Key points:
- Hycroft Mining (HYMC) stock remains popular among retail investors.
- But unfortunately, the miner has a long way to go before becoming profitable.
- Here’s why you should still stay away from this meme stock.
- The best gold and gold mining stocks to buy now.
Hycroft mining (HYCM) remains popular among retail traders despite our previous writeups on the company indicating that it was not a good investment at the start. However, things changed when AMC decided to take a 22% stake in the company giving it a boost that allowed it to raise $138.6 million by selling shares.
As my colleague Tim mentioned in a previous article, the underlying dynamics must support a rally higher for a meme stock to work. In Hycroft’s case, the miner had a big problem since it did not have a processing facility to process the ore it mined into silver and gold. However, the AMC investment solved this problem and was appreciated by investors from both sides in the form of a rally.
The long wait begins. How fast can Hycroft Mining build the processing facility? Will the miner turn a profit or keep making losses?
For example, a Tweet by Trade Ideas LLC, a Twitter account, set a $20 price target for HYCM, with no clear basis for the lofty price target. The miner currently has a market capitalisation of $289 million, which would rise to $3.85 billion if the $20 price target was hit, based on the current float. Such a scenario is highly unlikely given the unfavourable location of Hycroft’s mine at the edge of where all the significant gold and silver deposits are located.
Generally, I tend to stay away from meme stocks because I can’t justify buying an asset-based on hype. Of course, I might have missed out on some of the millions made by lucky investors last year, but the alternative would have been worse, more like selling my soul.
HYMC stock has fallen steadily since late March from a high of $3.09 to its current lows of $2.50, erasing half its value in the process, and was set to open lower today. Part of its latest decline is the falling silver prices that have affected even the most well-established and capitalised silver miners globally.
Investors are currently pricing in lower demand for commodities, including silver, due to the ongoing lockdowns in China that have affected global production and the expected slowdown of the global economy due to the high inflation witnessed worldwide.
As for Hycfrot Mining, I would wait for the following announcement from the miner, especially regarding how it utilised the funds raised to build a processing facility and when it will become operational. Still, it is unlikely I will invest in the company. There are better mining companies out there.
*This is not investment advice. Always do your due diligence before making investment decisions.
Hycroft Mining stock price.
Hycroft Mining Stock price has fallen over 50% in April.