now that I look at it, I think they are officially now my 3rd largest holding.

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#4) On February 28, 2011 at 11:09 AM, XMFSinchiruna (27.75) wrote:

outoffocus

Way to go!!!!

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#5) On February 28, 2011 at 12:02 PM, workfor (< 20) wrote:

Thanks for the heads up Sinch. I considered HL in the past, but for some reason I didn't buy it.

How about that unstoppable GPL though?!!!! I became dis enchanted with CDE in the past, so I sold it and loaded the boat with the likes of GPL :) Go CDE and GPL!!

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#6) On February 28, 2011 at 12:13 PM, XMFSinchiruna (27.75) wrote:

workfor

gotta love it!

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#7) On February 28, 2011 at 12:47 PM, magnetpal (< 20) wrote:

Sinch, I waited until today to sell my CDE calls.. Seems it was a great decision:).

AUY call booked at 60% profit after their results.

Booked Mar 28, 30 calls at 100% profit. Still got 10 calls (house money :) ) to go.

MFN calls booked at 225% profit after their results :).  Still got May calls to go:).

GRS Mar calls are there. waiting for a spike to book them. Hopefully I will get it before Mar 19th.:).

 Whoop there it is :). Thank you very much Sinch. Without you, it would not have been possible.

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#8) On February 28, 2011 at 12:54 PM, XMFSinchiruna (27.75) wrote:

magnetpal

wow ... way to lock it in!!

You're leaving something on the table in terms of pm exposure, though, right?  :)

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#9) On February 28, 2011 at 1:09 PM, magnetpal (< 20) wrote:

Oh Sinch, most of my portfolio is PM only :). very few gas & oil stocks :).

Copper fox crossed 100% today for me. Great panther is approaching 100% :). I am holding them as precious:).

The beauty is, I suggested so many of my friends to buy Copper fox, great panther  and GRS. They are all thanking you now :).  To see my friends also succeed (after persuading their reluctance to enter PM) is what actually gave me so much happiness.

 

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#10) On February 28, 2011 at 1:29 PM, XMFSinchiruna (27.75) wrote:

magnetpal

That's awesome! Now get them over here and into CAPS! :P

I'm incredibly happy for you, and delighted that you've spread the wealth among your friends.

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#11) On February 28, 2011 at 2:33 PM, XMFSinchiruna (27.75) wrote:

Alert: my prior caution on PZG has just been amplified! Details to come.

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#12) On February 28, 2011 at 3:48 PM, XMFSinchiruna (27.75) wrote:

http://phx.corporate-ir.net/phoenix.zhtml?c=86472&p=irol-newsArticle&ID=1533607&highlight=

Positive results in other areas of the Company's large Palmarejo land position, including the Don Ese vein structure. Paramount Gold and Silver has recently drilled on this structure located on Coeur's concessions, which is a situation the Company is aggressively addressing in order to defend its property rights. 

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#13) On March 01, 2011 at 2:37 AM, Valyooo (99.43) wrote:

SInch,

It is hard to say since I haven't seen an abundance of them, nor am I an expert....but its possible that you are the greatest silver mining anayst alive.

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#14) On March 01, 2011 at 7:55 AM, MoneyWorksforMe (< 20) wrote:

I dumped my HL stake at the open yesterday for a small profit...I was very angered by their last report--you can't be making such stupid mistakes while silver and gold are making record highs. You should be positioning yourself to capitalize in every way possible in this environment...

I took the profits and invested in GRS...Love its chart (technically speaking) and valuation...The silver and gold combination is also sweet...  

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#15) On March 01, 2011 at 9:09 AM, XMFSinchiruna (27.75) wrote:

Valyooo

Actually, you know who the best silver mining analysts alive probably are? The CEOs of my favorite mining companies. People like Bradford Cooke at Endeavour Silver, who has done more DD on Mexican silver miners in search of their mine #3 than I could possibly have the resources to perform. There are also guys out there who have been active in silver for 40+ years, including during the whole Hunt Bros. debacle. Those sorts of folks are likely to have a leg-up on me.

But here's something fun that you've got to see. You know how you're always joking (you say you're serious, but I still think you're half joking) about whether I can move a stock? Well, and here again I don't think these guys are right that my article was the primary trigger, but a lot of angry Hecla investors are writing scathing things over at the Yahoo Message board for HL about how my "hack analysis" roiled the stock to the tune of a 5% dip yesterday. Now, I understand their frustration, as yesterday was a day of celebration for long-term silver investors, and to see their favorite stock down against the trend must have been immensely frustrating. As a Hecla shareholder myself, I of course share in their disappointment. 

