Searchlight Minerals Corp. (OTCMKTS:SRCH) Jumps Up To New 52-Week High

After a month of silence Searchlight Minerals Corp. (OTCMKTS:SRCH) issued not one but two PRs early in the morning on Friday. The first press releases announced that SRCH have closed the second tranche of their private placement offering. Combined with the previous round that took place back in October the company has managed to boost its financials by approximately $1.6 million. The Second PR talked about the latest results of the pilot-scale tests from the Clarkdale Slag project.

The burst of PR activity didn’t remain unnoticed and SRCH enjoyed one extremely positive sessions. Their stock opened at $0.43, fluctuated a bit but a little more than an hour before the end of the trading day it began climbing upwards and didn’t stop until the closing bell rang. In the end the ticker had gained nearly 25% closing at its highest point for the day of $0.499. This price is also the new 52-week high for the company. The daily volume of 600 thousand shares surpassed the average by more than 4 times.

Investors certainly got excited by the announcements but there are some serious red flags around SRCH that should be taken into consideration. First of all, back in September the company allowed its Searchlight mining claims to lapse by refusing to pay the required maintenance fees. The decision left SRCH with only the Clarkdale Slag Project. The Clarkdale project was acquired back in 2007 but so far it hasn’t produced even a dime in revenues and judging by the last PR it may be quite some time before it does. The rest of the financial results of the company are not that encouraging either. The quarterly report for the period ending September 30 contained the following numbers:

• $351 thousand cash
• $657 thousand total current assets
• $1.7 million total current liabilities
• ZERO revenues
• $12.1 million net loss

As we said earlier SRCH were able to improve their cash position but they did so by selling millions of shares at a considerable discount. A total of 8 million units were sold at just $0.20 which is 60% lower than the current market price. Each unit consisted of 1 share and half a warrant (a full warrant can be exercised at $0.30 for the purchase of 1 share). Searchlight also have around $3 million in outstanding convertible notes with a conversion price at $0.40. The stock has already surpassed that price range and if it continues climbing the owners of the notes might become even more tempted to turn them into common shares.

The recent financial injection should be enough to keep the company going for a while but without any revenues SRCH will be forced to issue more and more shares in the future. The risks around the stock demand the use of caution. Do you own due diligence and time your trades accordingly.