| PO Box 3030 | Winnemucca, Nevada 89446 | | | | (Zip Code)Address of principal executive offices) (Zip code) | |
(303) 253-3267
| (775) 304-0260 | | | | (Registrant’s telephone number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | Securities registered pursuant to Section 12(b) of the Act: | | Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered | Class A common stock,par value $0.0001 per share | | HYMC | | The Nasdaq CapitalStock Market LLC | | Warrants to purchase common stock | | HYMCW | | The Nasdaq CapitalStock Market LLC | | Warrants to purchase common stock | | HYMCZHYMCL | | The Nasdaq CapitalStock Market LLC | | | | WarrantsSecurities registered pursuant to purchase common stockSection 12(g) of the Act: None | | HYMCL | | The Nasdaq Capital Market |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ | | | Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ | | | Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ | | | Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ | | | Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | |
| | | | | | | | | | | | | | | | ☐ | | Large accelerated filer | ☐ | | Accelerated filer | | ☒ | | Non-accelerated filer | ☒ | | Smaller reporting company | | | | ☒☐ | | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
The aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant as of June 30, 2020, the last business day of the registrants most recently completed second fiscal quarter, was $86,679,426.
As of May 12, 2021, there were 59,901,306 | | | | | | | | | | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | | | Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ | | | If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ | | | Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b)). ☐ | | | Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒ | | | | | | The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, was $52,124,124. | | | As of March 13, 2024, there were 21,005,192 shares of the Company’s common stock and no shares of the Company’s preferred stock issued and outstanding. | |
DOCUMENTS INCORPORATED BY REFERENCE Portion of the registrant's Proxy Statement of the 2021 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31, 2020. | | | | | | | | | | Portions of the registrant’s definitive Proxy Statement for its 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2023. | |
Explanatory Note
Hycroft Mining Holding Corporation (the “Company”) is filing this second amendment to Form 10- (“Form 10-K/A”) to amend our Annual Report on Form 10-K for the year ended December 31, 2020, originally filed with the Securities and Exchange Commission (the “SEC”) on March 24, 2021 and amended on April 9, 2021 (“Original Form 10-K”), to restate our financial statements and related footnote disclosures as of December 31, 2020, and for the year ended December 31, 2020. On May 6, 2021, the Company filed a Current Report on Form 8-K with the SEC disclosing the determination by the Audit Committee that, as a result of the re-evaluation described below, the Company will restate previously issued consolidated financial statements and related disclosures as of and for the year ended December 31, 2020. Refer to Note 25 - Restatement of Previously Issued Financial Statements, of Notes to Consolidated Financial Statements of this Form 10-K/A for additional information. This Form 10-K/A also amends certain other Items in the Original Form 10-K, as listed in “Items Amended in this Form 10-K/A” below.
Restatement Background
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled "Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”). Specifically, the SEC Statement clarified guidance for all SPAC-related companies regarding the accounting and reporting for their warrants and focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristics of the warrant holder, and because the holder of such warrants would not be an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude such warrants from being classified in equity and thus such warrants should be classified as a liability.
As a result of the SEC Statement, the Company re- evaluated the accounting treatment of the warrants that were issued prior to or in conjunction with the business combination and reverse recapitalization transaction that closed on May 29, 2020 (refer to Note 3 - Recapitalization Transaction of Notes to the Financial Statements), and the warrants issued October 6, 2020, with its public unit offering that had been recorded in equity in the Company’s consolidated balance sheet. Because the Company’s 5-Year Private Warrants (as such term is defined herein) contain provisions whereby the settlement amount varies depending upon the characteristics of the warrant holder, the 5-Year Private Warrants should have been recorded at fair value as a liability in the Company’s consolidated balance sheet. Accordingly, due to this reclassification and restatement, the 5-Year Private Warrants are now classified as a liability at fair value on the Company’s consolidated balance sheet at December 31, 2020, and the change in the fair value of such liability in each period is recognized as a gain or loss in the Company’s consolidated statement of operations.
A summary of the accounting impact of this adjustment to the Company’s consolidated financial statements as of and for the year ended December 31, 2020 is provided in Note 25 - Restatement of Previously Issued Financial Statements of the Notes to the Financial Statements of this Form 10-K/A.
In connection with the restatement, management has re-evaluated the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting as of December 31, 2020 based on the framework in “Internal Control- Integrated Framework (2013 framework)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has concluded that the Company’s disclosure controls and procedures and internal controls over financial reporting were not effective as of December 31, 2020, due to a material weakness in internal control over financial reporting related to the accounting for equity instruments. For a discussion of management’s consideration of our disclosure controls and procedures, internal controls over financial reporting, and the material weaknesses identified, see Part II, Item 9A, “Controls and Procedures” of this Form 10-K/A.
Items Amended in this Form 10-K/A
This Form 10-K/A presents the Original Report, amended and restated with modifications as necessary to reflect the restatements. The following items have been amended to reflect the restatement:
Part I, Item 1A. Risk Factors
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part II, Item 8. Financial Statements
Part II, Item 9A. Controls and Procedures
In addition, the Company’s Chief Executive Officer and Principal Accounting Officer have provided new certifications dated as of the date of this filing in connection with this Form 10-K/A (Exhibits 31.1, 31.2, 32.1 and 32.2), and the Company's Independent Auditors, Plante & Moran, PLLC have provided a new consent as of the date of this filing in connection with this Form 10-K/A (Exhibits 23.1).
Except as described above, this Form 10-K/A does not amend, update, or change any other items or disclosures in the Original Form 10-K and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Form 10-K/A speaks only as of the date the Original Form 10-K was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original Form 10-K to give effect to any subsequent events. Accordingly, this Form 10-K/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Form 10-K, including any amendment to those filings. Further, as a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, we were not required to provide quarterly selected financial data in the Original Form 10-K. We will restate prior quarterly periods in Quarterly Reports on Form 10-Q filed subsequent to this Form 10-K/A. Accordingly,
investors should rely only on the financial information and other disclosures regarding the restated periods in this Form 10-K/A or in future filings with the SEC (as applicable), and not on any previously issued or filed reports, earnings releases or similar communications relating to these periods.
HYCROFT MINING HOLDING CORPORATION Annual Report on Form 10-K TABLE OF CONTENTS
PART I
Cautionary Statement Regarding Forward-Looking Statements Certain statements in this Annual Report on Form 10-K for the year ended December 31, 20202023, (“20202023 Form 10-K”) may constitute “forward-looking” statements as defined inwithin the meaning of Section 27A of the Securities Act of 1933, (theas amended ( the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Private Securities Litigation Reform Act of 1995 (the “PSLRA”)1995. All statements, other than statements of historical facts, included herein and public statements by our officers or representatives, that address activities, events or developments that our management expects or anticipates will or may occur in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Suchfuture are forward-looking statements, involve knownincluding but not limited to such things as future business strategy, plans and unknown risks, uncertaintiesgoals, competitive strengths and other important factors that could cause the actual results, performance or achievementsexpansion and growth of Hycroft Mining Holding Corporation and its subsidiaries (“Hycroft”) or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as theour business. The words “estimate,” “plan,” “anticipate,” “expect,” “intend,” “believe,” “expect,“target,” “anticipate,” “intend,” “estimate,” “project,“budget,” “may,” “can,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or otherto” and similar words or the negativeexpressions, or negatives of these terms or other variations of these terms or comparable language or byany discussion of strategy or intentions. intention identify forward-looking statements. Forward-looking statements address activities, events or developments that the Company expects or anticipates will or may occur in the future and are based on current expectations and assumptions. These cautionary statements are being made pursuantinvolve known and unknown risks, uncertainties, assumptions and other factors which may cause our actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. See our other reports filed with the Securities Act, theand Exchange ActCommission (the “SEC”) for more information about these and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. Hycroft cautions investorsother risks. You are cautioned against attributing undue certainty to forward-looking statements. Although we have attempted to identify important factors that any forward-looking statements made by us are not guarantees or indicative of future performance ascould cause actual results and future events couldto differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although these forward-looking statements were based on assumptions that the Company believes are reasonable when made, you are cautioned that forward-looking statements are not guarantees of future performance and that actual results, performance or achievements may differ materially from those made in or suggested by the statements. The forward-looking statements contained in this 20202023 Form 10-K. In addition, even if our results, performance, or achievements are consistent with the forward-looking statements contained in this 2023 Form 10-K, those results, performance or achievements may not be indicative of results, performance or achievements in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements made in this 2023 Form 10-K speak only as of the date hereofof those statements, and we do not have, or undertake anyno obligation to update those statements or reviseto publicly announce the results of any forward-lookingrevisions to any of those statements whether as a result of new information, subsequentto reflect future events or otherwise, unless required by law.developments. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer tosee the Risk Factors section of this 2020 Form 10-K, and the Summary of Risk Factors in Item 1A. Risk Factors.of this 2023 Form 10-K.
PART I ITEM 1. BUSINESS About the Company Hycroft Mining Holding Corporation (formerly known as Mudrick Capital Acquisition Corporation) was incorporated under the laws of the state of Delaware on August 28, 2017. In this Annual Report on2023 Form 10-K, “we”, “us”, “our”, the “Company”, “Hycroft”,“we,” “us,” “our,” “Company,” “Hycroft,” and "HYMC"“HYMC” refer to Hycroft Mining Holding Corporation and its subsidiaries. We are a U.S.-based gold producer focused on operating and developing its wholly ownedsilver exploration and development company that owns the Hycroft Mine in a safe, environmentally responsible, and cost-effective manner. Our operating mine, the Hycroft Mine, is an open-pit heap leach operation located approximately 54 miles westprolific mining region of Winnemucca,Northern Nevada. Mining operations at the Hycroft Mine were restartedThe following discussion should be read in 2019. As part of the restart, Hycroft, along with third party consultants, completed the Hycroft Technical Report Summary, Heap Leaching Feasibility Study, prepared in accordanceconjunction with the requirements of the Modernization of Property Disclosures for Mining Registrants, with an effective date of July 31, 2019 (the “Hycroft Technical Report”Company’s Consolidated Financial Statements (“Financial Statements”) for our proprietary two-stage heap oxidation and leach process for sulfide ore, which is discussed in further detail in Item 2. Properties. During the year ended December 31, 2020 we sold 24,892 ounces of gold and 136,238 ounces of silver. As of December 31, 2020, the Hycroft Mine had proven and probable mineral reserves of 11.9 million ounces of gold and 478.5 million ounces of silver, which are contained in oxide, transitional, and sulfide ores. We currently recover gold and silver through our heap leach process operations, while we continue to study and conduct testing of commercial production using our proprietary two-stage heap oxidation and leach process.
The Hycroft Mine, our sole operating property, is located outside of Winnemucca, Nevada. Our corporate headquarters is located at 8181 E. Tufts Avenue, Suite 510, Denver, Colorado 80237, and our telephone number is (303) 253-3267. Our website is www.hycroftmining.com.
Recapitalization Transaction with MUDS
As discussed in Note 1 - Company Overview and Note 3 - Recapitalization Transaction to the Notes to the Financial Statements on(“Notes”) included in Part II – Item 8. Financial Statements of this 2023 Form 10-K.
On May 29, 2020, we formerly known as Mudrick Capital Acquisition Corporation (“MUDS”), consummated a business combination transaction (the “Recapitalization Transaction”) that resulted in Autar Gold Corporation (formerly known as MUDS Acquisition Sub, Inc. (“Acquisition Sub”) acquiring all of the issued and outstanding equity interests of the direct subsidiaries of Hycroft Mining Corporation (“Seller”) and substantially all of the other assets of Seller and assuming substantially all of the liabilities of Seller. In conjunction with the Recapitalization Transaction, Seller’s indebtedness existing prior to the Recapitalization Transaction was either repaid, exchanged for indebtedness of the Company, exchanged for shares of common stock or converted into shares of Seller common stock, and our post-Recapitalization Transaction indebtedness included amounts drawn under the Credit Agreement among MUDS,Hycroft, AuxAg Mining Corporation (formerly known as MUDS Holdco Inc.), Allied VGH LLC, Hycroft Mining Holding Corporation, Hycroft Resources and Development, LLC Sprott Private Resource Lending II (Collector) Inc., and Sprott Resources Lending Corp. (“Sprott Credit Agreement”) and the assumption of the newly issued 10% Senior Secured Notes (“Subordinated Notes (as such are defined herein)Notes”). Upon closing Our property, the Hycroft Mine, historically operated as an open-pit oxide mining and heap leach processing operation and is located approximately 54 miles northwest of Winnemucca, Nevada. Mining operations at the Hycroft Mine were restarted in 2019 on a pre-commercial scale and discontinued in November 2021 as a result of the Recapitalization Transaction, our unrestricted cashthen-current and expected ongoing cost pressures for many of the reagents and consumables used at the Hycroft Mine and to further determine the most effective processing method for the sulfide ore. In March 2023, Hycroft, along with its third-party consultants, completed and filed the Hycroft Property Initial Assessment Technical Report Summary Humboldt and Pershing Counties, Nevada with an effective date of March 27, 2023 (the “2023 Hycroft TRS”) and prepared in accordance with the SEC’s Modernization of Property Disclosures for Mining Registrants as set forth in subpart 1300 of Regulation S-K (“Modernization Rules”). The 2023 Hycroft TRS provides an initial assessment of the mineral resource estimate utilizing a milling and pressure oxidation (“POX”) process for sulfide and transition mineralization and a heap leaching process for oxide mineralization. The 2023 Hycroft TRS included: (i) additional exploration drilling results from 2021 and 2022; (ii) additional assay information associated with historical drilling that was previously missing; (iii) other updates after additional review of historical assay certificates; and (iv) other adjustments. The 2023 Hycroft TRS supersedes and replaces the Initial Assessment Technical Report Summary for the Hycroft Mine, prepared in accordance with the requirements of the Modernization Rules, with an effective date of February 18, 2022 (“2022 Hycroft TRS”), and the 2022 Hycroft TRS should no longer be relied upon. Our ongoing disclosures and many of management’s estimates and judgments as of and for the periods ended December 31, 2023 and 2022, are based on the 2023 Hycroft TRS. The Company will continue to build on the work to date, incorporate exploration data as it becomes available, for use totaled $68.9 million.and investigate opportunities identified through progressing the technical and data analyses leading up to the 2023 Hycroft TRS and subsequent studies and analyses, and we will provide an updated technical report at an appropriate time. We ceased mining activities in November 2021, and completed processing of gold and silver ore previously placed on leach pads as of December 31, 2022. We do not expect to generate revenues from gold and silver sales until after further developing the Hycroft Mine and recommencing mining and processing operations. As of December 31, 2023, the Hycroft Mine had measured and indicated mineral resources of 10.6 million ounces of gold and 360.7 million ounces of silver and inferred mineral resources of 3.4 million ounces of gold and 96.1 million ounces of silver, which are contained in oxide, transitional, and sulfide ores. Segment Information The Hycroft Mine is our only operating segment and includes the operations, development,exploration, and explorationdevelopment activities and containsaccounts for 100% of our revenues and production costs.Production costs. Corporate and Other includes corporate generalGeneral and administrative costs. See Note 18 -20 – Segment Informationto the Notes to the Consolidated Financial Statements for additional information on our segments. Principal Products, Revenues, and Market Overview During the year ended December 31, 2023, the Company generated no Revenues due to the cessation of active mining operations.
The principal products produced during 2022 at the Hycroft Mine arewere unrefined gold and silver bars (doré) and in-process inventories (metal-ladengold and silver-laden carbons and slags),slags, both of which arewere sent to third party refineries before beingand sold generally at prevailing spot prices after adjustments for refining and other associated fees, to financial institutions or to precious metals traders. Doré bars and metal-ladengold and silver laden carbons and slags arewere sent to refineries to produce bullion that meetsmeet the required market standards of 99.95% pure gold and 99.90% pure silver. Under the terms of our refining agreements, doré bars and metal-ladengold and silver laden carbons and slags arewere refined for a fee, and our share of the separately recovered refined gold and refined silver arewere credited to our account or delivered to our buyers. Product Revenues and Customers In 2020, revenuesAs the Company ceased active mining operations in November 2021 and completed the processing of gold and silver ounces from the leach pads, we do not expect to have Revenues from gold and silver made up 94%sales until restarting mining operations.
