Why Hecla Mining Stock Surged in September

Hecla Mining (NYSE: HL) investors probably felt that they hit something of a mother lode in September. On the back of several factors, the company -- which primarily concentrates on silver, but also extracts desired goods from the Earth like gold and zinc -- saw its share price zoom more than 42% higher during the month.

A small-cap star

One major catalyst for this double-digit rise was Hecla's ascension to a prominent stock index, which occurred on Sept. 5 and took effect on Sept. 22. In the quarterly readjustment of its indexes, S&P Dow Jones Indices saw fit to include the mining company on its S&P SmallCap 600 index.

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Hecla was part of a four-stock class gaining admission; the quartet's other members were offshore oil rig specialist Noble, fintech Q2 Holdings, and medical tech solutions provider Waystar Holding.

Of course, when one stock comes into an index, another must come out. The four departing titles this round were fast food company Jack in the Box, home healthcare specialist Owens & Minor, comestibles company B&G Food and specialized tech enterprise Simulations Plus.

In its press release on the graduation to the S&P SmallCap 600, Hecla quoted CEO Rob Krcmarov as saying that it "reflects both the strength of our assets and the dedication of our people."

While Hecla is well-known in the mining sector since (according to the company) it's the No. 1 silver producer in North America, inclusion in the index has made the company a known quantity to the broader investment community too.

50% more bullish

Another factor cranking Hecla's price up in September was an analyst's 50% price target increase. Several days after the index announcement, RBC Capital's Michael Siperco changed his fair value assessment to $12 per share; previously he had pegged it as being worth $8.

With that kind of heavy lift, no one should be surprised to learn that Siperco maintained his outperform (read: buy) recommendation on the stock.

The reasons for the pundit's move weren't immediately apparent, although it doesn't seem coincidental it occurred just after Hecla's graduation to the S&P SmallCap 600.

The company's second quarter earnings release -- published near the beginning -- very possibly played a role too. Buoyed by generally rising silver prices so far this year, Hecla posted sturdy (24%) year-over-year growth on the top line, to $304 million, with gross profit flipping to a profit of $34 million against an almost $9 million loss in the year-ago period.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Noble Plc. The Motley Fool has a disclosure policy.