Hecla closes Monday up huge on Reddit-driven trading

Hecla Mining started Monday off on the right foot, as a recent push by outsider traders to weaponize the struggling game retailer GameStop ended up driving up silver prices, with mining companies coming along for the ride.

On Wednesday morning, trading opened with silver futures at $24.75. Since then, chatter by online traders on the news board Reddit about buying silver shares led to a surge: On Monday, silver eclipsed $30 before settling down to $28.75 to end the day. And as silver has climbed, so, too, have the shares of local companies digging for ore. Hecla Mining, the Coeur d'Alene-based company that supplies just under a third of America’s silver, closed Friday at $5.67 a share, ended Monday at the closing bell up 28 percent at $7.27.

“The initial thoughts is, there’s been momentum in silver for the last little while,” Phillips S. Baker Jr., president and CEO of Hecla Mining, told the Coeur d’Alene Press. “It’s been really driven by two things. One is the demand for silver as our economy is decarbonizing. The other is the demand for silver as it tries to catch up to gold. So you have that momentum already in place, and you put on top of it the interest by these investors that clearly has caused other investors of an institutional nature to go into the commodity trade.”

A week ago, the very notion of a squeeze on the mineral commodity was nowhere near anyone’s radar. Reporters covering Wall Street were busy bearing witness to a movement of mostly-activist traders who aimed to bring down hedge funds heavily invested in “shorts” — or, bets on companies losing money — against faltering businesses heavily entrenched in America’s consumer history for the past 30 years. These companies include Nokia, AMC and — most notably — GameStop, whose $17.25 stock price one month ago skyrocketed in recent days to as high as $469.42 on Thursday.

But those companies’ business models have flailed in certain markets over the past 20 years. Nokia, a still-successful Finnish company once among America’s elite smartphone providers, failed to carve out a sustainable home in the American smartphone marketplace. Movie theater giant AMC was losing an entertainment war with streamers like Netflix and Hulu before the pandemic struck; the eruption of COVID-19 has turned the cinema industry’s future from challenging to downright grim.

But traders who flocked to the online platform Reddit thread WallStreetBets to organize a revitalization campaign among struggling stocks have found no greater success than in GameStop. The gaming retailer’s stock has steadfastly struggled over the years as the need for game cartridges and discs has given way to streaming and direct downloads. With hedge funds heavily banking on GameStop’s eventual demise, the late January push to drive up the stock has sent Wall Street scrambling for government intervention while hedge funds once worth as much as $19 billion now teeter toward bankruptcy.

With Reddit investors’ attention toward GameStop starting to wane Monday after what many consider a successful coup, the Reddit traders have now set their sights on silver. By Sunday afternoon, the hashtag #silversqueeze was trending on Twitter.

“The ‘Reddit Trade,’ I’ll call it for the lack of a better term,” Baker said, “they don’t really have access in an easy way to the commodities market. So given that the commodity silver was trading up significantly on Sunday night here when it opened up in Asia, clearly there’s more money coming into the space other than just from that source.”

Many big banks hold shorts on silver. But unlike GameStop, where activist traders acknowledged on the WallStreetSilver thread that investing in the gaming retailer is more about disrupting hedge funds than investing in the company’s future, some (though not all) Reddit traders have noted the spike in silver activity is more about trying to help the commodity find its actual price, and that hedge funds and big banks holding shorts have historically undervalued silver.

Baker said he sees the events of the last few days are a strong indicator of silver’s strength, particularly with the ubiquitous uses silver provides: from its famed roots in jewelry and coins to its conductive properties used in appliances and electronics.

“In the end,” he said, “these fundamentals that are in place — certainly in the case of silver — have a smaller market, relative to other commodities. Gold dramatically eclipses silver. If you read what people wrote [on Reddit], they’re writing on the fundamentals of silver, and they got that right. So they’re just, I think, accelerating what was already in place.”