Gold and 6%, respectively, of our total revenue and, as such, we consider gold our principal product. In 2020, all of our revenues were derived from metal sales to two customers; however, we do not believe we have any dependencies on these customers due to the liquidity of the metal markets and the availability of other metal buyers and financial institutions. GoldSilver Uses
Gold hasand silver have two main categories of use: fabrication and investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses,applications, medals, medallions and coins. Fabricated silver also has a variety of end uses, including jewelry, mirrors, cameras, electronics, energy production, engines, novelty explosives, and coins. Gold and silver investors buy gold and silver bullion, coins and jewelry. Gold and Silver Supply and Demand The supply of gold consists of a combination of current production from mining and metal recycling and the draw-down of existing stocks of gold held by governments, financial institutions, industrial organizations, and private individuals. Based on publicly available information published by the World Gold Council, gold production from mines decreased slightly for 2020increased 0.9% in 2023 compared to 2019with 2022 totaling approximately 3,4013,644 metric tons (or 109.3117.2 million troy ounces) and represented approximately 73.4%74.4% of the 20202023 global gold supply.supply of 4,899 metric tons. According to the World Gold Council, gold demand in 20202023 was approximately 3,7604,448 metric tons (or 120.9 million 143.0 million troy ounces) and totaled approximately $214$277.5 billion in value. In 2020,2023, gold demand by sector was comprised of jewelry (38%(49%), investments including bar and coin (24%and ETFs (21%), ETF investments (23%), technology (8%), and central bank purchases (23%), and technology (7%).
silver consists of a combination of current production from mining (approximately 82%) and metal recycling and other (approximately 18%). Based on publicly available information, estimated silver production from mines increased approximately 2% in 2023 compared with 2022 totaling approximately 842 million troy ounces and represented approximately 82% of the 2023 global silver supply of 1,025 million troy ounces. Silver demand in 2023 was approximately 1,167 million troy ounces and totaled approximately $24.9 billion in value. In 2023, silver demand by sector was comprised of photovoltaics (14%), other industrial (12%), jewelry (17%), silverware (5%), photography (2%), and investments (26%). Gold and Silver Prices The price of gold and silver is volatile and is affected by many factors beyond our control, including geopolitical events, such as conflicts or trade tensions, the sale or purchase of gold by central banks and financial institutions, inflation or deflation and monetary policies, fluctuation in the value of the U.S. dollar and foreign currencies, global and regional demand, and the political and economic conditions of major gold and silver producing countries throughout the world. The following table presents the annual high, low, and average afternoon fixingfix prices for gold and silver over the past tenthree years on the London Bullion Market (in U.S. dollars per ounce). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | GOLD PRICES | | SILVER PRICES | | Year | | High | | Low | | Average | | High | | Low | | Average | | 2018 | | 1,355 | | 1,178 | | 1,268 | | 17.52 | | 13.97 | | 15.71 | | 2019 | | 1,546 | | 1,270 | | 1,393 | | 19.31 | | 14.38 | | 16.21 | | 2020 | | 2,067 | | 1,474 | | 1,770 | | 28.89 | | 12.01 | | 20.55 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | GOLD PRICES | | SILVER PRICES | | Year | | High | | Low | | Average | | High | | Low | | Average | | 2021 | | $ | 1,943 | | | $ | 1,684 | | | $ | 1,799 | | | $ | 29.59 | | | $ | 21.53 | | | $ | 25.04 | | | 2022 | | $ | 2,039 | | | $ | 1,628 | | | $ | 1,800 | | | $ | 26.18 | | | $ | 17.77 | | | $ | 21.71 | | | 2023 | | $ | 2,150 | | | $ | 1,907 | | | $ | 1,944 | | | $ | 24.43 | | | $ | 22.00 | | | $ | 23.33 | | | 2024 (through Mar. 12th) | | $ | 2,180 | | | $ | 1,985 | | | $ | 2,046 | | | $ | 24.50 | | | $ | 22.09 | | | $ | 22.98 | |
On March 22, 2021,12, 2024, the afternoon fixingfix price for gold and silver on the London Bullion Market was $1,736$2,161 per ounce and $25.74$24.38 per ounce, respectively. Competition The top 10ten producers of gold comprise approximately one thirdone-quarter of total worldwide mined gold production. We are a developing producergold and silver exploration and development company with a single mine.property, the Hycroft Mine. The Hycroft Mine has a large gold and silver reserves with an expected average annual production of approximately 366,000 gold equivalent ounces, based on a 34-year mine life includedmineral resource as noted in the 2023 Hycroft Technical Report.TRS. We have not completed our engineering studies and we have not fully developed our operationsulfide ore milling and weprocessing studies and therefore, have not established our long-term
production and cost structure. Our costs are expected to be determined by the location, grade and nature of our ore body, processing technologies applied to our ore, and costs including energy, labor and equipment. The metals markets are cyclical, and our ability to maintain our competitive positioncompete in that market over the long-term iswill be based on our ability to develop and cost effectively operate the Hycroft Mine in a safe and environmentally responsible manner. We compete with other mining companies in connection with hiring and retaining qualified employees. There is substantial competition for qualified employees in the mining industry, some of which is with larger companies having substantially greater financial resources than us and a more stable history. As a result, we may have difficulty hiring and retaining qualified employees. Please seeSee Item 1A. Risk Factors —Industry— Industry Related Risks — We faceThe Company faces intense competition in the mining industryrecruitment and retention of qualified employees and contractors, for additional discussion related to our current and potential competition.
Employees At December 31, 2020,2023, we had approximately 24078 employees, of which 22869 were employed at the Hycroft Mine. None of our employees are represented by unions. COVID-19
We have implementedbelieve safety is a core value and support that belief through our philosophy of safe work performance. Our mandatory mine safety and health programs include employee engagement and ownership of safety policies forperformance, accountability, employee and contractor training, risk management, workplace inspection, emergency response, accident investigation, anti-harassment, and program auditing. This integrated approach is essential to ensure that our employees, contractors, and visitors that follow guidelines fromoperate safely. We reported no lost time incidents during the Centeryear ended December 31, 2023, and achieved one million workhours without a lost time incident in the second quarter of 2023. The Hycroft Mine’s total recordable injury frequency rate (“TRIFR”) for Disease Control (CDC)the trailing 12 months, which includes other reportable incidents, is one of the metrics we use to assess safety performance, and it is well below industry averages and significantly below pre-2021 historical levels experienced at the Mine SafetyHycroft Mine. During the year ended 2023, we continued our critical focus on safety, including allocating personnel, resources, workforce time, and Health Administration (MSHA). During 2020, especiallycommunications to operate safely. These actions contributed to maintaining our TRIFR of Nil (0.00) at December 31, 2023 and December 31, 2022. We remain committed to adapting our safety initiatives as necessary to ensure the fourth quarter,well-being of our operations faced certain limitations due to COVID-19 related absences, however the impact did not significantly adversely affect our operations. Please see Item 1A. Risk Factors — Industry Related Risks — The COVID-19 pandemic may adversely impact our business, financial condition,workforce, contractors, and results of operations as well as Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional discussion related to COVID-19.
Government Regulation of Mining-Related Activities Government Regulation Mining operations and exploration activities are subject to various federal, state and local laws and regulations in the United States, which govern prospecting, exploration, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, protection of the environment, mine safety, hazardous substances and other matters. We have obtained or have pending applications for those licenses, permits or other authorizations currently required to conduct our current mining, exploration and other programs. We believe that we are in compliance in all material respects with applicable mining, health, safety and environmental statutes and the regulations passed thereunder in Nevada and at the federal level in the United States. Although we are not aware of any current claims, orders or directions relating to our business with respect to the foregoing laws and regulations, changes to, or more stringent application, interpretation, or enforcement of, such laws and regulations in Nevada, or in jurisdictions where we may operate in the future, could require additional capital expenditures and increased operating and/or reclamation costs, which could adversely impact the profitability levels of our projects. On January 20, 2021, the Department of the Interior, Washington Office, issued order number 3395 (the “Order”) promulgating a suspension of authority for Department Bureaus and Offices to take actions including to take actions in accordance with the National Environmental Policy Act; to approve plans of operation, or to amend existing plans of operation under the General Mining Law of 1872; or any notices to proceed under previous surface use authorizations that will authorize ground-disturbing activities. The suspension will remain in effect for 60 days from January 20, 2021, or until any of its provisions are amended, superseded, or revoked. The Order suspended the authority of the local offices of the Bureau of Land Management (“BLM”) to make decisions or to approve any new ground-disturbing actions under previous decisions related to the Company’s planned operations. At the time of the suspension of authority, the Company had no material proposed actions pending with the local office of the Bureau of Land Management, will proceed with currently approved actions for the duration of the anticipated 60-day suspension of authority, and is not currently aware of any material adverse effects from the suspension of authority based on the duration stated in the Order. The Company may require authorization to proceed with new ground-disturbing activities under previous authorizations prior to proceeding into the sulfide ore bodies planned for 2022, in the event the Order has not been amended, superseded, or revoked.
Environmental Regulation Our mining projects are subject to various federal and state laws and regulations governing protection of the environment. These laws and regulations are continually changing and, in general, are becoming more restrictive. The federal laws and regulations, among other things: •impose strict, joint and several liability on current and former owners and operators of sites and on persons who disposed of or arranged for the disposal of hazardous substances found at such sites (the Comprehensive Environmental Response, Compensation, and Liability Act)Act of 1980, as amended (“CERCLA”)); •govern the generation, treatment, storage and disposal of solid waste and hazardous waste (the Federal Resource Conservation and Recovery Act)Act of 1976, as amended (“RCRA”)); •restrict the emission of air pollutants from many sources, including mining and processing activities (the Clean Air Act)Act of 1970, as amended (the “Clean Air Act”)); •require federal agencies to integrate environmental considerations into their decision-making processes by evaluating the environmental impacts of their proposed actions, including the issuance of permits to mining facilities and assessing alternatives to these actions (the National Environmental Policy Act)Act of 1970, as amended (“NEPA”));
•regulate the use of federal public lands to prevent undue and unnecessary degradation of the public lands (the Federal Land Policy and Management Act of 1976)1976, as amended (the “FLPMA”)); •restrict and control the discharge of pollutants and dredged and fill materials into waters of the United States (the Clean Water Act)Act of 1972, as amended (the “Clean Water Act”)); and •regulate the drilling of subsurface injection wells (the Safe Drinking Water Act of 1974, as amended (the “Safe Drinking Water Act”) and the Underground Injection Control programProgram promulgated thereunder).
We cannot predict at this time what changes, if any, to federal laws or regulations may be adopted or imposed by the new Biden Administration.current governmental administration. At the state level, mining operations in Nevada are regulated by the Nevada Department of Conservation and Natural Resources, Division of Environmental Protection, (the "Division"), which has the authority to implement and enforce many of the federal regulatory programs described above as well as state environmental laws and regulations. Compliance with these and other federal and state laws and regulations could result in delays in obtaining, or failure to obtain, government permits and approvals, delays in beginning or expanding operations, limitations on production levels, incurring additional costs for investigation or cleanup of hazardous substances, payment of fines, penalties or remediation costs for non-compliance, and post-mining closure, reclamation and bonding. It is our policy to conduct business in a way that safeguards our employees, public health and the environment. We believe that our operations are, and will be, conducted in material compliance with applicable laws and regulations. However, our past and future activities in the United States may cause us to be subject to liability under such laws and regulations. For information about the risks to our business related to environmental regulation, see the following risk factors in Item 1A. Risk Factors -– Industry Related Risks: •Our operations are subject toThe Company relies upon numerous governmental permits that are difficult to obtain, and wethe Company may not be able to obtain or renew all of the required permits, we require, or such permits may not be timely obtained or renewed; •Changes in environmental regulations could adversely affect our cost of operations or result in operations delays; •Environmental regulations could require usthe Company to make significant expenditures or expose usthe Company to potential liability;
•Failure to comply with environmental regulations could result in penalties and costs; and •Our explorationCompliance with current and development operations are subjectfuture government regulations may cause the Company to extensive environmental regulations, which could result in the incurrence of additional costs and operational delays.incur significant costs. During 2020the year ended December 31, 2022, the Company received a notice of non-compliance from the closure branch of the Nevada Division of Environmental Protection (“NDEP”) Bureau of Mining Regulation and 2019,Reclamation regarding a historical reclamation matter. As such, the Company has accelerated certain reclamation activities in order to regain compliance. During 2023 and 2022, there were no known material environmental incidents or non-compliance with any applicable environmental regulations on the properties now held by us, except as follows: On March 19, 2019, we executed an Administrative Order of Consent and agreed to a payment of $11,521 to the State of Nevada acting by and through the Division to settle a Finding of Alleged Violation and Order issued November 7, 2018 for non-compliance with the Resource Conservation and Recovery Act requirements to remove hazardous waste within 90 days of accumulation of such waste. Additionally, on December 11, 2019, the Division held an enforcement conference with our management to determine whether the issuance of Notices of Alleged Air Quality Violation Order No 2701 was or was not warranted. The Division issued a formal warning and has indicated that it did not intend to take any further action.incidents. We did not incur material capital expenditures for environmental control facilities during 20202023 and 20192022, and we do not expect to incur any material expenditures in 20212024 for such environmental control facilities. Reclamation We are required to mitigate long-term environmental impacts by amending, backfilling, stabilizing, contouring, re-sloping, and re-vegetating various portions of a site after mining and mineral processing are completed, mitigating potential impacts to surface water and groundwater resources. These reclamation efforts will be conducted in accordance with detailed plans, which must be reviewed and approved by the appropriate regulatory agencies. Our reclamation obligations at the Hycroft Mine are secured by surface management surety bonds that meet the financial assurance requirements of the State of Nevada and the BLM.Bureau of Land Management (“BLM”). Our most recent reclamation cost estimate was approved by the BLM and the State of Nevada in July 2020. AtAs of December 31, 2020,2023, our surface management surety bonds totaled $59.9$58.7 million, of which $58.3 million secures the financial assurance requirements for the Hycroft Mine, $1.0and $0.4 million secures the financial assurance requirements for the adjacent water supply well field and exploration within the project boundary. The Company began performing reclamation activities on its Crofoot leach pad beginning in 2023 and $0.6 million securesexpects to continue the financial assurance requirements for an archaeological mitigation project. Based on the December 31, 2020 estimate, noCrofoot reclamation activities in 2024. The Company also expects to treat and manage solutions in certain ponds beginning in 2024 and continuing through 2026. No additional material reclamation expenditures are expected to be incurred until 2047after mining and themineral processing are completed. If we incur additional long-term environmental impacts from future mining activities, we will likely have additional reclamation work is projectedobligations, as well as additional financial assurance requirements. For our existing obligations, as well as any future obligations we may incur, we may choose to engage in reclamation activities before mining and mineral processing are completed, but these expenses are not anticipated to be completed by 2065.material to the overall reclamation obligation. When we perform reclamation work in the future, the work will be planned to conform to our mining operations and will be required to be documented when completed under our governing permits with the government regulatory agencies. The reclamation obligation would be adjusted accordingly as allowed under current regulations, and the financial assurance requirements would be adjusted to account for the completed reclamation work. If we are required to comply with material unanticipated financial assurance requirements in the future, our financial position could be adversely affected, or our posted financial assurance may
be insufficient. For financial information about our estimated future reclamation costs, refer tosee Note 128 – Asset Retirement Obligation to ourthe Notes to the Consolidated Financial Statements.
Mine Safety and Health Administration Regulations Safety and health is aare core valuevalues, which is why we have mandatory mine safety and health programs that include employee and contractor training, risk management, workplace inspection, emergency response, accident investigation, and program auditing. We consider these programs to be essential at all levels within Hycroft to ensure that our employees, contractors, and visitors only operate in a safe and healthy workplace. Our operations and exploration properties are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977, as amended (the “Mine Act”). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended (the “Dodd-Frank Act”), issuers are required to disclose specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities in periodic reports. MSHA inspects our mines on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. The number of citations and orders charged against mining operations in the U.S., and the dollar penalties assessed for such citations, have generally increased in recent years. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires us to provide acertain mine safety disclosure, which we have done in Part I - – Item 4. Mine Safety DisclosuresDisclosures of this 2023 Form 10-K. Property Interests and Mining Claims Our exploration and development activities are conducted in the State of Nevada. Mineral interests in Nevada may be owned by the United States, the State of Nevada, or private parties. Where prospective mineral properties are held by the United States, mineral rights may be acquired through the location of unpatented mineral claims upon unappropriated federal land. Where prospective mineral properties are owned by the State of Nevada or private parties, some type of property acquisition agreement or access agreement is necessary in order for us to explore or develop such property. Mining claims are subject to the same risk of defective title that is common to all real property interests. Additionally, mining claims are self-initiated and self-maintained and, therefore, possess some unique vulnerabilities not associated with other types of property interests. It is impossible to ascertain the validity of unpatented mining claims solely from an examination of the public real estate records and, therefore, it can be difficult or impossible to confirm that all of the requisite steps have been followed for location and maintenance of a claim. For general information about our mineral properties and mining claims, refer tosee Item 2. Properties. For information about the risks to our business related to our property interests and mining claims, see the following risk factors in Item 1A. Risk Factors -– Industry Related Risks: •There are uncertainties as to title matters in the mining industry. Any defects in such title could cause usthe Company to lose ourits rights in mineral properties and jeopardize our business operations; and •Legislation has been proposed periodically that could, if enacted, significantly affect the cost of our operationsmine development on ourthe Company’s unpatented mining claimsclaims. Technical Report Summaries (“TRS”) and Qualified Persons The scientific and technical information concerning our mineral projects in the 2023 Form 10-K have been reviewed and approved by third-party “qualified persons” under the Modernization Rules, including Ausenco Engineering South USA, Inc. (“Ausenco”), Independent Mining Consultants, Inc, (“IMC”), and WestLand Engineering & Environmental Services, Inc. (“WestLand”). For a description of the key assumptions, parameters and methods used to estimate mineral resources included in the 2023 Form 10-K, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, sociopolitical, marketing or other relevant factors, please review the amount2023 Hycroft TRS incorporated by reference herein. Available Information The Company is a remote first company and does not maintain a corporate headquarters. Our mailing address is PO Box 3030 Winnemucca, Nevada 89446. Our telephone number is (775) 304-0260. Our website is www.hycroftmining.com. We encourage investors to use our website to find information about us. We promptly make available on this website, free of Net Proceeds Mineral Taxcharge, the reports that we payfile or furnish with the SEC, as well as corporate governance information (including our Code of Business Conduct & Ethics and our Code of Conduct and Ethics for Senior Financial Officers). The SEC maintains a website at www.sec.gov that contains annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and other information regarding Hycroft and other issuers that file electronically with the SEC. In addition, paper copies of these documents will be furnished to the Stateany stockholder, upon request, free of Nevada.charge.
ITEM 1A. RISK FACTORS You should carefully review and consider the following risk factors and the other information contained in this 2023 Form 10-K/A. We10-K. Investing in the Company’s common stock or warrants is speculative and involves a high degree of risk due to the nature of the business and the present stage of exploration and advancement of the Company’s mineral properties. The Company may face additional risks and uncertainties that are not presently known, to us, or that weare currently deemdeemed immaterial, which may also impair ourthe Company’s business or financial condition. If any of those risks actually occur, ourthe business, financial condition, and results of operations would suffer. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See also Cautionary Statement Regarding Forward-Looking Statements above.in this 2023 Form 10-K. The following discussion should be read in conjunction with the financial statementsFinancial Statements and notes to the financial statements included herein.Notes. Summary of Risk Factors: The following list provides a summary ourof risk factors discussed in further detail below: Risks related to changes in the Company’s operations at the Hycroft Mine, including: •Risks associated with cessation of mining operations at the Hycroft Mine; •Uncertainties concerning estimates of mineral resources; •Risks relating to a lack of a completed pre-feasibility or feasibility study; and •Risks related to the Company’s ability to finance and establish commercially feasible mining operations. Industry-related risks, including: •Fluctuations in the prices of gold and silver; •Uncertainties concerning estimatesIntense competition within the mining industry for mineral properties, employees, contractors and consultants; •The commercial success of, mineral reserves and mineral resources;risks relating to, the Company’s exploration and development activities; •Uncertainties relatingand risks related to the COVID-19 pandemic;reliance on contractors and consultants; •The intense competition within the mining industry;Availability and cost of equipment, supplies, energy, or commodities; •The inherently hazardous nature of mining activities, including safety and environmental risks; •OurPotential effects of U.S. federal and state governmental regulations, including environmental regulation and permitting requirements; •Uncertainties relating to obtaining, retaining or renewing approvals and permits from governmental regulatory authorities; •Cost of compliance with current and future government regulations, including environmental regulations; •Potential challenges to title in our mineral properties; •Inadequate insurance may not be adequate to cover all risks associated with our business, or cover the replacement costs of our assets or may not be available for some risks; •Potential effects on our operations of U.S. federal and state governmental regulations, including environmental regulation and permitting requirements; •Cost of compliance with current and future government regulations;
•Uncertainties relating to obtaining or retaining approvals and permits from governmental regulatory authorities;
•Potential challenges to title in our mineral properties;
•Risks associated with proposedpotential legislation in Nevada that could significantly increase the cost of mine development on the Company’s unpatented mining claims;
•Risks associated with regulations and pending legislation involving climate change could result in increased costs, or taxation of our operations; andwhich could have a material adverse effect the Company’s business; •Changes to the climate and regulations and pending legislation regarding climate change.change; and •Continued uncertainties relating to the COVID-19 pandemic or other pandemics. Business-related risks, including: •Risks related to our liquidity and going concern considerations; •Risks related to ourthe Company’s ability to raise capital on favorable terms or at all;
•Risks related to the proprietary two-stage heap oxidation and leach process at the Hycroft Mine and estimates of production; •Our ability to achieve our estimated production and sales rates and stay within our estimated operating and production costs and capital expenditure projections;
•Risks related to a decline in our gold and silver production;
•Our ability to successfully eliminate or meaningfully reduce processing and mining constraints; the results of our planned 2021 technical efforts and how the data resulting from such efforts could adversely impact processing technologies applied to our ore, future operations and profitability.
