Hycroft (NASDAQ:HYMC) has been on the radar of the meme crowd lately after AMC Entertainment (NYSE:AMC) surprisingly committed to a $27.9 million investment in the firm earlier this year. HYMC stock is an early-stage precious metals producer that explores gold and silver deposits in Nevada.
There have been rumbles from investors about Hycroft’s debt burden. The company runs at a leverage ratio of 174.33x, which has many worried. However, I see no reason to panic, and I’m encouraging investors to stay calm.
AMC owns 22% of the entity, meaning its investment in Hycroft is classified as an “investment in associates” under the U.S. GAAP accounting laws. As a result, AMC is allowed to execute significant intercorporate transactions, which could sort out any of Hycroft’s debt concerns.
Additionally, with more than 20% ownership, AMC yields significant influence over day-to-day activities, as GAAP laws allow for the interchanging of key personnel.
AMC has more than $1.5 billion in cash and equivalents on its balance sheet. I’m sure that could support most of Hycroft’s short-term liabilities, totaling approximately $31.3 million.
So, let’s have a look at what HYMC stock could yield to its investors. Hycroft is in the process of expanding its exploration of its gold and silver mine that stretches 8.7 miles across Nevada’s Sulfur mining district.
The mine’s latest geophysical report suggests the property contains approximately 15 million ounces of gold and 600 million ounces of silver. Hycroft’s existing claims have produced $110.7 million in year-over-year (YOY) revenue, leaving the firm with a foundation to refinance with outside capital when needed.
I think we should look past the meme trend here. Hycroft is an early-stage mining company with large ambitions and credible backers. Mining operations in Nevada usually spark optimism among investors, and I think we could see something special arise here.
The stock’s trading above its 10-, 50-, 100-, and 200-day moving averages, indicating the market’s pricing elevated precious metals prices and AMC’s backing. I’m bullish all the way!
On the date of publication, Steve Booyens did not hold any position (either directly or indirectly) 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.
