Why Hecla Mining Stock Withered This Week
Key Points
One of these is Hecla's favorite, silver.
This is an unpredictable conflict that looks as if it'll drag on for some time.
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When precious metals rise in price, the stocks of companies that mine them tend to increase in sympathy. When the reverse is true, the share price declines can be dramatic. That's exactly what happened to silver-focused miner Hecla Mining (NYSE: HL) this week; according to data compiled by S&P Global Market Intelligence, its stock price swooned by 12% over the five-day trading period.
War footing
Among many other assets, precious metals were -- and continue to be -- affected by the war with Iran, despite the fact that gold, silver, etc., prices tend to rise in times of global strife.
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In this instance, since oil is front and center in the conflict, its sharp price increases due to the war are boosting U.S. inflation. Oil is typically priced in dollars, so a higher price means greater demand for dollars, strengthening the greenback. However, this makes it more expensive for overseas investors to buy dollar-denominated assets, such as gold and silver.
And if interest rates go higher, they'll make investments like U.S. government bonds more attractive. These pay interest to holders, while precious metals don't.
Dedicated to digging
Hecla Mining is a pure-play miner, and as such, it's very exposed to downturns in its favored materials (chiefly silver, although it also extracts gold, critical base metals and minerals, and other goodies from the earth).
It's very effective at this activity, so at some point it might become a bargain on the future recovery of those expensive metals. It looks like both sides in the war are digging in for a long conflict, though, so right now there's significantly more downside than upside with Hecla and its peers, in my view. I'd be a seller of the stock, too.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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