•Risks related to our reliance on one mine with a new process;
•Risks related to our limited experience with a largely untested process of oxidizing and heap leaching sulfide ore;
•Uncertainties and risks related to our reliance on contractors and consultants;
•Availability and cost of equipment, supplies, energy, or commodities;
•The commercial success of, and risks relating to, our development activities;
•Risks related to slope stability;
•Risks related to our substantial indebtedness, including cross acceleration and our ability to generate sufficient cash to service our indebtedness;
•Uncertainties resulting from the possible incurrence of operating and net losses in the future;
•Uncertainties related to our ability to replace and expand our mineral reserves;
•The costs related to our land reclamation requirements;
•The loss of key personnel or ourthe Company’s failure to attract and retain personnel;
•Risks related to technology systemsthe Company’s substantial indebtedness, including operating and security breaches;financial restrictions under existing indebtedness, cross-acceleration and the Company’s ability to generate sufficient cash to service the indebtedness; •Any failureThe costs related to remediate and possibleland reclamation requirements;
•Future litigation as a result ofor similar legal proceedings could have a material weakness in our internal controls over financial reporting;adverse effect on the Company’s business and results of operations; •Risks related to information and operational technology systems, new technologies and security breaches; and •Risks that our principal stockholders will be able to exert significant influence over matters submitted to stockholders for approval. Risks related to ourthe Company’s common stock and warrants, including: •Volatility in the price of ourthe Company’s common stock and warrants; •Potential declines in the valueRisks relating to a potential dilution as a result of our common stock and warrants due to substantial future sales of our common stock and/or warrants;equity offerings; •Risks relating to a short “squeeze” resulting in sudden increases in demand for the Company’s common stock; •Risks relating to decreased liquidity of the Company’s common stock as a result of the reverse stock split; •Risks relating to information published by third parties about the Company that may not be reliable or accurate; •Risks associated with interest rate changes; •Volatility in the price of the Company’s common stock could subject it to securities litigation; •Risks associated with the Company’s current plan not to pay dividends; •Risks associated with future offerings of senior debt or equity securities; •Risks related to a failure to comply with the Nasdaq Stock Market LLC (“Nasdaq”) listing requirements and a potential delisting by Nasdaq; •Risks warrants may expire worthless; •The valuation of our 5-Year Private Warrants could increase the volatility in our net income (loss);Risks that certain warrants are being accounted for as a liability; •Anti–takeover provisions could make a third-party acquisition of usthe Company difficult; and •Risks related to limited access to ourthe Company’s financial information as we havedue to the fact the Company elected to take advantage of the disclosure requirement exemptions granted to emerging growth companies and smaller reporting companies. Risks Related to Changes in the Hycroft Mine’s Operations The Company has mineral resources at the Hycroft Mine, but the mine may not be brought into production. The Company is not currently conducting commercial mining operations at the Hycroft Mine. There is no certainty that the mineral resources estimated at the Hycroft Mine will be mined or, if mined, processed profitably. The Company has no specific plans and cannot currently predict when the Hycroft Mine may be back in production. The commercial viability of the Hycroft Mine is dependent on many factors, including metal prices, the availability of and ability to raise capital for development, government policy and regulation and environmental protection, which are beyond the Company’s control. The Company may not generate commercial-scale revenues until the Hycroft Mine is back in production. The figures for the Company’s mineral resources are estimates based on interpretation and assumptions and the Hycroft Mine may yield less mineral production or less profit under actual conditions than is currently estimated. Unless otherwise indicated, mineral resource figures in the Company’s filings with the SEC, press releases, and other public statements made from time to time are based upon estimates made by the Company’s personnel and independent geologists. These estimates are imprecise and depend upon geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be inaccurate. There can be no assurance that mineral resources or other mineralization figures will be accurate or that this mineralization could be mined or processed profitably. Because the Company has not completed a feasibility study or recommenced commercial production at the Hycroft Mine, mineral resource estimates may require adjustments or downward revisions based upon further exploration or advancement work or actual production experience. In addition, the grade of ore ultimately mined, if any, may differ from that indicated by drilling results. There can be no assurance that recovery of minerals in small-scale tests will be duplicated in larger-scale tests under on-site conditions or in production scale. Until mineral resources are mined and processed, the quantity of ore and grades must be considered as an estimate only. In addition, the quantity of mineral resources may vary depending on metal prices, which largely determine whether mineral resources are classified as ore (economic to mine) or waste (uneconomic to mine). Current mineral resource estimates were calculated using sales prices of $1,900 per ounce of gold price and $24.50 per ounce of silver. A material decline in the current price of gold or silver or material changes in processing methods or cost assumptions could require a reduction in mineral
resource estimates. Any material reductions in estimates of mineral resources, or of the Company’s ability to upgrade these mineral resources to mineral reserves and extract these mineral resources, could have a material adverse effect on the Company’s prospects, and restrict its ability to successfully implement strategies for long-term growth. In addition, the Company cannot provide assurances that gold and silver recoveries experienced in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. The Company has not completed a feasibility study for the Hycroft Mine. There are no assurances future advancement activities by the Company, if any, will lead to a favorable feasibility study or profitable mining operations. The Company completed and issued the 2023 Hycroft TRS, which replaced the 2022 Hycroft TRS. The 2023 Hycroft TRS provides an initial assessment of the mineral resource estimate and is not a feasibility study for the Hycroft Mine. Typically, a company will not make a production decision until it has completed a feasibility study. There is no certainty that a feasibility study for the Hycroft Mine will be completed or, if completed, that it will result in sufficiently favorable estimates of the economic viability of the Hycroft Mine to justify a construction decision. The Company may not be able to successfully establish mining operations or profitably produce precious metals. The Company currently has no commercial mining operations or sustaining revenue from the exploration, development and care and maintenance operations currently conducted at the Hycroft Mine. Mineral exploration and advancement involve a high degree of risk and few properties that are explored are ultimately developed into producing mines. The future advancement of the Hycroft Mine will require obtaining permits and financing and the construction and operation of the mine, processing plants, and related infrastructure. The Company’s ability to establish mining operations or profitably produce precious metals from the Hycroft Mine will be affected by: •timing and cost, which can be considerable, of the construction of additional mining and processing facilities; •availability and costs of skilled labor and mining equipment; •availability and cost of appropriate refining arrangements; •necessity to obtain additional environmental and other governmental approvals and permits, and the timing of those approvals and permits; •availability of funds to finance equipment purchases, construction, and advancement activities; •management of an increased workforce and coordination of contractors; •potential opposition from non-governmental organizations, environmental groups, or local groups, which may delay or prevent advancement activities; and •potential increases in construction and operating costs due to changes in the cost of fuel, power, labor, supplies and foreign exchange rates. It is common in new mining operations to experience unexpected problems and delays during advancement, construction, start-up commissioning, and transition to commercial operations. In addition, delays in the commencement of mineral production often occur. Accordingly, there are no assurances that, if the Company decides to initiate construction or mining activities, that it will be able to successfully establish mining operations or profitably produce gold and silver at the Hycroft Mine. Industry-Related Risks The market prices of gold and silver are volatile. A decline in gold andor silver prices could result in decreased revenues, decreased net income, increased losses, and decreased cash inflows which may negatively affect ourthe business. Gold and silver are commodities. TheirCommodity prices fluctuate and are affected by many factors beyond ourthe Company’s control, including interest rates, expectations regarding inflation, speculation, currency values, central bank activities, governmental decisions regarding the disposal of precious metals stockpiles, global and regional demand and production, political and economic conditions and other factors. The prices of gold and silver, as quoted by The London Bullion Market Association on December 31, 20202023 and December 31, 2019,2022, were $1,888$2,062.40 and $1,515$1,813.75 per ounce for gold, respectively, and $26.49$23.79 and $18.04$23.945 per ounce for silver, respectively. The prices of gold and silver may decline in the future. A substantial or extended decline in gold or silver prices would adversely impact ourthe Company’s financial position, revenues, net income and cash flows, particularly in light of our current strategy of not engaging in hedging transactions with respect to gold or silver.position. In addition, sustained lower gold or silver prices may:may materially adversely affect the Company’s business, including: •reduce revenue potential due to cessation of the mining of deposits,halting, delaying, modifying, or portions of deposits, that have become uneconomic at the then-prevailing gold or silver price; •reduce or eliminate the profit, if any, that we currently expect from mining operations;
•halt, delay, modify, or cancelcanceling plans for the mining of oxide, transitional, and sulfide ores or the development of new and existing projects;
•Table of Contentsmake it more difficult for us to satisfy and/or service our debt obligations;•reducereducing existing mineral reservesresources by removing oresore from mineral reservesresources that can no longer be economically processed at prevailing prices; and •cause uscausing the Company to recognize an impairment to the carrying values of its long-lived assets. Mineral reserve and mineral resource calculations are estimates only and are subject to uncertainty due to factors including metal prices, inherent variability of the ore and recoverability of metal in the mining process.
The calculation of mineral reserves, mineral resources and grades are estimates and depend upon geological interpretation and statistical inferences or assumptions drawn from drilling and sampling analysis, which may prove to be unpredictable. There is a degree of uncertainty attributable to the calculation of mineral reserves and mineral resources, and corresponding grades. Until mineral reserves and mineral resources are actually mined and processed, the quantity of ore and grades must be considered as an estimate only. In addition, the quantity of mineral reserves and mineral resources may vary depending on metal prices, which largely determine whether mineral reserves and mineral resources are classified as ore (economic to mine) or waste (uneconomic to mine). A decline in metal prices may result in previously reported mineral reserves (ore) becoming uneconomic to mine (waste). Current mineral reserve estimates were calculated using sales prices of $1,200 per ounce of gold price and $16.50 per ounce of silver. A material decline in the current price of gold or silver or material changes in our processing methods could require a reduction in our mineral reserve estimates. Any material change in the quantity of mineral reserves, mineral resources, mineralization, grade or stripping ratio may affect the economic viability of our properties. In addition, we can provide no assurance that gold and silver recoveries experienced in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. The COVID-19 pandemic may adversely impact our business, financial condition, and results of operations.
The COVID-19 global pandemic and efforts to reduce its spread have led to a significant decline of economic activity and significant disruption and volatility in global markets. An outbreak could adversely affect our operations if significant portions of our workforce are unable to work or travel effectively for a prolonged period because of government-mandated quarantines, closures, or other restrictions, then our business and financial operations will be significantly impacted and could result in a temporary shutdown of the Hycroft Mine. The continued spread of coronavirus without any impact from effective vaccines or therapeutic treatments may cause further financial instability, and disruptions to our supply chain, which could increase supply costs or prevent us from procuring the supplies necessary to operate the Hycroft Mine. We cannot at this time predict the duration of the coronavirus pandemic or the impact of government regulations that might be imposed in response of the pandemic; however, the coronavirus pandemic may have a material adverse effect on our business, financial position, results of operations and cash flows.
We faceCompany faces intense competition in the mining industry.recruitment and retention of qualified employees and contractors.
The mining industry is intensely competitive some of which is withfor employees and contractors and includes several large established mining companies with substantial mining capabilities and with greater financial and technical resources than ours. We competethe Company’s. The Company competes with other mining companies in the recruitment and retention of qualified managerial and technical employees and in acquiring attractive mining claims.as well as contractors. If we are unable to successfully attract and retain qualified employees ourand contractors, the Company’s exploration and development programs and/or our operations may be slowed down or suspended, which may materially adversely impact our development,the Company’s financial condition and results of operations. The Company cannot be certain that future exploration and development activities will be commercially successful. Substantial expenditures are required to construct and operate the Hycroft Mine, including additional equipment and infrastructure that is typically seen in milling and processing operations to allow for extraction of gold and silver from the sulfide mineral resource, to further develop the Hycroft Mine to establish mineral reserves and identify new mineral resources through exploration drilling and analysis. In 2024, the Company expects to continue to advance its evaluation reflected in the 2023 Hycroft TRS. In conjunction with the 2023 Hycroft TRS, the Company intends to complete additional exploration drilling, focusing on higher grade opportunities, conducting trade-off studies using the results from the 2022-2023 drill program and variability test work program and conduct alternatives analyses. The Company cannot provide any assurance that an economic process can be developed for the sulfide mineral resource using POX or other similar sulfide extraction processes, that any mineral resources discovered will be in sufficient quantities and grades to justify commercial operations or that the funds required for development can be obtained on a timely or economic basis. Several factors, including costs, actual mineralization, consistency and reliability of ore grades, and commodity and reagent quantities and prices, affect successful project development. The efficient operation of processing facilities, the existence of competent operational management, as well as the availability and reliability of appropriately skilled and experienced consultants also can affect successful project development. The Company can provide no assurance that the exploration, development and advancement of the Hycroft Mine sulfide processing operations will result in economically viable mining operations. The Company’s reliance on third-party contractors and consultants to conduct exploration and development projects exposes the Company to risks. In connection with the exploration and development of the Hycroft Mine, the Company contracts and engages third-party contractors and consultants to assist with aspects of the project. As a result, the Company is subject to a number of risks, some of which are outside its control, including: •negotiating agreements with contractors and consultants on acceptable terms; •the inability to replace a contractor or consultant and their operating equipment in the event that either party terminates the agreement; •reduced control over those aspects of exploration or development operations that are the responsibility of the contractor or consultant; •failure of a contractor or consultant to perform under their agreement or disputes relative to their performance; •interruption of exploration or development operations or increased costs in the event that a contractor or consultant ceases their business due to insolvency or other unforeseen events; •failure of a contractor or consultant to comply with applicable legal and regulatory requirements, to the extent they are responsible for such compliance; and •problems of a contractor or consultant with managing their workforce, labor unrest or other employment issues. In addition, the Company may incur liability to third parties as a result of the actions of contractors or consultants. The occurrence of one or more of these risks could increase the Company’s costs, interrupt or delay exploration or development activities or the ability to access its mineral resources, and materially adversely affect the Company’s liquidity, results of operations and financial position. A shortage of equipment and supplies and/or the time it takes such items to arrive at the Hycroft Mine could adversely affect the Company’s ability to operate.
The Company is dependent on various supplies and equipment to engage in exploration and development activities. The shortage of supplies, equipment, and parts and/or the time it takes such items to arrive at the Hycroft Mine could have a material adverse effect on the Company’s ability to explore and develop the Hycroft Mine. Such shortages could also result in increased costs and cause delays in exploration and development projects. Mining, exploration, development and processing operations pose inherent risks and costs that may negatively impact ourthe Company’s business. Mining, exploration, development and processing operations involve many hazards and uncertainties, including, among others: •metallurgical or other processing problems; •ground or slope failures; •industrial accidents; •unusual and unexpected rock formations or water conditions; •environmental contamination or leakage; •flooding and periodic interruptions due to inclement or hazardous weather conditions or other acts of nature; •fires; •seismic activity; •organized labor disputes or work slow-downs or civil disturbances, including road closures or blockades;supply and transportation interruptions; •pandemics adversely affecting the availability of workforces and supplies; •mechanical equipment failure and facility performance problems; and •the availability of skilled labor, critical materials, equipment, reagents, and skilled labor.consumable items. These occurrences could result in damage to, or destruction of, ourthe Company’s properties or production facilities, personal injury or death, environmental damage, delays in future mining or processing, increased future production costs, long-lived asset write downs,impairments, monetary losses and legal liability, any of which could have a material adverse effect on ourfuture exploration and development plans, the Company’s ability to raise additional capital, and/or the Company’s financial condition, results of operations and financial condition and adversely affect our projected development and production estimates.
Our insurance may not cover all of the risks associated with our business.
The mining business is subject to risks and hazards, including, but not limited to, construction risks, environmental hazards, industrial accidents, the encountering of unusual or unexpected geological formations, slide-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or destruction of, mineral properties mining equipment or production facilities, personal injury or death, environmental damage, reduced production and delays in mining, asset write-downs, monetary losses and possible legal liability. Insurance fully covering many of these risks is not generally available to us and if it is, we may elect not to obtain it because of the high premium costs or commercial impracticality. We do not currently carry business interruption insurance, but may obtain such insurance in the future. Any liabilities incurred for these risks and hazards could be significant and could materially and adversely affect our results of operations, cash flows and financial condition.liquidity.