Anyway, let that serve as a reminder to Fools never to become so enamored of a single company that you lose objectivity in assessing the significance of new developments, etc. Those guys on the Yahoo boards should be venting their frustration with Hecla's management that the company slapped them (us) with an inforeseen 300% increase in the scale of liability from a 20-year old litigation!!!

Anyway, I found it fascinating to see the prevalence of folks attributing Hecla's move to my article rather than the nature of the development. Now, if the silver market is merely so uninformed that my Monday article was the first it had caught wind of the litigation issue, then we have a different sort of problem to consider. Either way, it's interesting, and it reminded me of the way in which PZG's stock failed to react to the Don Ese vein discovery until my article appeared the next day. I'm not saying my articles directly impacted the share prices, but it's fun to wonder.

Again, if that is the case, then we have a big problem in the silver market ... i.e. a very, very poorly informed demographic even at the professional-money level. I suppose that's not too unlikely, since silver's momentum will have attracted massive volume from the quant funds, but it does raise the question of whether we have a market capable of efficient price discovery at the moment.

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#16) On March 01, 2011 at 9:26 AM, cbwang888 (25.83) wrote:

HL offsets their 193M booked litigation loss this quarter with 80M deferred taxes asset and 78M tax accrual from the litigation itself.

Yes, it will make a dent on their 284M cash but their balance sheets still look quite good and the cash flow is good if not the best among silver miners relatively speaking.

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#17) On March 01, 2011 at 9:39 AM, XMFSinchiruna (27.75) wrote:

cbwang888

All true, and I am not selling my HL stake. But it was abusive of today's shareholders nonetheless to spring a sudden 300% increase in the expected scale of the litigation liability from a case brought 20 years ago ... don't you think? It certainly draws into question the company's commitment to the interests of shareholders.

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#18) On March 01, 2011 at 12:20 PM, cbwang888 (25.83) wrote:

I guess SLW has no problem like HL which make it the best idea for silver investing

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#19) On March 01, 2011 at 1:00 PM, XMFSinchiruna (27.75) wrote:

cbwang888

That's one of several reasons why SLW remains my #1 equity holding.  :) (though my #2 holding gave it a run for its money this morning!)

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#20) On March 01, 2011 at 1:04 PM, XMFSinchiruna (27.75) wrote:

Here's another silver analyst's take on the Hecla litigation debacle, from veteran silver tracker David Bond:

http://silverminers.com/commentary/wallace/index.php?&content_id=1344

Excerpt: (please follow the link to read the full article, and bookmark Bond's website at silverminers.com:

As Motley Fool's Christopher Barker noted on 28th February, this emerging settlement with the United Snakes tosses a wet blanket over what otherwise would be Hecla's most stellar performance in its 120-year history. Opines Mr Barker:

"The resulting accrual of $193.2 million for Hecla - beyond its previously estimated liability - polluted Hecla's quarterly result, converting a laudable operating performance into a deeply disappointing $13.1 million net loss! Now, rather than hailing the miner's impressive cash cost of negative $0.14 per ounce of silver produced - still trailing only Silvercorp Metals (NYSE:SVM) among the industry's lowest-cost producers - shareholders are instead left to consider the effect of a $262 million outlay upon this company's ability to fund growth in the near to medium term . . ."

". . . Hecla essentially now enters this crucial period of the precious metals bull market with one hand tied behind its back. I remain a Hecla shareholder, though my enthusiasm has been materially diminished."

Barker, sadly, is right. Thank-you, United Snakes and the U.S.E.P.A. So much for the EPA's claim that its beyond-absurd cleanup antics here in the Silver Valley, now scoped out for 90 years (Which need to end immediately for the sake of our precious environment!) and which amount to hauling non-toxic yard dirt from King Street here in Wallace down to its "toxic waste" dump below a flood plain 20 miles west in Cataldo, Idaho, won't interfere with "responsible" mining activities in the Coeur d'Alene Mining District.

It already has. A lot of savvy Wall Street investors read The Motley Fool. The message, and this is no fault of Barker's, is that EPA's invasive presence here scares investors away. Better to put your bets down in China, or the Congo, than in a century-old American mining company mining silver, lead and zinc in America at per-ounce silver costs rivaling anyone and everyone on the planet. So much for doing a good job, here in America. No wonder the sun is setting on the great American Experiment.

