Hycroft Mining Holding Corporation (HYMC) in Denver, Colo., is a gold and silver producer. The company's primary mining reserves are located in Nevada. Shares of HYMC have gained 124.2% in price year-to-date and 256.4% over the past month, thanks to bullish investor sentiment surrounding precious metals amid continuing market weakness.
However, because the Fed Reserves’ interest rate hike increase yesterday strengthens the U.S. dollar, gold prices are expected to fall slightly in the near term. Furthermore, with multiple conflict resolution talks between Russia and Ukraine and slumping oil prices, gold bullion prices fell 1.2% following the Fed’s announcement.
Shares of HYMC have declined 19.1% in price over the past five days to close yesterday's trading session at $1.37.
Click here to check out our Gold and Silver Industry Report for 2022
Here is what could shape HYMC's performance in the near term:
Lawsuits
Multiple law firms have been investigating HYMC to determine whether its officers and/or directors engaged in securities fraud or other unlawful business practices. The investigation was precipitated by HYMC's business update report released on Nov. 10, 2021, which stated that the company was discontinuing pre-commercial scale mining at its run-of-mine operation due to cost pressures. As a result of this disclosure, shares of HYMC plummeted 37.4% intraday on November 10, 2021, causing shareholders to suffer significant losses.
Equity Dilution
On March 15, HYMC completed a private equity placement of 23.41 million units, each comprising one share and one share purchase warrant, with institutional precious metals investor Eric Sprott and AMC Entertainment Holdings, Inc. (AMC). HYMC raised a combined $56 million from the at-the-market equity placement, which it plans to use to fund its general corporate expenses, working capital, capital expenditures, refinancing, redemption, and repayment of existing debt.
HYMC CEO Diane Garrett said, "Collectively, their investment dramatically improves Hycroft's liquidity position and provides years of financial runway. Additionally, their confidence underscores the world-class nature of Hycroft's gold and silver deposit and our potential to unlock value at a pivotal moment in its development. We look forward to working alongside our new investors to advance Hycroft up the value chain."
Risk Factors
HYMC's operations are subject to immense industry-related risks, including the fluctuating prices of gold and silver and uncertainties concerning estimates of mineral reserves and resources. Furthermore, proposed legislation in Nevada could significantly increase HYMC's tax liabilities, thereby shrinking its profit margins. And risks relating to the company's liquidity, its ability to raise capital at favorable terms, compliance with its credit agreements, and going-concern considerations might limit HYMC's near-term growth prospects.
POWR Ratings Reflect Bleak Prospects
HYMC has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
HYMC has a grade of D for Momentum and an F for Quality. The stock is currently trading below its 200-day moving average of $1.51, which is in sync with its Momentum grade. In addition, HYMC's negative trailing-12-month ROE and net income margin justify the Quality grade.
Among the 42 stocks in the F-rated Miners – Gold industry, HYMC is ranked #25.
Beyond what I have stated above, view HYMC ratings for Growth, Sentiment, Stability, and Value here.
Bottom Line
The Fed plans to raise benchmark interest rates up to six times this year, which will likely place downward pressure on gold prices. Also, increased borrowing costs are expected to harm HYMC's liquidity and raise its interest expenses. So, analysts expect the company's bottom line to remain negative until at least this year. Thus, we think HYMC is best avoided now.
How Does Hycroft Mining Holding (HYMC) Stack Up Against its Peers?
While HYMC has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Argonaut Gold Inc. (ARNGF), Jaguar Mining Inc. (JAGGF), and Endeavour Mining Corporation (EDVMF), which have a B (Buy) rating.
Click here to check out our Gold and Silver Industry Report for 2022
HYMC shares were trading at $1.40 per share on Thursday morning, up $0.03 (+2.19%). Year-to-date, HYMC has gained 128.12%, versus a -8.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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