Environmental regulations could require usthe Company to make significant expenditures or expose usthe Company to potential liability. To the extent we becomethe Company becomes subject to environmental liabilities, the payment of such liabilities, or the costs that we may incur,be incurred, including costs to remedy environmental pollution, would reduce funds otherwise available to usthe Company and could have a material adverse effect on ourthe Company’s financial condition, results of operations, and liquidity. If we are unable to fully remedy an environmental violation or release of hazardous substances, wethe Company might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy or corrective action. The environmental standards that may ultimately be imposed at a mine site can vary and may impact the cost of remediation.remediation costs. Actual remedialremediation costs may exceed the financial accruals that have been made for such remediation. Additionally, the timing of the remedial costs may be materially different from the current remediation plan. The potential exposure may be significant and could have ana material adverse effect on ourthe Company’s financial condition and results of operations. Moreover, governmental authorities and private parties may bring lawsuits based upon damage to property or natural resources and injury to persons resulting from the environmental, health and safety impacts of ourthe Company’s past and current operations, which could lead to the imposition of substantial fines, remediation costs, penalties, injunctive relief and other civil and criminal sanctions. Substantial costs and liabilities, including those required to restore the environment after the closure of mines, are inherent in ourmining operations. WeThe Company cannot provide any assurance that any such law, regulation, enforcement or private claim will not have a material negative effect on ourthe Company’s business, financial condition or results of operations. OurThe Company relies upon numerous governmental permits that are difficult to obtain, and the Company may not be able to obtain or renew all of the required permits, or such permits may not be timely obtained or renewed.
In the ordinary course of business, the Company is required to obtain and renew governmental permits for the current limited operations at the Hycroft Mine. Additional governmental permits are subjectneeded to extensiveaccomplish the long-term plans to mine sulfide ores under plans yet to be developed. Obtaining or renewing the necessary governmental permits is a complex and time-consuming process involving costly undertakings by the Company. The duration and success of efforts to obtain and renew
permits are contingent upon many variables not within the Company’s control, including the interpretation of applicable requirements implemented by the permitting authority and intervention by third parties in any required environmental review. The Company may be unable to obtain or renew necessary permits on a timely basis or at all, and the cost to obtain or renew permits may exceed the Company’s estimates. Failure to comply with permit terms may result in injunctions, fines, suspension or revocation of permits and other penalties. The Company can provide no assurance that it has been, or will at all times be, in full compliance with all of the terms of its permits or that the Company has all required permits. The costs and delays associated with compliance with these permits and with the permitting process could alter all or a portion of any mine plan proposed in the future, delay or stop the Company from proceeding with the development of the Hycroft Mine or increase the costs of development or production, any or all of which may materially adversely affect the Company’s business, prospects, results of operations, financial condition and liquidity. Failure to comply with environmental regulations which could result in operational delays, penalties and costs. All phases of ourWhile the Company is not conducting active mining operations at the Hycroft Mine, the facilities and prior operations have been and are, and the Company’s future development plans may continue to be, subject to extensive federal and state environmental regulation, including those enacted under the following laws:
•Comprehensive Environmental Response, Compensation, and Liability Act;CERCLA; •Resource Conservation and Recovery Act;RCRA; •Clean Air Act; •National Environmental Policy Act;NEPA; •Clean Water Act; •Safe Drinking Water Act; •Federal Land Policy and Land Management Act;FLPMA; and •Bald and Golden Eagle Protection Act;Act of 1940, as amended. Additional regulatory authorities may also have or have had jurisdiction over some of ourthe Company’s operations and mining projects including the Environmental Protection Agency, the Nevada Division of Environmental Protection,NDEP, the U.S. Fish and Wildlife Service, BLM, and the Nevada Department of Wildlife.
These environmental regulations require usthe Company to obtain various operating permits, approvals and licenses and also impose standards and controls relating to development and production activities. For instance, we arethe Company is required to hold a Nevada Reclamation Permit with respect to the Hycroft Mine. This permit mandates concurrent and post-mining reclamation of mines and requires the posting of reclamation bonds sufficient to guarantee the cost of mine reclamation. Changes to the amount required to be posted for reclamation bonds for our operations at the Hycroft Mine could materially affect ourthe Company’s financial position, results of operations, cash flows and liquidity following consummation of the business combination.liquidity. Also, the U.S. Fish and Wildlife Service may designate critical habitat and suitable habitat areas it believes are necessary for the survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material land-use restrictions to land use and may materially delay or prohibit land access for our development. For example, wethe Company had to obtain certain permits associated with mining in the area of an eagle habitat. Failure to obtain such required permits or failure to comply with federal and state regulations could also result in delays in beginning or expanding exploration, future operations, incurring additional costs for investigation or cleanup of hazardous substances, payment of penalties for non-compliance or discharge of pollutants, and post-mining closure, reclamation, and bonding, all of which could have a material adverse impact on ourthe Company’s financial performance, results of operations, and liquidity. Compliance with current and future government regulations may cause usthe Company to incur significant costs. OurMining operations are subject to extensive federal and state legislation governing matters such as mine safety, occupational health, labor standards, prospecting, exploration, production, exports, toxic and hazardous substances, explosives, management of natural resources, land use, water use, air emissions, waste disposal, environmental review, and taxes. ComplianceWhile the Company has ceased mining operations at the Hycroft Mine, continued compliance with thisthese regulations and other legislation relating to regulation obligations concerning the Hycroft Mine and its future exploration and development could require us to make significant financial outlays.outlays to comply with these laws. The enactment of new legislation or more stringent enforcement of current legislation may also increase these costs, which could have a negative effect on ourmaterially and negatively affect the Company’s financial position, results of operations, and liquidity. We cannot predict at this time what changes, if any, to federal laws or regulations may be adopted or imposed by the new Biden Administration. We cannotThe Company can provide anyno assurances that weit will be able to adapt to these regulatory developments on a timely or cost-effective basis. Violations of these laws, regulations, and other regulatory requirements could lead to substantial fines, penalties or other sanctions, including possible shutdown of the Hycroft Mine or future operations, as applicable.
Changes in environmental regulations could adversely affect our cost of operations or result in operational delays.
The regulatory environment in which we operate is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. New environmental laws and regulations or changes in existing environmental laws and regulations could have a negative effect on exploration activities, operations, production levels and methods of production.
We cannot predict at this time what changes, if any, to federal laws or regulations may be adopted or imposed by the new Biden Administration. We cannot provide any assurance that future changes in environmental laws and regulations will not adversely affect our current operations or future projects. Any changes to these laws and regulations could have an adverse impact on our financial performance and results of operations by, for example, requiring changes to operating constraints, technical criteria, fees or financial assurance requirements.
Our operations are subject to numerous governmental permits that are difficult to obtain and we may not be able to obtain or renew all of the permits we require, or such permits may not be timely obtained or renewed.
In the ordinary course of business we are required to obtain and renew governmental permits for our operations, including in connection with our plans for heap leaching our sulfide ore at the Hycroft Mine. We will also need additional governmental permits to accomplish our long-term plans to mine sulfide ores, including without limitation, permits to allow construction of additional leach pad space. Obtaining or renewing the necessary governmental permits is a complex and time-consuming process involving costly undertakings by us. The duration and success of our efforts to obtain and renew permits are contingent upon many variables not within our control, including the interpretation of applicable requirements implemented by the permitting authority and intervention by third parties in any required environmental review. We may not be able to obtain or renew permits that are necessary to our operations on a timely basis or at all, and the cost to obtain or renew permits may exceed our estimates. Failure to comply with the terms of our permits may result in injunctions, fines, suspension or revocation of permits and other penalties. We can provide no assurance that we have been, or will at all times be, in full compliance with all of the terms of our permits or that we have all required permits. The costs and delays associated with compliance with these permits and with the permitting process could alter all or a portion of our life of mine plan, delay or stop us from proceeding with the operation or development of the Hycroft Mine or increase the costs of development or production, any or all of which may materially adversely affect our business, results of operations, financial condition and liquidity.operations.
There are uncertainties as to title matters in the mining industry. Any defects in such title could cause usthe Company to lose ourits rights in mineral properties and jeopardize our business operations.the business. Our mineral properties consistThe Hycroft Mine consists of private mineral rights, leases covering private lands, leases of patented mining claims, and unpatented mining claims. Areas of the Hycroft Mine are unpatented mining claims located on lands administered by the BLM Nevada State office to which we havethe Company has only possessory title. Because title to unpatented mining claims is subject to inherent uncertainties, it is difficult to determine conclusively ownership of such claims. These uncertainties relate to such things as sufficiency of mineral discovery, proper location and posting and marking of boundaries, and possible conflicts with other claims not determinable from descriptions of record. We believeThe Company believes a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, and this uncertainty is inherent in the mining industry.
The present status of ourthe Company’s unpatented mining claims located on public lands allows usthe Company the right to mine and remove valuable minerals, such as precious and base metals, from the claims conditioned upon applicable environmental reviews and permitting programs. We also areThe Company is generally allowed to use the surface of the land solely for purposes related to mining and processing the mineral-bearing ores. However, legal ownership of the land remains with the United States. We remainThe Company remains at risk thatof the mining claims may bebeing forfeited either to the United States or to rival private claimants due to failure to comply with statutory requirements. Prior toBefore 1994, a mining claim locator who was able to prove the discovery of valuable, locatable minerals on a mining claim and to meet all other applicable federal and state requirements and procedures pertaining to the location and maintenance of federal unpatented mining claims had the right to prosecute a patent application to secure fee title to the mining claim from the Federal government. TheHowever, the right to pursue a patent however, has been subject to a moratorium since October 1994 through federal legislation restricting the BLM from accepting any new mineral patent applications. If we dothe Company does not obtain fee title to ourits unpatented mining claims, we can provide no assurancethe Company cannot assure that weit will be able to obtain compensation in connection with the forfeiture of such claims. There may be challenges to title to the mineral properties in which we holdthe Company holds a material interest. If there are title defects with respect toconcerning any properties, we mightthe Company may be required to compensate other persons or perhaps reduce ourits interest in the affected property. Also, in any such case, the investigation and resolution of title issues would divert our management’s time from ongoing productionbusiness operations. The Company’s insurance may not cover all of the risks associated with the business. The mining industry is subject to risks and development programs.hazards, including, but not limited to, environmental hazards, industrial accidents, the encountering of unusual or unexpected geological formations, slide-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. These occurrences could result in damage to, or destruction of, mineral properties, equipment or facilities, personal injury or death, environmental damage, long-lived asset impairments, monetary losses, and possible legal liability. Insurance fully covering many of these risks is not generally available to the Company and if it is, the Company may elect not to obtain it because of the high premium costs or commercial impracticality. Any liabilities incurred for these risks and hazards could be significant and could materially and adversely affect the Company’s results of operations, cash flows, and financial condition. Legislation has been proposed periodically that could, if enacted, significantly affect the cost of our operationsmine development on ourthe Company’s unpatented mining claims or the amount of Net Proceeds of Mineral Tax we pay to the State of Nevada.claims. Members of the U.S. Congress have periodically introduced bills whichthat would supplant or alter the provisions of the Mining Law of 1872. Such bills have proposed, among other things, to either eliminate or greatly limit the right to a mineral patent and to impose a federal royalty on production from unpatented mining claims. Such proposed legislation could change the cost of holding unpatented mining claims and could significantly impact ourthe Company’s ability to develop mineralized material on unpatented mining claims. A majority of ourthe Company’s mining claims at the Hycroft Mine are unpatented claims. Although we cannotthe Company is unable to predict what legislated royalties might be, the enactment of these proposed bills could adversely affect the potential for development of ourthe Company’s unpatented mining claims and the economics of our existing operating minesany future mine operations on federal unpatented mining claims. Passage of such legislation could materially adversely affect ourthe Company’s financial performance and results of operations. We are subject to Net Proceeds of Mineral Tax, which we refer to as “NPT,” to the State of Nevada on up to 5% of net proceeds generated from our Hycroft Mine. Net proceeds are calculated as the excess of gross yield over direct costs. Gross yield is determined as the value received when minerals are sold, exchanged for anything of value or removed from the state. Direct costs generally include the costs to develop, extract, produce, transport and refine minerals. From time to time Nevada legislators introduce bills which aim to increase the amount of NPT mining companies operating in the state pay. As of the date of this filing, there are two proposed amendments to the NPT that would change the calculation of the NPT. Both of the amendments increase the rate of the tax, but one of the amendments would base NPT on gross proceeds instead of net proceeds. If legislation is passed that increases the NPT we pay to the State of Nevada, our business, results of operations, and cash flows could be negatively impacted.
Regulations and pending legislation governing issues involving climate change could result in increased operating costs, which could have a material adverse effect on ourthe Company’s business. A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate change interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change could impose significantmaterially increase the Company’s costs, on us and ourthe costs of its suppliers, for further exploration and development of the Hycroft Mine, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations. Any adopted future climate change regulations could also negatively impact ourthe Company’s ability to compete with companies situated in areas not subject to such
regulations. Given the emotion, political significance and uncertainty around the impact of climate change and how it should be dealt with, wethe Company cannot predict how legislation and regulation will affect ourits financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness, and any adverse publicity in the global marketplace about potential impacts on climate change by usthe Company or other companies in ourthe mining industry could harm our reputation.cause reputational harm. Climate change could have an adverse impact on ourthe Company’s cost of operations. The potential physical impacts of climate change on ourthe Company’s development activities or future operations are highly uncertain and would be particular to the areaareas in which we operate.the Company operates. These climate changes may include changes in rainfall and storm patterns and intensities, water shortages, and changing temperatures. These changes in climate could materially adversely affect our mining operations, including by affecting the moisture levels and pH of ore on our leach pads, increasecould materially and adversely affect the cost of production atto construct and operate the Hycroft Mine, and materially and adversely affect the Company’s financial performance of ourand operations. Business-Related Risks
Due to uncertainty surroundingThe ongoing effects of the coronavirus pandemic or other pandemics may adversely impact our ability to achieve sales, production, cost and other operating targets, as well as our ability to consummate a future financing transaction to provide additional working capital and to fund capital projects in the future, substantial doubt exists as to our ability to continue as a going concern. Our plans to alleviate the substantial doubt about our ability to continue as a going concern may not be successful, and we may be forced to limit our business activities or be unable to continue as a going concern, which would have a material adverse effect on our results of operations and financial condition.
The financial statementseffects of the CompanyCOVID-19 pandemic have been prepared on a “going concern” basis, which contemplateslargely abated. However, the presumed continuationremaining ongoing effects are uncertain. The pandemic could begin worsening again in the U.S. and elsewhere, creating renewed uncertainty. The worsening of the COVID-19 pandemic could continue to, and possible future similar epidemics or other possible pandemics could also, materially and negatively impact the Company’s business, including without limitation, employee health, workforce productivity, insurance premiums, ability to travel, the availability of industry experts and personnel, restrictions or delays to current and future drill and work programs and/or the timing to process drilling and other metallurgical testing, and other factors that will depend on future developments beyond the Company’s control, which may have a material and adverse effect on its business, financial condition and results of operations. Additionally, the Company’s financial condition and results could be adversely and materially impacted due to pandemic closures or restrictions requested or mandated by governmental authorities, disruption to supply chains, and credit losses when vendors or counterparties fail to satisfy their obligations to the Company. Business-Related Risks The Company even though eventswill need to raise additional capital, but such capital may not be available on favorable terms or at all. The exploration and conditions exist that, when considered individually ordevelopment of the Hycroft Mine for mining and processing mineral resources will require significant investment. Failure to obtain sufficient financing may result in the aggregate, raise substantial doubt about our ability to continue as a going concern because it is probable that, without additional capital injections, we may be unable to meet our obligations as they become due within one year afterdelay or indefinite postponement of exploration, development, or production at the date of this report. We restarted operationsHycroft Mine. The covenants in 2019 and have incurred net losses, negative operating cash flow and required cash flow from financing to meet our operating and capital spending needs for both the years ended December 31, 2020 and 2019. Based on our internal cash flow projection models, we currently forecast we will likely require additional cash from financing activities in less than 12 months from the issuance of this report to meet our operating and investing requirements and future obligations as they become due. Our current cash flow projection models include the cash payments required pursuant to the Sprott Credit Agreement which are currently estimated at $9.0 million overcould significantly limit the next 12 months including interest payments.
OurCompany’s ability to continue as a going concern is contingent upon increasing sales, by achieving higher cost-effective operating tonnagessecure new or additional credit facilities, increase the cost of borrowing, and recovery rates as planned as well securingmake it difficult or impossible to raise additional fundingcapital on favorable terms or at all.
The Company’s primary future cash requirements for 2024 will be to fund working capital needs, capital and project expenditures, satisfying debt service required under the Sprott Credit Agreement, and other corporate expenses. Youexpenses so the Company can continue to develop the Hycroft Mine by conducting targeted exploration drilling and completing the necessary technical studies to determine the likely timeline to bring the sulfide mineral resources into commercial-scale operation. As of December 31, 2023, the Company had unrestricted cash of $106.2 million. Stockholders are cautioned that management’s expectations regarding ourthe Company’s liquidity and capital resources are based on a number of assumptions that we believe are believed to be reasonable but could prove to be incorrect. For example, ourthe Company’s expectations are based on assumptions regarding commodity prices, gold and silver recovery percentages and rates, production estimates, timing of oxidation, anticipated costs and other factors that are subject to a number of risks, many of which are beyond ourthe Company’s control. If ourthe Company’s assumptions prove to be incorrect, weit may require additional financing sooner than we expectexpected to continue to operate ourthe business, which may not be available on favorable terms or at all and which could have a material adverse effect on ourthe Company’s results of operations, financial condition, and liquidity. WeIf the Company loses key personnel or cannot attract and retain additional personnel, the Company may needbe unable to raise additional capital, but such capital may not be available on favorable terms or at all.explore and develop the business.
