Hycroft Mining Stock News and Forecast: HYMC pumps and then dumps on AMC news

Hycroft Mining stock soared on Tuesday as AMC takes a stake.
Hycroft Mining was making headlines on social media as well as CNBC.
HYMC shares opened up nearly 100% on Tuesday but closed up 9%.

Ivan Brian FXStreet

Hycroft Mining (HYMC) was not a name many of us were familiar with before Tuesday when the stock supercharged its way higher as retail traders piled into the name. Hycroft Mining is as the name suggests a mining stock with one mine in Nevada producing gold and silver. Gold had been a top-performing asset since the Russia-Ukraine conflict kicked off, but that still was not the reason for the super spike.

Hycroft Mining Stock News

The real news was an investment by noted metal investor AMC Entertainment. A touch of sarcasm perhaps, but I do not think anyone saw that one coming. I cannot think of a more left-field diversification from another stock in all my time in the market. AMC CEO Adam Aron was on the wires speaking about the investment and pointed out that HYMC was just like AMC one year ago, struggling for cash.

Indeed, Hycroft is not exactly in a healthy financial position. This appears to be a tough mine with costs of extraction looking too high and dwarfing any revenues from the mining operation. HYMC has not turned a profit since 2013. Despite this, the AMC apes, retail traders or someone saw fit to pile into HYMC stock, and it spiked 100% higher just on the open of the regular session on Tuesday.

Adam Aron was due to appear on CNBC to discuss the investment but had to pull out for fear of stoking the frenzy even more. The frenzy quickly died down, and HYMC lost about 90% of its intraday highs to close at $1.52 for a gain of 9.35%. Of course, the reason was a Bloomberg report suggesting HYMC could do a share offering as early as Tuesday. HYMC is listed to sell up to $500 million in share offerings, which would be extremely dilutive.

Hycroft Mining Stock Forecast

On Tuesday FXSteet was blunt enough in our assessment when we said to avoid HYMC stock. We would have been blunter, but this is a family site. so we have to mind our Ps and Qs. Suffice to say this was another frenzy, which quickly died down. HYMC is loss-making and as mentioned has not turned a profit since 2013. HYMC needs cash to survive, so I suppose AMC has provided this, and it is not too significant as CEO Aron alluded to. Still this is a little too left-field for our liking.

This probably keeps HYMC afloat though. CNBC reports that back in November the company said it needed to raise capital to meet its financial obligations and that it laid off half of its workforce at the Nevada mine, which is not exactly comforting from an investment point of view. This is distressed, high-risk investing. If you are looking for optimism, I suppose this investment and capital raise keeps the company afloat.

HYMC stock chart, daily

The author is long puts in HYMC.

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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