Hycroft Mining: Invest the Money You Can Afford to Lose

Stock Market

Investors are picky in the current environment. Spooked by rising inflation and interest rates, value stocks are getting the most attention. Therefore, despite some enticing elements, one cannot give a thumbs up to Hycroft Mining Holding Corporation (NASDAQ:HYMC) stock.

The silver and gold miner gained notoriety when AMC Entertainment (NYSE:AMC) purchased a 22% stake in the company. Both AMC and HYMC are Reddit darlings.

However, Hycroft Mining’s stock price has fallen substantially after rallying in the middle of March when AMC Entertainment and key investor Eric Sprott helped spark the parabolic rally. The fact that AMC Entertainment and Eric Sprott have both invested in the miner shows how much they value the company. Using the funds, it was able to repay some of its debts and invest in exploration, which is vital for future growth. HYMC is looking into building processing facilities at its mining sites. This would eliminate the need for it to ship its minerals to other facilities for final processing before being sold.

At the moment, investors are patiently waiting for any news about the progress made by Hycroft Mining. Until then, HYMC is expected to stay risky.

Meanwhile, Eric Sprott has sold five million shares for $6.37 million. This is not great news for HYMC since he is a major shareholder. It only adds to the woes of the miner, which needs positive catalysts to make a bounce-back.

Ticker Company Price
HYMC Hycroft Mining Holding Corporation $1.10

Why Is HYMC Stock on the Rise?

Retail investors and traders are interested in the company because of its vast resource base and potential for rising gold prices. The Russia-Ukraine conflict has led to a sharp increase in the price of gold and silver, a positive tailwind for HYMC, according to bulls. The other major reason bulls are touting it is the company’s reputation as a Reddit favorite.

Undoubtedly, both these reasons can have a huge impact on the stock price. However, there is no guarantee both of these factors will influence the stock market moving forward. Hycroft Mining owns a gold and silver project that began as a small heap leach operation in 1983. In 2021, Hycroft Mine increased its production of gold and silver to 55,668 ounces and 355,967 ounces, respectively. That is hardly a huge amount.

Hycroft Mining has released the results of its initial assessment of the mine. It was able to conclude an estimate of 15.3 million ounces of gold in the measured and indicated categories, along with another estimated 7 million ounces in the inferred category. However, the grades are low and no one knows how much it can recover at the prevailing prices of gold. It will require a substantial capital investment, which the company does not have.

HYMC Stock Is a Pure Momentum Play

It’s difficult to predict the trajectory of HYMC stock since it is subject to Reddit-induced rallies. As per Louis Navellier, the company does have access to lucrative reserves. That makes the company one to watch.

However, he also correctly points out that it will take a lot of money to take out these precious metals for processing. If the company wants to take advantage of the situation, it will have to issue massive equity to finance its operations. If you believe the situation is impossible, you haven’t been following Reddit mania.

However, should you play along? It’s a classic situation of only investing the money you can afford to lose and sitting tight for any Reddit-induced bumps along the way.

On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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