The continuing operation of our Hycroft Mine and futureCompany’s development for mining and processing our mineral reserves and mineral resources will require significant investment. Failure to obtain sufficient financing may result in the delay or indefinite postponementfuture will be highly dependent on the efforts of development or production atkey management employees, specifically Diane Garrett, its President and Chief Executive Officer; Stanton Rideout, its Executive Vice President and Chief Financial Officer; and other key employees the Hycroft Mine. The covenantsCompany may hire in the Sprott Credit Agreement could significantly limit our ability to secure new or additional credit facilities, increase our cost of borrowing, and make it difficult or impossible to raise additional capital on favorable terms or at all. Our primary future cash requirements for 2021 will be to fund capital projects, leases for mining equipment, technical work, augment or recommission process plant equipment, and pay for corporate costs including debt service requirements under
the Sprott Credit Agreement. As of December 31, 2020, we had cash of $56.4 million. Using current metal prices and our estimates of future metal sales volumes and costs, we currently expect to fund negative net cash flows from cash on hand during the fiscal year ending December 31, 2021. Future development of the Hycroft Mine may require additional capital to fund expenditures including refurbishing and commissioning the North Merrill-Crowe plant, additional leach pad expansions, additional process plant operations, mining fleet additions, material handling equipment, a rail spur, and working capital. You are cautioned that management’s expectations regarding our liquidity and capital resources are based on a number of assumptions that we believe are reasonable but could prove to be incorrect. For example, our expectations are based on assumptions regarding commodity prices, gold and silver recovery percentages and rates, production estimates, anticipated costs and other factors that are subject to a number of risks, many of which are beyond our control. If our assumptions prove to be incorrect, we may require additional financing sooner than we expect to continue to operate our business, which may not be available on favorable terms or at all and which could have a material adverse effect on our results of operations, financial condition and liquidity.
future. The estimation of the ultimate recovery of gold and silver from the Hycroft Mine, is based on standard industry sampling and estimating methods, which are subjective. Our results of operations, liquidity, and financial position may be negatively impacted if actual recoveries of gold and silver are lower than estimations. We use several integrated steps to estimate the metal content of ore placed on the leach pad and the ultimate recovery of gold and silver based on the process projected to be applied to the various ore types. Although we refine our estimates as appropriate at each step in the process, the final amounts are not determined until a third-party smelter refines the doré or metal-laden carbon and determines the final ounces of gold and silver available for sale. We then review this end result and reconcile it to the estimates we developed and used throughout the production process. Based on this review, we adjust our estimation procedures when appropriate. Due to the complexity of the estimation process and the number of steps involved, among other things, actual recoveries can vary from estimates, and the amount of the variation could be significant and could have a material adverse impact on our financial condition, results of operations and liquidity.
There is only limited experience of recovering gold and silver from sulfide ores using a proprietary two-stage heap oxidation and leach process and we may not be able to economically recover gold and silver.
The Hycroft Technical Report reflects extracting gold and silver from transitional and sulfide ores using a proprietary two-stage heap oxidation and leach process on transitional and sulfide ores using soda ash to manage pH and alkalinity during the oxidation process. However, the economic parameters described in the Hycroft Technical Report include a number of assumptions and estimates that could prove to be incorrect. Additionally, this proprietary two-stage heap oxidation and leach process to oxidize transitional and sulfide ores before heap leaching to extract gold and silver is a new and relatively untested process and it has not been widely accepted as a viable process. We cannot provide any assurance that the development and advancement of the Hycroft Mine using our proprietary two-stage heap and leach process will result in economically viable mining operations, yield new mineral reserves or mineral resources, enable us to convert other mineralized material (included within mineral resources identified by the Hycroft Technical Report), or be implemented on an economic and profitable basis.
Cost estimates of operating our Hycroft Mine are uncertain, which may adversely affect our expected production and profitability.
The expenditures to implement our proprietary two-stage heap oxidation and leach process, and access our sulfide ore, are considerable and changes in processing requirements, costs, construction schedules, commodity prices and other factors can adversely affect project economics and expected production and profitability. There are a number of factors that can affect process requirements, costs and construction schedules and result in our assumptions and estimates about the anticipated benefits of a project being incorrect, including, among others:
•changes in input commodity prices and labor costs;
•process requirements vary by mineralogy and ore types;
•changes in estimates of prices and quantities of required reagents for processing, including cyanide, soda ash and lime;
•recovery rates of gold and silver from ore;
•availability and terms of financing;
•availability of labor, energy, transportation, equipment, and infrastructure;
•changes in anticipated tonnage, grade and metallurgical characteristics of the ore to be mined and processed;
•difficulty of estimating construction costs over a period of years;
•delays in completing any environmental review or in obtaining environmental or other governmental permits;
•weather and severe climate impacts; and
•potential delays related to civil disturbances or social and community issues.
We have previously recovered gold and silver from oxide and transitional ores at the Hycroft Mine through our heap leach operations. In connection with our restarted mining operations, in addition to mining oxide ore, the Hycroft Technical Report reflects mining gold and silver sulfide ore using a modified heap leach process, in which soda ash is used in a two-stage heap oxidation and leach process. However, it is important to note that the economic parameters described in a feasibility study, such as the Hycroft Technical Report, include a number of assumptions and estimates that could prove to be incorrect. We use feasibility studies to make a reasoned determination of whether to proceed with a project and to support the required financing for a project, but you should not assume that the economic analysis contained in a feasibility study is a guarantee of future performance as projected in the feasibility study or that the estimated net present value or internal rates of return will be achieved. Actual results may differ materially. In particular, the processing of sulfide ore at the Hycroft Mine is uncertain and, therefore, the process requirements, recovery rates, reagent requirement assumptions, costs and timing of the commencement of the production of sulfide ore operations at the Hycroft Mine could vary greatly from our estimates. Further, we will continue to monitor and evaluate other processing technologies for their potential to process certain sulfide ores, but such technologies may not be economical.
We may not achieve our production and/or sales estimates and our costs may be higher than our estimates, thereby reducing our cash flows and negatively impacting our results of operations and liquidity.
We prepare estimates of future production, sales, and costs for our operations. We develop our estimates based on, among other things, mining experience, processing and mining fleet equipment reliability, operational efficiencies, recovery methods, mineral reserve and mineral resource estimates, assumptions regarding ground conditions and physical characteristics of ores (such as hardness and presence or absence of certain metallurgical characteristics), costs to construct new leach pads and estimated rates and costs of mining and processing. All of our estimates are subject to numerous uncertainties, many of which are beyond our control. Our actual production and/or sales may be lower than our estimates and our actual costs may be higher than our estimates, which could negatively impact our cash flows and results of operations. While we believe that our estimates are reasonable at the time they are made, actual results will vary and such variations may be material. These estimates are speculative in nature, and it may be the case that one or more of the assumptions underlying such projections and estimates may not materialize. You are cautioned not to place undue reliance on the projections and estimates set forth in the Original Form 10-K or any document incorporated by reference.
Plans for eliminating or reducing processing and mining constraints and planned technical efforts in 2021, each aimed at positioning us for a future ramp up in production, may not be successful, could result in information which could adversely impact conclusions in the Hycroft Technical Report and/or could provide data, information or test results that could materially and adversely impact our processing technology, potential future output, results of operations and profitability.
In 2021, we expect to continue to more fully evaluate potential opportunities while we also position the Hycroft Mine for ramping up production at the appropriate time. We intend to focus much of our technical efforts for 2021 on, among other things, (1) using our internal technical team to complete a variety of technical analyses and studies; (2) further refine operating parameters of our proprietary two-stage heap oxidation and leach process in order to position ourselves for large-scale application of the oxidation heap leach; and (3) engaging engineering firms to assess and evaluate potential design changes to the current leach pad and unit operations to better support the sulfide oxidation process. While each of these actions is intended to provide us with additional data on which we can assess potential efficiencies and operational improvements and such information provided from these activities could result in updates to the existing Hycroft Technical Report or a new Technical Report including consideration of multiple processing technologies, no assurances can be given that the results of this ongoing technical work in 2021 will enhance or improve our ability to efficiently and successfully access the ore within the Hycroft Mine. Further, while these technical efforts are intended to allow us to ramp up the Hycroft Mine at the appropriate time, that future ramp up is dependent on eliminating current mining and processing constraints. We expect that weCompany will need to acquire an expanded mining fleet capable of mining targeted production rates, and recruit and train operatorsretain other qualified managerial and maintenance staff. Additional resources must also be spent on enhancing our processing plant capabilities. No assurances can be given that we will be abletechnical employees to successfully eliminate these miningbuild and processing constraints.
As information, test results, and data becomes available to us resulting from our 2021 technical efforts, that information may lead us to modify the scope, nature, and timing of technical, testing, engineering, and growth planning work actually performed.maintain its operations. If the results of our technical efforts do not result in increased efficiencies and capabilities and/or if our attempts to eliminate mining and processing constraints are not successful, each of those events could have a material adverse impact on our potential future output, results of operations and profitability.
We currently depend on a single mine and there is no assurance that we will not incur any interruptions or stoppages in our mining activities which would have an adverse effect on our results of operations and financial condition.
The Hycroft Mine is our only mining property. We can provide no assurance that we will be successful in profitably operating the Hycroft Mine using the oxide leach process, the proprietary two-stage heap oxidization and leach process for
sulfide ore, or alternative processing technologies. Further, any interruption in our ability to operate the Hycroft Mine, such as, but not limited to, a pandemic, natural disaster, loss of material permits, extended supply interruptions, processing interruptions or difficulties or labor strike would have a material adverse effect on our ability to produce gold and silver and to generate revenue and liquidity.
We cannot be certain that our future development activities will be commercially successful.
Substantial expenditures are required to construct and operate the Hycroft Mine including additional equipment and infrastructure such as additional leach pads to extract gold and silver from our sulfide ore utilizing the new metallurgical processes described in the Hycroft Technical Report, to further develop our Hycroft Mine to identify new mineral reserves and mineral resources, and to expand or establish mineral reserves and mineral resources through drilling and analysis. We cannot provide assurance that our process to extract gold and silver from sulfide ore using a proprietary two-stage heap oxidation and leach process can be maintained on an economic and profitable basis, that any mineral reserves or mineral resources discovered will be in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely or economic basis. A number of factors, including costs, actual mineralization, consistency and reliability of ore grades and commodity and reagent quantities and prices affect successful project development. The efficient operation of processing facilities, the existence of competent operational management, as well as the availability and reliability of appropriately skilled and experienced consultants also can affect successful project development. We can provide no assurance that the development and advancement of the Hycroft Mine sulfide leaching operations will result in economically viable mining operations or yield new mineral reserves or resources.
Our reliance on third party contractors and consultants to conduct our operations and construction projects exposes us to risks.
In connection with the operation of the Hycroft Mine, we contract and engage third party contractors and consultants to assist with aspects of our operations and related construction projects, including construction of new leach pads, maintenance, repair and improvements to our crushing and processing facilities, and mining of our ore and waste. As a result, our operations and construction projects are subject to a number of risks, some of which are outside our control, including:
•negotiating agreements with contractors and consultants on acceptable terms;
•the inability to replace a contractor or consultant and their operating equipment in the event that either party terminates the agreement;
•reduced control over those aspects of operations which are the responsibility of the contractor or consultant;
•failure of a contractor or consultant to perform under their agreement or disputes relative to their performance;
•interruption of operations or increased costs in the event that a contractor or consultant ceases their business due to insolvency or other unforeseen events;
•failure of a contractor or consultant to comply with applicable legal and regulatory requirements, to the extent they are responsible for such compliance; and
•problems of a contractor or consultant with managing their workforce, labor unrest or other employment issues.
In addition, we may incur liability to third parties as a result of the actions of our contractors or consultants. The occurrence of one or more of these risks could decrease our gold and silver production, increase our costs, interrupt or delay our mining operations or our ability to access our ores, and adversely affect our liquidity, results of operations and financial position.
A shortage of equipment and supplies and/or the time it takes such items to arrive at our Hycroft Mine could adversely affect our ability to operate our business.
We are dependent on various supplies and equipment to engage in mining and development operations. The shortage of such supplies, equipment and parts and/or the time it takes such items to arrive at our Hycroft Mine could have a material adverse effect on our ability to carry out our operations and develop the Hycroft Mine, and therefore limit or increase the cost of production. Such shortages could also result in increased construction costs and cause delays in expansion projects.
The inability to obtain soda ash or delays in obtaining soda ash could adversely affect our ability to profitably operate our business.
There are a limited number of suppliers that produce and supply soda ash and to our knowledge, such suppliers do not typically mine soda ash in excess of what they believe they can sell. We entered into a three-year agreement with a soda ash supplier in April 2019 to provide soda ash for our operations. However, if the contracted supplier cancels the contract,Company is unable to producesuccessfully recruit and supply enough soda ash or ceases operations because ofretain such persons, the large quantities of soda ash required in our operations, we may have to temporarily stop mining until we can obtain a new contract to purchase soda ash. Further, we cannot provide any assurance as to the costs that we might incur in obtaining soda ash from a substitute supplier which could materiallyCompany’s exploration, development and adversely affect the profitability and cash flows of our mining operations.
Changes in the cost or supply of energy or commodities used in operations may adversely affect the profitability of our operations and our financial condition.
Our mining operation requires significant quantities of energy. Our principal energy sources are electricity and diesel fuel. We rely upon third parties for our supply of energy resources consumed in our mining activities. Energy prices can be affected by numerous factors beyond our control, including global and regional supply and demand, political and economic conditions, and applicable regulatory regimes. The prices of various sources of energy may increase significantly from current levels. An increase in energy prices could materially and adversely affect our results of operations and financial condition.
Disruptions in the supply of our energy resources could temporarily impair our ability to produce gold and silver or delay any expansion projects or plans. Our mining operation is in a remote location requiring the long-distance transmission of power. A disruption in the transmission of energy, inadequate energy transmission infrastructure or the termination of any of our energy supply contracts could interrupt our energy supply and adversely affect our operations or expansion projects.
Our production costs are also affected by the prices of commodities we consume or use in our operations, such as diesel fuel, sodium cyanide, soda ash, lime, tires, and explosives. The prices of such commodities are influenced by supply and demand trends affecting the mining industry in general and other factors outside our control. Increases in the price for materials consumed in our mining and production activities could materially and adversely affect our liquidity, results of operations, financial condition and cash flows.
We may be adversely affected by challenges relating to slope stability.
Our open pit mine gets deeper and creates a larger footprint as we mine it, presenting certain geotechnical challenges including the possibility of slope failure. If we are required to decrease pit slope angles or provide additional road access to prevent such a failure, our stated mineral reservesgrowth plans could be negatively affected. Further, hydrological conditions relating to pit slopes, removal of material displaced by slope failures and increased stripping requirements could also negatively affect our stated mineral reserves. We cannot provide any assurances that we will not have to take additional action to maintain slope stability in the future or that our actions taken to date will be sufficient. Unexpected failure or additional requirements to prevent slope failure may negatively affect our results of operations and financial condition, as well as have the effect of diminishing our stated mineral reserves.significantly curtailed.
The Sprott Credit Agreement imposes significant operating and financial restrictions that may limit ourthe Company’s ability to operate ourits business.
The Sprott Credit Agreement imposes significant operating and financial restrictions on usthe Company and ourits restricted subsidiaries. These restrictions will limit ourthe Company’s ability and the ability of our restricted subsidiaries to, among other things, as applicable: •incur additional debt; •pay dividends or make other restricted payments, including certain investments; •create or permit certain liens; •sell assets; •engage in certain transactions with affiliates; and •consolidate or merge with or into other companies, or transfer all or substantially all of ourthe Company’s assets or the assets of ourits restricted subsidiaries. These restrictions could limit ourthe Company’s ability to finance our future operations or capital needs, make acquisitions or pursue available business opportunities. In addition, the Sprott Credit Agreement will require usrequires the Company to comply with a number of customary covenants, including:as well as cross acceleration defaults. The customary covenants include: •covenants related to the delivery of monthly, quarterly and annual consolidated financial statements, and semi-annual budgets and annualor projections;
•maintaining required insurance; •compliance with laws (including environmental); •compliance with ERISA;Employee Retirement Income Security Act of 1974, as amended (“ERISA”); •maintenance of ownership of 100% of the Hycroft Mine; •restrictions on consolidations, mergers or sales of assets; •limitations on liens; •limitations on issuance of certain equity interests; •limitations on issuance of additional indebtedness; •limitations on transactions with affiliates; and •other customary covenants. We cannot assure youThe Company has received several waivers to date from covenant obligations under the Sprott Credit Agreement. The Company can make no assurances that weit will satisfy these covenants or that ourits lenders will continue to waive any future failure to do so. A breach of any of the covenants under the Sprott Credit Agreement could result in a default. See Note 9 – Debt, Netto the Notes to the Financial Statements for further information. If a default occurs under the Sprott Credit Agreement and/or the Royalty Agreement among Hycroft Mining Holding Corporation, its wholly owned subsidiarythe Company, Hycroft Resources and Development, LLC, a wholly owned subsidiary of the Company, and Sprott Private Resource Lending II (CO)(Co) Inc., (“Sprott (the “Sprott Royalty Agreement”), the lenders could elect to declare the debt, together with accrued interest and other fees, to be immediately due and payable and proceed against the collateral securing that debt, which, in the case of the Sprott Credit Agreement and the Sprott Royalty Agreement, constitutes all or substantially all of ourthe Company’s assets.
OurThe Company’s substantial indebtedness could adversely affect ourits financial condition.
As of December 31, 2020, we2023, the Company had substantial outstanding indebtedness under the Sprott Credit Agreement and the Subordinated Notes. Subject to the limits and terms contained in the Sprott Credit Agreement, if we are ablethe Company is unable to incur additional debt or grant additional security interests from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes, then the risks related to ourthe Company’s high level of debt could intensify. OurThis high level of debt and royalty payment obligations could: •make it more difficult for usthe Company to satisfy our obligations with respect to ourits outstanding debt; •require a substantial portion of ourthe Company’s cash flows to be dedicated to debt service and/or royalty payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes; •limit ourthe Company’s ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;
•increase our vulnerability to commodity price volatility, including increases in prices of commodities that we purchasethe Company purchases and decreases in prices of gold and silver that we sell,the Company sells, each as part of our operations, general adverse economic and industry conditions; •limit our flexibility in planning for and reacting to changes in the industry in which we compete;the Company competes; •place usthe Company at a disadvantage compared to other, less leveraged competitors; and •increase ourthe Company’s cost of borrowing. Any of the above-listed factors could have an adverse effect on ourthe Company’s business, financial condition and results of operations, and ourthe Company’s ability to meet our payment obligations under ourthe debt, and the price of ourthe Company’s common stock. The Sprott Credit Agreement contains restrictive covenants that limit ourthe Company’s ability to engage in activities that may be in ourthe Company’s long-term best interest. Our failureinterests. Failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of nearly all of ourthe Company’s debt. If we defaultthe Company defaults on ourits obligations to pay any of ourits indebtedness or otherwise defaultdefaults under the agreements governing ourthe indebtedness, lenders could accelerate such debt and wethe Company may be subject to restrictions on the payment of our other debt obligations or cause a cross-acceleration. Any default under the agreements governing ourthe Company’s indebtedness that is not waived by the required lenders or holders of such indebtedness, and the remedies sought by the holders of such indebtedness, could prevent usthe Company from paying principal, premium, if any, and interest on other debt instruments. If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness and royalty payment obligations, or if we otherwise fail to comply with the various covenants in any agreement governing ourthe indebtedness, wethe Company would be in default under the terms of the agreements governing such indebtedness and other indebtedness under the cross-default and cross-acceleration provisions of such agreements. In the event of such default:
•the lenders or holders of such indebtedness could elect to terminate any commitments thereunder, declare all the funds borrowed thereunder to be due and payable and, if not promptly paid, in the case of ourthe Company’s secured debt, institute foreclosure proceedings against ourcompany assets; and •even if thesethe lenders or holders do not declare a default, they may be able to cause all of ourthe Company’s available cash to be used to repay indebtedness owed to them. As a result of such default and any actions the lenders may take in response thereto, wethe Company could be forced into bankruptcy or liquidation. WeThe Company may not have sufficient cash or may not be able to generate sufficient cash to service all of ouroutstanding indebtedness and may be forced to take other actions to satisfy ourindebtedness obligations, under our indebtedness, which may not be successful.