 

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#21) On March 01, 2011 at 1:31 PM, XMFSinchiruna (27.75) wrote:

Here's a classic:

http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_H/threadview?m=tm&bn=8571&tid=271963&mid=271963&tof=5&rt=2&frt=2

Christopher Barker should be in Jail!

 

I believe in freedom of speech. When we read something in a respected publication like the Motley Fool(not respected any more), we expected some degree of objectivity and honesty.

Anyone who has read this guys recent articles, will not find objectivity and honesty. He is a shameless pumper of CDE and a consistent basher of HL. He must be on a someones payroll.

To bash HL two days in a row is beyond belief. If he has legitimate concerns, Ok voice them. However, this is old news which the company will resolve very soon since a settlement seems imminent.

I am preparing to send a complaint to the Motley Fool since Barker should not be given a national forum for his rants.

You may notice that the shorts seem ineffective today and Barker's article has done nothing to hurt this stock. 

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#22) On March 01, 2011 at 5:17 PM, jtnrt330 (< 20) wrote:

Chris,

Read that thread, LMAO on some of those comments. 

GPL and SLW have been flying high, thanks for all your hard work.... 

Have you heard of this company? Any knowledge on it would be appreciated.

Golden Phoenix Minerals, Inc. (GPXM.OB) Nevada-based company focuses on royalty mining in the Americas, with gold, silver, and molybdenum projects in the United States, Canada, and Peru

Thanks,

 John 

 

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#23) On March 01, 2011 at 5:18 PM, kowalaT (< 20) wrote:

Hey Sinch ... I want to thank you for being a big part in me developing my thesis for investing most of my real dollars in silver/gold related vehicles

 I have a few questions if you've got a sec.

 

What do you think the possibility of a new global reserve currency being created backed by gold/silver and other metals is? any timeframe?

 Is it possible that a majority of gold held in reserve isn't pure gold, but is salted with tungsten? Will this have a significant impact on gold? or is this baked in to current prices?

 

 I'm personally not one who believes the world is ending in any way, but silver and gold look to vastly outperform the dollar and low cost miners seem the best  way to capture their this appreciation (since I don't know exactly when this appreciation will occur, but it seems immenent)

 

Thanks for all you do

 

-Evan

 

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#24) On March 01, 2011 at 8:01 PM, t0bes (< 20) wrote:

Hi Chris,

I certainly hope you still have internet access when they lock you up!

Just wanted to say thanks again. Today, when the indices were down so sharply, I nervously checked my TDAmeritrade and found about a dozen of your recommendations I'd bought were up very nicely.  The best, BRD up almost 15%.

Please take care of yourself, your country needs you... And don't worry, I'm sure a few of us will get together and post bail!

Dave 

  

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#25) On March 01, 2011 at 10:31 PM, skypilot2005 (< 20) wrote:

“On March 01, 2011 at 8:01 PM, t0bes (< 20) wrote:

Hi Chris,

I certainly hope you still have internet access when they lock you up! “

Sinch,

 

Put me down for a silver cup.  No tin cup for you in the lock up.  :)

 

My cost basis for HL is $6.24, thanks to you, a “paltry” 65% return based on today’s close.  I am using the term paltry in the context of the returns I’ve realized on many of the stocks you’ve profiled for us here at “The Fool”.  Your D. D. is unequaled, in my opinion. 

 

I am hanging on for the “ride”.

 

My total portfolio of stocks in all accounts was up 3%, today.

 

The Dow was off 1.38%

 

Gold was up 1.52%

 

My REITS which are my second largest holding and appreciated asset after mining stocks were off 1.6%.

 

Hmmmm

 

To me money talks and unsupported cheap shots walk………

 

That is why, to borrow another’s statement, “In Sinchi we trust.”

 

A truism I’ve found over the years is that as you receive recognition for excelling in your field, those that are less competent will become increasingly critical.  Just know we’ve got your back.

 

Sky Pilot

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#26) On March 02, 2011 at 8:22 AM, silverminer (31.08) wrote:

jtnrt330

I don't think that one has ever crossed my radar, at least not to my recollection. At this stage of the game, and given the amount of collective time I have invested surveying the micro-cap space, that might just mean something ... but I can't sure. :P More than likely, though, it just means that my path hasn't crossed that company yet ... there is no shortage of them.

