Hycroft Mining (NASDAQ: HYMC) stock should rise 1,000% today. That 10x leap in HYMC stock will not be as the result of their declaring some bonanza of a new gold find. Nor that they’ve suddenly discovered how to extract from their current low quality ore cheaply and efficiently. No, the rise today will be the result of a purely technical matter. One that was actually announced some 6 months back - or perhaps it was made obviously then, even if not specifically announced.
It’s also worth pointing out to any still holding after the AMC fun and games. While the price will go up ten times everyone will also have one tenth the number of shares. So the value of any individual holding won’t rise either.
Over the longer term one description of Hycroft is that the company wwas simply undercapitalised. We believed it for a time - a few years back. If only they could raise the capital to build a processing plant, and so not have to ship ore, expensively, to another one, then they would be profitable. AMC got grossly overcapitalised through the meme stock frenzy and invested and that should have solved that. It didn’t. We’re now believers in the alternate theory that Hycroft simply has low grade, chemically difficult, ore to process and that’s why it doesn’t make money. This is also a problem that isn’t going to be solved by new money nor a new processing plant - not unless there’s a revolution in gold ore processing chemistry. Something unlikely given that humans have been thinking about this the past 3,000 years. Note that what we believe doesn’t make either theory right or wrong, they’re both just theories.
Hycroft Mining stock price from Google Finance
The specific issue today we described that 6 months back about Hycroft Mining: “OK - so, when the price goes below $1, NASDAQ sends a warning. Sort it out. There's an easy way to do this, a reverse stock split, a consolidation to Brits. Everyone who used to have 10 shares now has 1, the price is 10x what it was, NASDAQ is satisfied. This is easy and cheap to do. It's also true that NASDAQ gives you some time to do this in. And that's why this 16% move by Hycroft is trivial. NASDAQ has just told Hycroft that they've 180 days to sort out their below $1 stock price. OK, that's normal - 180 days is normal - and the solution is simple anyway. So why this should increase the valuation of Hycroft by 16% - well, maybe folk don't quite understand what's going in here? Yes, this does mean the NASDAQ quote is safe for another 6 months. But that could and would happen anyway. It doesn't make the gold mine any better, so why that valuation rise? Silliness?”
So, here we are with the Hycroft price around one third what it was 6 months back and here’s the predicted reverse stock split: “Hycroft Mining Holding Corporation (HYMC) will effect a one-for-ten (1-10) reverse split of its Class A Common Stock. The reverse stock split will become effective on Wednesday, November 15, 2023.”
And that’s it. Hycroft Mining stock will rise 1,000%, or 10x, today. There will be no greater amount of gold there, no better ore, as a result. But that Nasdaq problem will have been solved.