OurThe Company’s ability to make scheduled payments on ourits debt, including pursuant to the Sprott Credit Agreement and Subordinated Notes, and royalty obligations or refinance our debt obligations (if necessary) depends on ourits financial condition, and operating performance, which areis subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond ourthe Company’s control, including the market prices of gold and silver. WeThe Company may be unable to maintain a level of cash flow from operating activities sufficient to permit usit to pay the principal, premium, if any, and interest on ourthe Company’s indebtedness and our royalty obligations.
If our cash flows and capital resources are insufficient to fund ourthe Company’s debt service obligations and our royalty obligations, weit could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets, seek additional debt or equity capital or restructure or refinance our indebtedness. WeThe Company may not be ableunable to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow usthe Company to meet ourits scheduled debt service obligations. The Sprott Credit Agreement restricts ourthe Company’s ability to dispose of assets and use the proceeds from those dispositions and may also restrict ourthe ability to raise debt to be used to repay other indebtedness when it becomes due. WeThe Company may not be ableunable to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service and royalty payment obligations then due. In addition, we conduct a substantial portion of our operations through our subsidiaries, certain of which in the future may not be guarantors of our indebtedness. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of our indebtedness, our subsidiaries do not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.
OurThe Company’s inability to generate sufficient cash flows to satisfy ourits debt and royalty obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect ourthe Company’s financial position and results of operations and ourthe ability to satisfy ourits obligations.
If wethe Company cannot make scheduled payments on ourits debt, weit will be in default and the lenders under the Sprott Credit Agreement and the Sprott Royalty Agreement could foreclose against the assets securing theirits borrowings and wethe Company could be forced into bankruptcy or liquidation. Our lack of exploration activities will lead to our inability to replace depleted mineral reserves.
To maintain production levels over time we must replace depleted reserves by exploiting known ore bodies and locating new deposits. We have plans to continue exploration related to the mining and processing of gold and silver contained in ore within the Hycroft Mine, which may include areas surrounding the Hycroft Mine operating properties. There can be no assurance that such projects will be successful. Our mineral base will decline if reserves are mined without adequate replacement, and we may not be able to sustain production beyond the currently contemplated mine life, based on projected production rates. As a result, our revenues from the future sale of gold and silver may decline, resulting in lower income and reduced growth. Further, we expect to encounter strong competition from other mining companies in connection with the acquisition of properties producing or capable of producing gold and silver. If or when we attempt to acquire new properties, we will face competition from many of these companies that have greater financial resources than we do. Consequently, we may be unable to replace and expand current mineral reserves through the acquisition of new mining properties or interests therein on terms we consider acceptable.
Land reclamation requirements for the Hycroft Mine may be burdensome and expensive and include requirements that we provide financial assurance supporting those requirements.
Land reclamation requirements for the Hycroft Mine may be burdensome and expensive and may include requirements that the Company provide financial assurance supporting those requirements. Land reclamation requirements are generally imposed on companies with mining operations in order to minimize the long-term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents, treat ground and surface water to drinking water standards, and reasonably re-establish pre-disturbance landforms and vegetation. In order toTo carry out reclamation obligations imposed on usthe Company in connection with ourits activities weat the Hycroft Mine, the Company must allocate financial resources that might otherwise be spent on further exploration and development programs. We haveThe Company has established a provision for ourits reclamation obligations on the Hycroft Mine, property, as appropriate, but this provision may not be adequate.inadequate. If we are required to carry out unanticipated reclamation work, ourthe Company’s financial position could be adversely affected.
We areThe Company is also required by U.S. federal and state laws and regulations to provide financial assurance sufficient to allow a third party to implement approved reclamation plans for the Hycroft Mine if we arethe Company is unable to do so. Third party financial assurances may not be available to usthe Company or wethe Company may elect not to obtain it because of the high costs, associated collateral requirements may be too expensive, or it may be commercially impractical, which could materially adversely affect ourthe Company’s financial position.
If we lose keyFuture litigation or similar legal proceedings could have a material adverse effect on the Company’s business and results of operations.
Lawsuits and other administrative or legal proceedings may arise in the course of the Company’s operations. The Company may also face heightened regulatory or other public scrutiny as a result of going public via a transaction with a special purpose acquisition company (“SPAC”). These sorts of lawsuits or proceedings can involve substantial costs, including the costs associated with investigation, litigation and possible settlement, judgment, penalty or fines. In addition, lawsuits and other legal proceedings may be time-consuming and may require a commitment of management and personnel resources that will be diverted from the Company’s normal business operations. Although the Company generally maintains insurance to mitigate certain costs, there can be no assurance that costs associated with lawsuits or are unable to attract and retain additional personnel, weother legal proceedings will not exceed the limits of the Company’s insurance policies. Moreover, the Company may be unable to develop our business. Our developmentcontinue to maintain its existing insurance policies at a reasonable cost, if at all, or to secure additional coverage, which may result in the future will be highly dependent on the efforts of key management employees, specifically, Diane Garrett, our President and Chief Executive Officer, Stanton Rideout, our Executive Vice President and Chief Financial Officer, John (Jack) Henris, our Executive Vice President and Chief Operating Officer,costs associated with lawsuits and other key employees that we may hire in the future. We will need to recruitlegal proceedings being uninsured. The Company’s business, financial condition, and retain other qualified managerial and technical employees to build and maintain our operations. If we are unable to successfully recruit and retain such persons, our development and growthresults of operations could be significantly curtailed.adversely affected if a judgment, penalty or fine is not fully covered by insurance.
We areThe Company is dependent upon information and operational technology systems and new technologies that are subject to disruption, damage, failure, and risks associated with implementation and integration.
We areThe Company is dependent upon information technology systems in theto conduct of ourits operations. OurThe information technology systems are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyber-attacks,cyberattacks, natural disasters and defects in design. Cybersecurity incidents in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, extortion to prevent or the unauthorized release of confidential or otherwise protected information and the corruption of data. Given the unpredictability of the timing, nature and scope of information technology disruptions, wethe Company could potentially be subject to productionoperational downtimes, operational delays, extortion, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on ourthe Company’s cash flows, financial condition or results of operations.
WeThe Company could also be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into ourits operations. System modification failures could have a material adverse effect on our business,the Company’s operations, financial position and results of operations and could, if not successfully implemented, adversely impact the effectiveness of ourthe Company’s internal controls over financial reporting.
We have identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective which, if not remediated, may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
In connection with the restatement as discussed in Note 25 - Restatement of Previously Issued Financial Statements of Notes to Consolidated Financial Statements of this Form 10-K/A, management has concluded there was a material weakness in our internal control over financial reporting as of December 31, 2020. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
As described in “Item 9A. Controls and Procedures,” management identified a material weakness in our controls over the accounting for the 5-Year Private Warrants issued in connection with the initial public offering of MUDS and recorded to our consolidated financial statements as a result of the Recapitalization Transaction that was consummated on May 29, 2020. Our controls to evaluate the accounting for complex financial instruments, such as for warrants issued by MUDS, did not operate effectively to appropriately apply the provisions of ASC 815-40. This material weakness resulted in a material error in our accounting for the 5-Year Private Warrants recorded as part of the Recapitalization Transaction and a restatement of our previously issued financial statements as more fully described in Note 25 - Restatement of Previously Issued Financial Statements to the Notes to Consolidated Financial Statements set forth herein. Management now concludes that, as of December 31, 2020, our internal control over financial reporting and our disclosure controls and procedures were not effective.
To remediate the material weakness in our internal control over financial reporting, management implemented additional review procedures, and additional training and enhancements to the accounting policy related to the accounting for equity and liability instruments (including those with warrants) to determine proper accounting in accordance with GAAP.
Although our remediation plan has been implemented and is expected to be completed as of the filing date of our Annual Report on Form 10-K for the year ended December 31, 2021, the material weakness cannot be considered remediated until the controls operate for a sufficient period and management has concluded, through testing, that our internal controls are operating effectively. While management believes that the remedial efforts will resolve the identified material weakness, there is no assurance that management’s remedial efforts conducted to date will be sufficient or that additional remedial actions will not be necessary. In addition, there can be no assurance that additional material weaknesses will not be identified in the future. If we are unsuccessful in remediating our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting or disclosure controls and procedures, investors may lose confidence in our financial reporting and the accuracy and timing of our financial reporting and disclosures and our business, reputation, results of operations, liquidity, financial condition, ability to access the capital markets, perceptions of our creditworthiness, and stock price could be adversely affected. In addition, we may be unable to maintain or regain compliance with applicable securities laws or stock market listing requirements.
We may face litigation and other risks as a result of the restatement and material weakness in our internal control over financial reporting.
As part of the Restatement, we identified a material weakness in our internal controls over financial reporting. As a result of such material weakness, the Restatement, the change in accounting for the 5-Year Private Warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and the material weakness in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Form 10-K/A, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition.
The threetwo largest stockholders of the Company are able tocan exert significant influence over matters submitted to stockholders for approval, which could delay or prevent a change in corporate control or result in the entrenchment of management or the Board of Directors, possibly conflicting with the interests of ourthe Company’s other stockholders. As of December 31, 2020, Mudrick Capital Management LP,March 13, 2024, 2176423 Ontario Limited, an entity affiliated with Eric Sprott, and American Multi-Cinema, Inc. (“Mudrick Capital”AMC”), Whitebox Advisors LLC (“Whitebox”), and Highbridge Capital Management LLC, (“Highbridge”) beneficially owned approximately 42%9% and 11%, 20% and 13%respectively, of the Company’s outstanding voting securities and each has the right to acquire 23,408,240 additional shares, respectively, of common stock upon the exercise of warrants held by them. In addition, AMC has the right to receive an additional 61,189 shares of our common stock respectively.upon vesting of restricted stock units granted to AMC for its Board of Directors representative. Because of their significant stockholdings, each of Mudrick Capital, WhiteboxMr. Sprott and Highbridge
AMC could exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise influence ourthe business. This influence could have the effect of delaying or preventing a change in control of the Company or entrenching management or the Board of Directors, which could conflict with the interests of other stockholders and, consequently, could adversely affect the market price of ourthe Company’s common stock.
Risks related to ourthe Company’s Common Stock and Warrants The market prices and trading volume of shares of the Company’s common stock have experienced, and may continue to experience, extreme volatility, which could cause purchasers of the Company’s common stock to incur substantial losses. The market prices and trading volume of shares of the Company’s common stock have experienced, and may continue to experience, extreme volatility, which could cause purchasers to incur substantial losses. For example, during 2023, the market price of ourthe Company’s common stock fluctuated from an intra-day low of $1.63 per share on November 15, 2023 to an intra-day high of $7.18 on January 13, 2023, and the last recorded sales price of the Company’s common stock on Nasdaq on March 13, 2024 was $2.32 per share. •The Company believes the historical volatility may reflect market and trading dynamics unrelated to the Company’s underlying business, or macro or industry fundamentals, and it is unknown how long these dynamics will last. Under the circumstances, investing in the Company’s common stock may cause stockholders to incur the risk of losing all or a substantial portion of their investment. •Extreme fluctuations in the market price of the Company’s common stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums. The market volatility and trading patterns the Companyhas experienced create several risks for stockholders, including the following: ◦the market price of the Company’s common stock has experienced and may experience in the future rapid and substantial increases or decreases unrelated to the Company’s financial performance or prospects or macro or industry fundamentals, and substantial increases may be significantly inconsistent with the risks and uncertainties the Company continues to face; ◦factors in the public trading market for the Company’s common stock include the sentiment of retail investors (including as may be expressed on financial trading and other social media sites and online forums), the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in the Company’s securities, access to margin debt, trading in options and other derivatives on the Company’s common stock and any related hedging and other trading factors; ◦the Company’s market capitalization, as implied by various trading prices, has at times reflected valuations that diverge significantly from those seen prior to recent volatility, and to the extent these valuations reflect trading dynamics unrelated to the Company’s financial performance or prospects, purchasers of its common stock could incur substantial losses if there are declines in market prices driven by a return to earlier valuations; and ◦to the extent volatility in the Company’s common stock is caused, as has widely been reported, by a “short squeeze” in which coordinated trading activity causes a spike in the market price of the Company’s common stock as traders with a short position make market purchases to avoid or to mitigate potential losses, stockholders purchase at inflated prices unrelated to the Company’s financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has abated. The market price of the Company’s shares of common stock and publicly traded warrants may fluctuate widely. The trading price of ourthe Company’s common stock and warrants listed for trading may fluctuate substantially and may be lower than their current price. Thisprices. The market prices and trading volume of shares of the Company’s common stock have experienced, and may be especially true for companies like oursexperience in the future, extreme volatility, which could cause purchasers of the Company’s common stock to incur substantial losses. The Company may continue to incur rapid and substantial increases or decreases in its stock price in the foreseeable future that may not coincide in timing with a small public float. If an activethe disclosure of news or developments by or affecting the Company. Accordingly, the market for our securities continues, the trading price of our securities could be volatile and subject to wide fluctuations. The trading priceshares of ourthe Company’s common stock may fluctuate dramatically, and warrants depends on manymay decline rapidly, regardless of any developments in the Company’s business. Overall, there are various factors, many of which are beyond ourthe Company’s control, that could negatively affect the market price of the Company’s common stock or result in fluctuations in the price or trading volume of the Company’s common stock, including: •publication of research reports by analysts or others about the Company or the precious metals market, which may be unfavorable, inaccurate, inconsistent or not disseminated on a regular basis;
•changes in market interest rates that may cause purchasers of shares of the Company’s common stock to demand a different yield; •changes in market valuations of similar companies; •market reaction to any additional equity, debt or other securities that the Company may issue in the future, and which may or may not be related to our operating performance. These fluctuations could cause you to lose all or partdilute the holdings of your investment in our common stock and/or warrants. Any of the factors listed below could have an adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline. Factors affecting the trading price of our securities may include:existing stockholders;
•actual or anticipated fluctuationsvariations in our financial resultsthe Company’s annual or the financialquarterly results of companies perceived to be similar to the Company;operations; •changesadditions or departures of key personnel or Board of Directors members; •actions by institutional or significant stockholders; •short interest in the market’s expectations about our operating results;Company’s stock and the market response to such short interest; •the public’s reaction to our press releases, other public announcementsdramatic increase in the number of individual holders of the Company’s stock and filings with the SEC;their participation in social media platforms targeted at speculative investing; •speculation in the press or investment community;community about the Company or industry; •actualstrategic actions by the Company or anticipated developments in our businessits competitors, such as acquisitions or our competitors’ businesses or the competitive landscape generally;other investments; •the operating results failingongoing impacts and developments relating to meet the expectation of securities analysts or investors in a particular period;COVID-19 pandemic; •changes in financial estimates and recommendations by securities analysts concerninglegislative, administrative, regulatory or other actions affecting the Company or the market in general;industry; •operating and stock price performance of other companiesinvestigations, proceedings, or litigation that investors deem comparable toinvolve or affect the Company; •changes in laws and regulations affecting our business;
•commencement of, or involvement in, litigation involving the Company;
•changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
•the volume of our common stock available for public sale;
•any major change in the Board of Directors or management;
•sales of substantial amounts of our common stock by our directors, officers or significant stockholders or the perception that such sales could occur; and
•general market, economic and political conditions, such as recessions, interest rates, “trade wars,” reductions in precious metals prices, increases in fuel and other commodity prices used in the operation of our business operations, currency fluctuations, and acts of war or terrorism. Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq Capital Market have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to the Company could depress our stock price regardless of our business, prospects, financial conditions or results of operations. Broad market and industry factors, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our common stock and warrants, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following the business combination. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this type, if instituted against us,the Company, could result in substantial costs and a diversion of our management’s attention and resources. Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that wethe Company to make significant payments. You may experience dilution as a result of future equity offerings. On March 14, 2022, the Company entered into definitive agreements to issue 46,816,480 units in a private placement with select investors (the “Private Placement Offering”), with each unit consisting of one-tenth share of the Company’s common stock (on a post 1-for-10 reverse stock split basis) and one warrant to purchase one-tenth share of common stock. In addition, the Company conducted an “at-the-market” registered public offering in which it sold 8,955,358 additional shares of common stock (on a post 1-for-10 reverse stock split basis). The private placement and the “at-the-market” registered public offering substantially increased the number of issued and outstanding shares of common stock. In the future, the Company may issue additional shares of common stock to raise cash to bolster the Company’s liquidity, to pay indebtedness, for working capital, to finance strategic initiatives and future acquisitions or for other purposes. The Company may also issue securities convertible into, or exchangeable for, or that represent the right to receive, shares of common stock. The Company may also acquire interests in other companies or other assets by using a combination of cash and shares of common stock or using only shares of common stock. The Company may sell shares or other securities in any other offering at a price per share that is less than the prices per share paid by stockholders, and stockholders purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which the Company sells additional shares of common stock, or securities convertible into, exercisable or exchangeable for shares of common stock, in future transactions may be higher or lower than the prices per share paid by stockholders. Additional equity offerings may dilute the holdings of existing stockholders or reduce the market price of the Company’s common stock, or both. Any of these events may dilute the ownership interests of current stockholders, reduce earnings per share or have an adverse effect on the price of shares of the Company’s common stock. Further, sales of substantial amounts of the Company’s common stock, or the perception that these sales could occur, could have a material adverse effect on the price of the Company’s common stock. A “short squeeze” due to a sudden increase in demand for shares of the Company’s common stock that largely exceeds supply and/or focused investor trading in anticipation of a potential short squeeze have led to, may be currently leading to, and could again lead to, extreme price volatility in shares of the Company’s common stock. Stockholders may purchase shares of the Company’s common stock to hedge existing exposure or to speculate on the price of the Company’s common stock. Speculation on the price of the Company’s common stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of common stock available for purchase on the open market, stockholders with short exposure may have to pay a premium to repurchase shares of the Company’s common
stock for delivery to lenders of the Company’s common stock. Those repurchases may, in turn, dramatically increase the price of shares of the Company’s common stock until additional shares are available for trading or borrowing. This is often referred to as a “short squeeze.” A short squeeze and/or focused investor trading in anticipation of a short squeeze have led to, and could again lead to volatile price movements in shares of the Company’s common stock that may be unrelated or disproportionate to the Company’s financial performance or prospects and, once stockholders purchase the shares of the Company’s common stock necessary to cover their short positions, or if investors no longer believe a short squeeze is viable, the price of the Company’s common stock may rapidly decline. Stockholders that purchase shares of the Company’s common stock during a short squeeze may lose a significant portion of their investment. The Company cautions stockholders against investing in the Company’s common stock, unless stockholders are prepared to incur the risk of losing all or a substantial portion of their investment. Information available in public media that is published by third parties, including blogs, articles, online forums, message boards and social and other media may include statements not attributable to the Company and may not be reliable or accurate. The Company has received, and may in the future receive, a high degree of media coverage that is published or otherwise disseminated by third parties, including blogs, articles, online forums, message boards and social and other media. This includes coverage that is not attributable to statements made by the Company’s directors, officers or employees. Investors should read carefully, evaluate and rely only on the information contained in documents filed by the Company with the SEC in determining whether to purchase shares of the Company’s common stock. Information provided by third parties may not be reliable or accurate and could materially impact the trading price of the Company’s common stock which could cause stockholders to incur losses on their investments. Increases in market interest rates may cause potential investors to seek higher returns and therefore, may reduce demand for the Company’s common stock, which could result in a decline in the Company’s stock price. One of the factors that may influence the price of the Company’s common stock is the return on the Company’s common stock (i.e., the amount of distributions as a percentage of the price of the Company’s common stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of the Company’s common stock to expect a return, which the Company may be unable or choose not to provide. Further, higher interest rates would likely increase the Company’s borrowing costs and potentially decrease the cash available. Thus, higher market interest rates could cause the market price of the Company’s common stock to decline. Volatility in the price of the Company’s common stock may subject the Company to securities litigation. As discussed above, historically, the market for the Company’s common stock has been characterized by significant price volatility when compared to seasoned issuers, and the Company expects that its share price will continue to be more volatile than that of a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. The Company may in the future be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources. The Company does not anticipate paying common stock dividends in the foreseeable future. The Company currently plans to invest all available funds and future cash flows, if any, in the exploration and development and growth of its business. The Company has never paid dividends on its common stock and currently has no plans to do so. The Company’s debt agreements contain provisions that restrict its ability to pay dividends. As a result, a rise in the market price of the Company’s common stock, which is uncertain and unpredictable, is the only source of potential gain for the foreseeable future and stockholders should not rely on an investment in the Company’s common stock for dividend income. Future offerings of debt, which would be senior to the Company’s common stock upon liquidation, and/or preferred equity securities, which may be senior to its common stock for purposes of distributions or upon liquidation, could adversely affect the market price of its common stock. In the future, the Company may attempt to increase capital resources by making additional offerings of debt or preferred equity securities, including convertible or non-convertible senior or subordinated notes, convertible or non-convertible preferred stock, medium-term notes and trust preferred securities. Upon liquidation, holders of the Company’s debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of available assets prior to the holders of common stock. In addition, any preferred stock the Company may issue could have a preference on liquidating distributions or a preference on distribution payments that could limit the Company’s ability to make a distribution to the holders of its common stock. Since the Company’s decision to issue securities in any future offering will depend on market conditions and other factors beyond its control, the Company cannot predict or estimate the amount, timing, or nature of future offerings. Thus, stockholders bear the risk of future offerings reducing the market price of the Company’s common stock.