As with all micro-caps, just please be sure to perform at least five-times the quantity and intensity of DD before pulling any trigger. One can't just act in this space on excitement over a flashy website or a well-placed advertisement that leads one to a flashy website ... it has to be vetted to the nth degree.

As you perform that process, if you are still very excited about the opportunity, then please come back to me and I'll be more than happy to invest time taking a closer look as well.

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#27) On March 02, 2011 at 8:32 AM, silverminer (31.08) wrote:

skypilot2005

Thank you very much for the kind words, and your moral support! :)

TMFSmashy (Toby), who just left the Fool, was truly the master of deep DD. When we chatted once about AuEx Ventures vs. Fronteer Gold, he displayed an understanding of the AuEx's particulars to a degree where I was left wondering if he had a surveillance camera in the boardroom or something. 

Toby blasted me for saying a kind word about Jaguar once ... and he was absolutely, 100% right. He has incredible research skills.

 

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#28) On March 02, 2011 at 3:13 PM, chk999 (99.97) wrote:

Sinchy, a big thanks to you for the SLW comments.

My last position hit my limit sell order today. I made very nice bank on this! I am out of silver now as the risk/reward doesn't look as good to me. (It will undoubtedly go higher as I am always early, but the train arrived at my station and I got off.)

Anyways, a big shout out. I made real money on your analysis and I appreciate it a lot. 

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#29) On March 02, 2011 at 5:07 PM, skypilot2005 (< 20) wrote:

Sinchi,

 Did you see the Northern Abitibi Viking resouce estimate was relaesed today?

 

http://www.naminco.ca/docs/NR11-3%20Resource%20Estimate%20final.pdf

 

at:  http://www.naminco.ca/

After you get a chance to peruse it, I'd like to know what you think.  I am sure others would, too.

thanks

Sky Pilot

 

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#30) On March 02, 2011 at 5:09 PM, frederick7 (< 20) wrote:

Hi Sinchiruna,

Are you concerned that Copper Fox may be overvalued since total assets are in excess of Total liabilities by only $21M? 

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#31) On March 03, 2011 at 8:52 AM, XMFSinchiruna (27.75) wrote:

frederick7

I recommend doing your own calculation of the asset value by multiplying Schaft Creek recoverable resources (4.76 billion pounds copper) by prevailing metal prices (let's use $3.50 for a conservative value), which for a mine that projects a negative cost structure thanks to gold, silver, and moly byproducts, gives us notional life-of-mine operating profit (and also true asset value of M&I copper resource) of at least $16.7B.

With a market cap of less than 4% of the conservative market value of their copper asset in the ground, no, I am nowhere near concerned about Copper Fox being undervalued.

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#32) On March 03, 2011 at 8:53 AM, XMFSinchiruna (27.75) wrote:

skypilot2005

I had a long talk with the CEO yesterday. He was as disappointed as we are by the modest result for the resource estimate, but he went a long way to aleviate any concerns that might have cause me. I'll discuss in detail either later today or tomorrow.

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#33) On March 03, 2011 at 2:22 PM, jamo101 (< 20) wrote:

Hi Chris,

 I have had a nice return from slw in the past 2 yrs that I have owned it.  So thank you for bringing that to my attention.  I would like to add another silver miner to my holdings.  Do you have a preference between exk and gpl?  

 Thanks

Maureen

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#34) On March 03, 2011 at 4:17 PM, magnetpal (< 20) wrote:

Sinch, do you have any idea when GRS is releasing their quaterly results? 

 

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#35) On March 03, 2011 at 10:18 PM, skypilot2005 (< 20) wrote:


Thanks Sinch.  I just read the details on your CAPS Page.  I am reaching for my cookie jar to add to my position, tomorrow.

For those of you not familiar with Northern Abitibi, I suggest you read Sinchi's CAPS page and peruse the information on their corporate website before YOU commit real dineros. This is one you would want to go into with your eyes wide open.

Sky Pilot

 

  

 

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#36) On March 04, 2011 at 8:34 AM, XMFSinchiruna (27.75) wrote:

skypilot2005

Yup, certainly an extra-important rule of thumb before delving into the micro-cap space: DYOEEDD (Do your own extremely exhaustive DD).

magnetpal

Yahoo says March 28. I haven't checked for a pressa release to see if that's confirmed.

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#37) On March 04, 2011 at 1:58 PM, jamo101 (< 20) wrote:

Yikes, it looks like I should have dipped in either one yesterday.  Exk up 10 percent, gpl up 8 percent.

 

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