There is no guarantee that our the Company’soutstanding 5-Year Public Warrantswarrants will ever be in the money, and they may expire worthless and. The Company’s outstanding warrants have a strike price that is higher than the termslast recorded sale price of warrants may be amended. We have 34,289,898 publicly tradedthe Company’s common stock on Nasdaq on March 13, 2024. Specifically, the Company has 33,937,583 warrants outstanding that expire on May 29, 2025 that entitle holders to purchase oneone-tenth share of ourthe Company’s common stock at an exercise price of $11.50, per share for a period of five years from the May 29, 2020 Recapitalization Transaction. On9,583,334 warrants outstanding that expire on October 6, 2020, we issued 9,583,334 units in an underwritten public offering at an offering price2025 that entitle holders to of $9.00 per unit, with each unit consisting of onepurchase one-tenth share of our common stock and one warrant to purchase one share of ourthe Company’s common stock at an exercise price of $10.50 per share.
Additionally, as partshare and 46,816,480 warrants outstanding that expire on March 15, 2027 that entitle holders to purchase one-tenth share of the Recapitalization Transaction, we assumed the obligations and liabilities under that certain warrant agreement, dated asCompany’s common stock at an exercise price of October 22, 2015, by and between Seller and Computershare Inc., a Delaware corporation, and its wholly owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, collectively as initial warrant agent; and Continental Stock Transfer & Trust Company, LLC was named as the successor warrant agent (the “Seller Warrant Agreement”). Pursuant to the assumption$1.068 per share.
Certain of the Seller Warrant Agreement, theCompany’s warrants issued thereunder (the “Seller Warrants”) became exercisable into shares of our common stock. As of March 22, 2020, the exercise price for the Seller Warrants was $40.31 per share of our common stock. There is no guarantee that any or all of the 5-Year Public Warrants or Seller Warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.
Our 5-Year Private Warrants are being accounted for as a warrant liability and are being recorded at fair value upon issuance with changes in fair value each period reported in earnings, which could increase the volatility in ourthe Company’s net income (loss) and may have an adverse effect on the market price of ourthe Company’s common stock.
In addition to other securities, warrants to purchase shares of the Company’s common stock were issued in a private placement to the SPAC sponsor and SPAC underwriter had been issued an(the “5-Year Private Warrants”) in the aggregate amount of 5-Year Private Warrants to purchase 7,740,000 shares of our common stock at an exercise price of $11.50 per share prior to the Recapitalization Transaction on May 29, 2020, and concurrently with the closing of the Recapitalization Transaction, as part of a forward purchase unit offering, the Company issued an additional 2,500,000 5-Year Private Warrants to the SPAC sponsor at an exercise price of $11.50 per share. We haveThe Company determined that the 5-Year Private Warrants are a liability that isrequired to be marked-to-market with the non-cash fair value adjustments recorded in earnings at each reporting period. Changes in the trading price of ourthe Company’s common stock and the fair value of the 5-Year Private Warrants could result in significant volatility in ourthe warrant liability and our net income (loss) in our consolidated statementthe Company’s Consolidated Statements of operations.
Anti-takeover provisions contained in ourthe Company’s charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
OurThe Company’s charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We areThe Company is also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make it more difficult to remove management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for ourthe Company’s securities. These provisions include:
•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; •the right of ourthe Company’s Board of Directors to appoint a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies ouron the Company’s Board of Directors; •a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members ourof the Company’s Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; •the ability of ourthe Company’s Board of Directors to determine whether to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; •limiting the liability of, and providing indemnification to, the directors and officers; and •advance notice procedures that stockholders must comply with in order to nominate candidates to ourthe Company’s Board of Directors or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
We are an "emerging growth company"The Company is a “smaller reporting company,” and a "smaller reporting company," and the applicable reduced disclosure requirements applicable to us as such may make ourthe Company’s common stock less attractive to our stockholders.
We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the “JOBS Act.” As such, we have elected to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following February 12, 2023, the fifth anniversary of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that are held by non-affiliates exceeds $700 million as of the last business day of the Company’s prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we qualify as an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt outCompany is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
We are also a “smaller reporting company”,company,” and we will remain a smaller reporting company until the fiscal year following the determination that ourthe Company’s voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of ourthe second fiscal quarter, or ourthe Company’s annual revenues are $100 million or more during the most recently completed fiscal year and ourthe voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of ourthe second fiscal quarter. Similar to emerging growth companies, smallerSmaller reporting companies are able to provide simplified executive compensation disclosure and have certain other reduced disclosure obligations, including, among other
things, being required to provide only two years of audited consolidated financial statements. OurThe Company’s stockholders may find ourthe Company’s common stock less attractive as a result of ourthe Company’s status as an “emerging growth company” anda “smaller reporting company” and ourthe Company’s reliance on the reduced disclosure requirements afforded to these companies. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Our comprehensive risk management strategy for the assessment, identification and management of material risks stemming from cybersecurity threats involves a systematic evaluation of potential threats, vulnerabilities, and their potential impacts on our organization’s operations, data, and systems. Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program, including legal, compliance, strategic, operational, and financial risk areas. The cybersecurity risk management program includes: • Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, and broader enterprise IT environment; •A team principally responsible for managing (i) cybersecurity risk assessment processes, (ii) security controls, and (iii) response to cybersecurity incidents; •The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of security controls; •Cybersecurity awareness training for users and senior management, including through the use of third-party providers for regular mandatory training; •A cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and, •A risk management process for third-party service providers, suppliers and vendors, including a rigorous vetting process and ongoing monitoring mechanisms designed to ensure compliance with cybersecurity standards. As of the date of this Annual Report on Form 10-K, the Company is not aware of any cybersecurity incidents, that have had a materially adverse effect on our operations, business, results of operations, or financial condition. Governance Our Board of Directors considers cybersecurity risk as part of its risk oversight function. It has delegated oversight of cybersecurity and other information technology risks to the Audit Committee (the “Committee”). The Committee oversees the implementation of the cybersecurity risk management program. The Committee receives periodic reports from management on potential cybersecurity risks and threats and receives presentations on cybersecurity topics from Hycroft’s Information Systems Manager. The Committee reports to the full Board of Directors regarding its activities, including those related to cybersecurity. The full Board of Directors also receives briefings from management on the cybersecurity risk management program as needed. Management is responsible for assessing and managing our material risks from cybersecurity threats. Management has primary responsibility for our overall cybersecurity risk management program and supervises both the internal cybersecurity personnel and external cybersecurity consultants. Hycroft’s Information Systems Manager has many years of experience leading cybersecurity oversight and has extensive experience with information technology, including security, auditing, compliance, systems, and programming. The management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants; and alerts and reports produced by security tools deployed in the IT environment. Our cybersecurity incident response plan governs our assessment and response upon the occurrence of a material cybersecurity incident, including the process for informing senior management and our Board of Directors. ITEM 2. PROPERTIES OurThe Company’s sole property is the Hycroft Mine. The Hycroft Mine is an open-pit (surface)existing gold and silver operation located 54 miles northwest of Winnemucca in Humboldt County and Pershing County, Nevada. The Hycroft Mine is accessible via Nevada State Route 49 (Jungo Road), an all-weather, unpaved road that is maintained by Humboldt County and the Company. A major east–west railway runs immediately adjacent to the property.
The Hycroft Mine straddles Townships 34, 35, 35½, and 36 North and Ranges 28, 29, and 30 East, Mount Diablo Base and Meridian (“MDB&M”), with an approximate latitude 40°52’ north and longitude 118°41’ west. The mine with a long history of operations as discussed below. Commencing in January 2019, Hycroft Mining Corporation (the "Seller") began efforts to restart mining operations. Duringis situated on the first quarter of 2019, the Seller worked to bring our six haul trucks, two hydraulic shovels and one wheel loader back into operation. In addition, the Seller began the rehabilitationwestern flank of the crushing system andKamma Mountains on the construction of leach pad space to enable mining operations to begin in the second quarter of 2019. Initial gold and silver production occurred in August 2019. During 2020, the rehabilitationeastern edge of the Black Rock Desert.
The Hycroft Mine consists of 30 private parcels with patented claims that comprise approximately 1,787 acres, and 3,247 unpatented mining claims that encompass approximately 62,298 acres. The combined patented and unpatented claims comprise approximately 64,000 acres. On May 15, 2023, the Company expanded its holdings by acquiring a 50% undivided interest in three additional mining claims, totaling approximately 60 acres. Existing facilities on-site include two administration buildings, a mobile maintenance shop, a light vehicle maintenance shop, a warehouse, three Heap Leach Pads (Crofoot, North, and Brimstone), primary, secondary, and tertiary crushing system was completed, additional mobile fleet equipment was rented, headcount increased, repairssystems, two Merrill-Crowe process plants, and restorationa refinery. Slopes on the historic Crofoot Heap Leach Pad are being re-graded in accordance with the reclamation plan approved by the BLM. It is considered that the other existing components of processing facilities were continued,the mine property may be utilized for future development. The Hycroft Mine operates under permit authorizations from the BLM, NDEP, NDOW, Nevada Department of Water Resources (“NDWR”), and the construction of a new leach pad expansion and related infrastructure began. The North Merrill-Crowe processing and refining facility continues on care and maintenance and it will require expenditures to restore it to operational status.County agencies. Hycroft Technical Report Summary On March 28, 2023, the Company, along with its third-party consultants, completed and filed the 2023 Hycroft TRS prepared in accordance with the Modernization Rules. The 2023 Hycroft TRS provides an initial assessment of the mineral resource estimate utilizing a milling and POX process for sulfide and transition mineralization and heap leaching process for oxide mineralization. As a result of additional information, including historical assay certificates and drilling results obtained during 2022 and included in the 2023 Hycroft TRS, the 2023 Hycroft TRS supersedes and replaces the 2022 Hycroft TRS. Accordingly, the 2022 Hycroft TRS should no longer be relied upon. In addition, see the sections entitled “Cautionary Note to U.S. Investors Regarding Mineral Resources,” “Cautionary Note Regarding Forward-Looking Statements,” and “Risk Factors” when reviewing the information set forth in this Section. The information that follows relating to the Hycroft Mine is derived, for the most part, from, and in some instances is an extract from, the 2023 Hycroft Technical Report prepared in compliance with the SEC’s Modernization of Property Disclosures for Mining Registrants.TRS. Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the 2023 Hycroft Technical Report,TRS, incorporated herein by reference as Exhibit 96.1 to this 2023 Form 10-K and made a part hereof. During 2022 and 2023, the Company, together with its consultants, continued to advance the metallurgical processes to treat the Hycroft sulfide mineral resource. The focus of this 2020 Form 10-K, as previously filedongoing work has included further development of the comminution circuit with crushing and grinding studies, flotation variability studies, benchtop pressure oxidation studies, carbon-in-leach studies, thickener dewatering studies, preparation for a benchtop roaster study, and tailings compaction study. The purpose of these studies is to generate higher gold and silver recoveries in sulfide-bearing ores and identify potential alternative products for additional revenue streams that will optimize the SEC on February 14, 2020.mineral economics of the deposit. Upon furnishing the 2023 Hycroft TRS, the Hycroft Mine had measured and indicated mineral resources of 10.6 million ounces of gold and 360.7 million ounces of silver and inferred mineral resources of 3.4 million ounces of gold and 96.1 million ounces of silver, which are contained in oxide, transitional, and sulfide ores. Overview and Highlights The 2023 Hycroft Mine Technical Report contemplates average annual productionTRS summarizes the results of approximately 366,000 gold equivalent ounces, based on a 34-year mine life for miningan initial assessment and processingsupports the disclosure of mineral reserves. As of December 31, 2020, we had not yet begun the ramp up of our operations to production levels contemplated in the Hycroft Technical Report and, as such, we are producing gold and silver at a much lower rate. Our 2021 production plan will allow us to maintain our existing workforce and the decision to delay ramp up to high production levels will allow us time to optimize our mining plan, take additional steps to define our ore body, and resolve technical issues to better understand the proprietary two-stage heap oxidation and leach process and evaluate the proposed oxidation process for transitional and sulfide ores, and allow us to evaluate implementing additional processing technologies that may be more profitable for certain ore types. Our current plans focus our efforts on placing the Hycroft Mine in a position for a future ramp up of production at the appropriate time. The Hycroft Technical Report sets forth a novel process for processing sulfide ore and assumes that we will utilize a substantial amount of existing infrastructureresources at the Hycroft Mine utilizing a milling and POX process for sulfide and transition mineralization and heap leaching process for oxide mineralization. The work has been prepared at the request of the Company and completed by third-party consultants including administration buildings, mobile maintenance shop, light vehicle maintenance shop, warehouse, leach pads, crushing system, a refinery,Ausenco, IMC, and two Merrill-CroweWestLand. Employees of IMC and Ausenco who have worked on and approved this mineral resource estimate are Qualified Persons as defined under the Modernization Rules.
After evaluating the information obtained, and carefully considering the numerous and significant opportunities developed during the assessment process plants, after refurbishment. Additionally, a second refinerythat warrant follow-up analysis and work, coupled with the highly inflationary environment for equipment and cost inputs, the Company filed the 2023 Hycroft TRS. The 2023 Hycroft TRS supersedes all previous technical studies. The Company will continue to build on the work to date and investigate opportunities identified through progressing the technical and data analyses leading up to the 2023 Hycroft TRS and will provide an updated technical report at an appropriate time. The mineral resource is planned using existing equipment. In order to ramp up and maintain our operation to tonnage and production levels contemplatedbased upon information provided by the Hycroft Technical Report, we will need to construct additional leach pad space, add crusher capacity, add material handling systems,Company, which has been checked and construct a rail spurvalidated wherever possible by IMC. The calculations and storage space among other projects. In addition to infrastructure additions, we will need to significantly expand our mobile mining fleet and workforce, and perform repairs and maintenance to existing infrastructure, particularlyinterpretations presented here are the North Merrill-Crowe process plant. Inwork of IMC, which takes responsibility for the event that we determine to implement additional processing technologies and/or materially change our assumptions for consumption of reagents or metallurgical recovery rates, we may update or file a new technical report in the future. We currently have established goals and budgeted estimated costs for this work in 2021 or 2022.
Hycroft Mine For a detailed discussion of the Hycroft Mine’s operating and production data, see Part II -– Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations -– Hycroft Mine. The following shows where our Hycroft Mine and Advanced Exploration Properties are located as well as areas of the Hycroft Mine.
Additionally, the map below shows the current property and facilities layout.
The Hycroft Mine and related facilities are located approximately 54 miles westnorthwest of Winnemucca, Nevada. Winnemucca, a city with a population of approximately 7,800 (2019)8,431 (2020 Census data), is a commercial community on Interstate 80,
164 miles northeast of Reno. The mine property straddles Townships 34, 35, 351∕2 and 36 North and Ranges 28, 29 and 30 East (MDB&M) with an approximate latitude 40°52’ north and longitude 118°41’ west.
The following shows the location of our property.
Additionally, the following map shows the current property and facilities layout.  The town is served by a transcontinental railroad and has a municipal airport. Access to the Hycroft Mine from Winnemucca is by Jungo Road, formerly designated as State Route 49, a good-quality, unpaved road, and a short access road to the main entrance of the mine. Well-maintained mine and exploration roads provide access throughout the property. Access is also possible from Imlay, Gerlach and Lovelock by unpaved roads intersecting Interstate 80 and Nevada State Route 447. The majority of ourthe Hycroft Mine’s employees live in the Winnemucca area. The site receives electrical power provided by NV Energy from the northwestern Nevada power grid. Initial surveys indicate that the town of Winnemucca has the required infrastructure (shopping, emergency services, schools, etc.) to support the maximum workforce and dependents. The Hycroft Mine currently has water rights which are believed adequate to support our plannedpotential future heap leach operations. The mineHycroft Mine is situated on the eastern edge of the Black Rock Desert and on the western flank of the Kamma Mountains between Winnemucca and Gerlach, Nevada. There are no streams, rivers or major lakes in the general area. Elevations in the mineHycroft Mine area range between 4,500 and 5,500 feet above sea level.
The climate of the region is arid, with precipitation averaging 2.17.7 inches per year. Average temperatures during the summer range from 50°F to 90°F and average winter temperatures range from 20°F to 40°F. We holdThe Hycroft Mine consists of 30 private parcels with patented claims that comprise approximately 1,787 acres, and 3,247 unpatented lode and placer mining claims that constitute our Hycroft Mine operating property.encompass approximately 62,298 acres. The total acreage covered by unpatented claims is approximately 68,759 acres and an additional 1,912 acres is covered by patented claims. Combining thecombined patented and unpatented
claims total claims covercomprise approximately 70,67164,000 acres. OurThe Hycroft MineMine’s patented claims occupy private lands, and ourits unpatented claims occupy public lands, administered by the BLM. These claims are governed by the laws and regulations of the U.S. federal government and the State of Nevada. To maintain the patented claims in good standing, we must pay the annual property tax payments to the county in which the claims are held. To maintain the unpatented claims in good standing, we must file a notice of intent to maintain the claims within the county and pay the annual mineral claim filing fees to the BLM. Such filing fees amounted to $0.6 million in 2020.for the years ended December 31, 2023 and 2022. As long as we file the annual notice and pay the claim filing fees, there is no expiration date for our unpatented claims. A portion of the Hycroft Mine is subject to a mining lease requiring us to pay a 4% net profit royalty to the owner of certain patented and unpatented mining claims, subject to a maximum of $7.6 million, of which $4.9$3.3 million has been satisfied, and $4.3 million remained payable as ofoutstanding at both December 31, 2020.2023 and 2022. There is no expiration date on the net profit royalty. The Hycroft Mine is also subject to the Sprott Royalty Agreement (as defined herein) thatand which requires us to pay a perpetual royalty equal to 1.5% of the Net Smelter Returns, as such term is defined in such agreement, from ourthe Hycroft Mine. There is no expiration and no limit on the amount that can be paid on the Sprott Royalty Agreement. We have the right to repurchase up to 33.3% (0.5% of the 1.5% royalty) of the royalty on each of the first and second anniversaries from May 29, 2020. The Hycroft Mine was formerly known as the Crofoot-Lewis open pit mine, which was a small heap leaching operation that commenced in 1983. Vista Gold Corp., a corporation incorporated under the laws of the Yukon Territory (“Vista”Vista”), acquired the Crofoot-Lewis claims and mine in 1987 and 1988. During this first operating period, the mine produced over 1.0 million ounces of gold and 2.5 million ounces of silver. The mine production continued until it was placed on a care and maintenance program in December 1998 due to low gold prices. SellerHycroft Mining Corporation (“HMC”) acquired the Hycroft Mine in 2007 pursuant to an arrangement agreement where Vista transferred its Nevada mining properties to Seller’sHMC’s predecessor. SellerHMC restarted the Hycroft Mine in 2008 and suspended mining operations on July 8, 2015. During 2016, SellerHMC was actively processing and producing gold from the ore within the heap leach pads. On January 1, 2017, SellerHycroft Mining Corporation (“HMC” or “Seller”) went into a care and maintenance mode when it stopped adding lime to the leach pads and continued to operate in a care and maintenance mode throughout 2017 and 2018. Prior to restarting operations, production of gold and silver was a byproduct of Seller’sHMC’s maintenance activities on the Hycroft Mine. In January 2019 SellerDecember 2018 HMC began restart activities, including the restartrehabilitation of the crushing facility and construction of a new leach pad, with active mining operations. Duringoperations beginning in the firstsecond quarter of 2019 Seller began operations again with six haul trucks, two hydraulic shovels, and one wheel loader. In addition, Seller began the rehabilitation of its crushing system and the construction of new leach pad space to enable mining operations to begin in the second quarter of 2019. Initial gold and silver production occurred in August 2019.2019 and continued until active mining operations ceased at the Hycroft Mine in November 2021. OnExisting facilities on site facilities include antwo administration building,buildings, a mobile maintenance shop, a light vehicle maintenance shop, a warehouse, leach pads, primary, secondary, and tertiary crushing system,systems, two Merrill-Crowe process plants, and a refinery. The componentsComponents for a second refinery are present on-site and will be constructedassembled during the mining activities expansion. In the event of any missing components for the refinery’s construction, they will be acquired and delivered to the site as part of the expansion ofoverall mining activities. expansion. The crushing system was refurbished as part of the restart activities and allactivities. All other facilities are operational with the exception ofexcept for the North Merrill-Crowe plant, which is currently expected towill be needed in 2022.rehabilitated and brought online when required. The gross bookcarrying value of Property, plant, and equipment, net associated with the Hycroft Mine as of December 31, 2020,2023 and 2022, was $85.3 million.$87.1 million and $86.6 million, respectively.
Geology and Mineralization The Hycroft Mine is located on the western flank of the Kamma Mountains. The deposit is hosted in a volcanic eruptive breccia and conglomerates associated with the Tertiary Kamma Mountain volcanics. The volcanics are mainly acidic to intermediate tuffs, flows, and coarse volcanoclastic rocks. Fragments of these units dominate the clasts in the eruptive breccia. The Central Fault and East Fault control the distribution of mineralization. A post-mineral range-front fault separates the ore-bodyore body from the adjacent Pleistocene Lahontan Lake sediments in the Black Rock Desert. The geological events have created a physical setting ideally suited to the open-pit, heap-leachheap leach mining operation at the Hycroft Mine. The heap leach method is widely used in the southwestern United States and allows the economical treatment of oxidized low-grade ore deposits in large volumes. The Company is contemplating sulfide processes commonly used worldwide to treat refractory sulfide ores. The deposit is typically broken into six major zones based on geology, mineralization, and alteration. These zones include Brimstone, Vortex, Central, Bay, Boneyard, and Camel. Breaks between the zones are major faults.
Mineralization at the Hycroft Mine has been deposited through multiple phases. An early silica sulfide flooding event deposited relatively low-grade gold and silver mineralization generally along bedding. This mineralization is cross cutcrosscut by later, steeply dipping quartz alunite veins. Late stageLate-stage silver bearing veins are found in the Vortex zone and at depth in the Central area. Late to present supergene oxidation along faults has liberated precious metals from sulfidessulfide mineralization and further enriched gold and silver mineralization, along water table levels. The known gold mineralization extends for a distance of three miles in a north-south direction by 1.5 miles in an east-west
direction. Mineralization extends to a depth of less than 330 feet in the outcropping to near-outcropping portion of the deposit on the northwest side to over 2,500 feet in the Vortex deposit in the east. ProvenDrilling
The Hycroft Mine mineral resource model includes data from 1981 to 2022 and Probable Mineral Reserves Our mineral reserve estimatesincludes 5,601 holes, representing 2,588,826 feet of drilling, of which 171 holes were added during 2021 and 2022. In the 2023 Hycroft TRS, there are calculated in accordance with subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants. Proven and probable mineral reserves may not be comparable to similar information regarding mineral reserves disclosed in accordance with the guidance of other countries. We conduct ongoing studies of our ore bodies to optimize economic values and to manage risk. We revise our mine plans and estimates of proven and probable mineral reserves as required and in accordance with the latest available studies. Our estimates of proven and probable mineral reserves are prepared by and are the responsibility of our employees.
Our estimated proven and probable mineral reserves were determined in 2019 and have been adjusted to reflect depletion solely from mining activities through December 31, 2020. Our mineral reserves are based on prices of $1,200 per ounce for gold and $16.50 per ounce for silver. The gold and silver prices used in estimating mineral reserves were lower than the trailing 3-year average price of $1,272.66 per ounce for gold and $16.53 per ounce for silver at the time they were established. The average London Bullion Market spot metal prices for each of the years ended December 31, 2019, 2018 and 2017 was $1,393, $1,268 and $1,257 per ounce for gold, respectively, and $16.21, $15.71 and, $17.04 per ounce for silver, respectively. Below is a summary of our estimated proven and probable mineral reserves as of December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tons | | Grades, oz/t | | Contained Oz (000s) | | | (000s) | | Au | | Ag | | Au | | Ag | | Proven (Heap Leach) | | | | | | | | | | | | Oxide ROM | | 21,921 | | | 0.009 | | 0.233 | | 201 | | | 5,114 | | | Transitional ROM | | 3,257 | | | 0.006 | | 0.12 | | 21 | | | 391 | | | Oxide 3∕4” Crushed | | 14,667 | | | 0.012 | | 0.739 | | 180 | | | 10,837 | | | Transitional 3∕4” Crushed | | 4,361 | | | 0.005 | | 0.312 | | 23 | | | 1,361 | | | Transitional 1∕2” Crushed | | 86,406 | | | 0.011 | | 0.452 | | 908 | | | 39,014 | | | Sulfide 1∕2” Crushed | | 249,563 | | | 0.012 | | 0.467 | | 2,910 | | | 116,457 | | | Total Proven Heap Leach | | 380,175 | | | 0.011 | | 0.456 | | 4,243 | | | 173,174 | | | Probable (Heap Leach) | | | | | | | | | | | | Oxide ROM | | 12,988 | | | 0.005 | | 0.229 | | 70 | | | 2,979 | | | Transitional ROM | | 3,550 | | | 0.005 | | 0.131 | | 19 | | | 465 | | | Oxide 3∕4” Crushed | | 2,847 | | | 0.010 | | 0.716 | | 28 | | | 2,038 | | | Transitional 3∕4” Crushed | | 1,298 | | | 0.004 | | 0.496 | | 5 | | | 643 | | | Transitional 1∕2” Crushed | | 51,752 | | | 0.010 | | 0.461 | | 496 | | | 23,858 | | | Sulfide 1∕2” Crushed | | 662,787 | | | 0.010 | | 0.411 | | 6,929 | | | 272,219 | | | Total Probable Heap Leach | | 735,222 | | | 0.010 | | 0.411 | | 7,547 | | | 302,202 | | | Total Probable Sulfide Stockpile 1∕2” Crushed | | 7,445 | | | 0.01 | | 0.422 | | 75 | | | 3,139 | | | Total Proven and Probable Mineral Reserves | | 1,122,842 | | | 0.011 | | 0.426 | | 11,865 | | | 478,515 | | | Waste | | 1,316,936 | | | | | | | | | | | Total Tons | | 2,439,778 | | | | | | | | | | | Strip Ratio | | 1.17 | | | | | | | | |
Below is a summary of our estimated proven and probable mineral reserves as of December 31, 2019 that were determined in 2019 and have been adjusted to reflect depletion solely from mining activities through December 31, 2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tons | | Grades, oz/t | | Contained Oz (000s) | | | (000s) | | Au | | Ag | | Au | | Ag | | Proven (Heap Leach) | | | | | | | | | | | | Oxide ROM | | 22,475 | | | 0.009 | | 0.232 | | 205 | | | 5,211 | | | Transitional ROM | | 4,081 | | | 0.008 | | 0.185 | | 32 | | | 755 | | | Oxide 3∕4” Crushed | | 15,250 | | | 0.012 | | 0.716 | | 184 | | | 10,926 | | | Transitional 3∕4” Crushed | | 4,395 | | | 0.005 | | 0.311 | | 24 | | | 1,367 | | | Transitional 1∕2” Crushed | | 90,095 | | | 0.01 | | 0.448 | | 945 | | | 40,328 | | | Sulfide 1∕2” Crushed | | 250,333 | | | 0.012 | | 0.466 | | 2,921 | | | 116,698 | | | Total Proven Heap Leach | | 386,629 | | | 0.011 | | 0.453 | | 4,311 | | | 175,285 | | | Probable (Heap Leach) | | | | | | | | | | | | Oxide ROM | | 13,145 | | | 0.005 | | 0.229 | | 71 | | | 3,005 | | | Transitional ROM | | 3,658 | | | 0.005 | | 0.138 | | 20 | | | 505 | | | Oxide 3∕4” Crushed | | 3,001 | | | 0.01 | | 0.687 | | 29 | | | 2,063 | | | Transitional 3∕4” Crushed | | 1,300 | | | 0.004 | | 0.495 | | 5 | | | 644 | | | Transitional 1∕2” Crushed | | 52,451 | | | 0.01 | | 0.458 | | 504 | | | 24,041 | | | Sulfide 1∕2” Crushed | | 662,931 | | | 0.01 | | 0.411 | | 6,932 | | | 272,252 | | | Total Probable Heap Leach | | 736,486 | | | 0.01 | | 0.411 | | 7,561 | | | 302,510 | | | Total Probable Sulfide Stockpile 1∕2” Crushed | | 8,289 | | | 0.01 | | 0.396 | | 85 | | | 3,281 | | | Total Proven and Probable Mineral Reserves | | 1,131,404 | | | 0.011 | | 0.425 | | 11,957 | | | 481,076 | | | Waste | | 1,320,164 | | | | | | | | | | | Total Tons | | 2,451,568 | | | | | | | | | | | Strip Ratio | | 1.17 | | | | | | | | |
•Mineral reserves estimated at $1,200/oz Au and $16.50/oz Ag.
•Cut-off grades used a Net Smelter Return (NSR) calculation.
•Numbers5,532 drill holes in the table have been roundedresource model area which includes holes drilled to reflect the accuracy of the estimate and may not sum due to rounding.define stockpiles.
We did not use metal or equivalent metal cut-off grades in estimating proven and probable mineral reserves set forthDrill hole collar locations are shown in the table above and the complexity of the ore body resulted in the use of multiple metallurgical recovery factors by domain and process method, as reflected in the NSR calculations contained in Section 12 of the Hycroft Technical Report. NSR calculations were used as the basis of proven and probable mineral reserve estimations and for decisions influencing operating strategy, mine planning and design, because of differing mining and processing costs, recoveries, and the influence of both gold and silver. Factors including the variable ore types and mineralogy, different process streams and metallurgical recoveries, and related haulage distance can all cause variability in mining and processing costs and block value. Consequently, calculation of the breakeven NSR contained no profit assumptions. Metallurgical recovery factors used to estimate proven and probable mineral reserves set forth in the table above are variable based upon the domain and processing method applied. Detailed domain specific metallurgical recoveries used to estimate proven and probable mineral reserves are set forth in Table 12-3 in Section 12 of the Hycroft Technical Report, including Au and Ag recoveries by domain for ROM Heap Leach Recovery, 3/4” Crushed Heap Leach Recovery, and 1∕2” Crushed Heap Leach Recovery.figure below.
The reference point for mineral reserves is ore delivered to the leach pad and does not include reductions attributed to anticipated leach recoveries. In the case of the Hycroft Mine’s open pit, all costs are accounted for during the optimization phase of pit limit planning. Once the optimum pit extents have been determined, the decision to mine the material has been made and the cost incurred; the only task remaining then is to determine the optimal routing of the material. General and administrative expenses, as applied at Hycroft, are a fixed cost and do not vary by the tons mined or processed. As such, general and administrative costs are applied as an annual cost in the mine planning and not applied as a dollar to ton of ore processed. All material routing is based on optimal destination determination accounting for all applicable costs, recoveries, and limits (i.e., crushing capacity).
Below is a summary of gold and silver ounces contained in our estimated proven and probable mineral reserves as of December 31, 2020 to reflect the reduction in mineral reserves resulting from mining in 2020, as compared to December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Au Oz (000s) | | Ag Oz (000s) | | | | | As of December 31, | | Change in Oz | | As of December 31, | | Change in Oz | | Classification | | Material | | 2020 | | 2019 | | Au Oz | | % | | 2020 | | 2019 | | Ag Oz | | % | | Proven | | Oxide ROM | | 201 | | | 205 | | | (4) | | | (2.0) | % | | 5,114 | | | 5,211 | | | (97) | | | (1.9) | % | | | Oxide 3/4" Crush | | 21 | | | 32 | | | (11) | | | (34.4) | % | | 391 | | | 755 | | | (364) | | | (48.2) | % | | | Transition ROM | | 180 | | | 184 | | | (4) | | | (2.2) | % | | 10,837 | | | 10,926 | | | (89) | | | (0.8) | % | | | Transition 3/4" Crush | | 23 | | | 24 | | | (1) | | | (4.2) | % | | 1,361 | | | 1,367 | | | (6) | | | (0.4) | % | | | Transition 1/2" Crush | | 908 | | | 945 | | | (37) | | | (3.9) | % | | 39,014 | | | 40,328 | | | (1,314) | | | (3.3) | % | | | Sulfide 1/2" Crush | | 2,910 | | | 2,921 | | | (11) | | | (0.4) | % | | 116,457 | | | 116,698 | | | (241) | | | (0.2) | % | | | Total | | 4,243 | | | 4,311 | | | (68) | | | (1.6) | % | | 173,174 | | | 175,285 | | | (2,111) | | | (1.2) | % | | | | | | | | | | | | | | | | | | | | | Probable | | Oxide ROM | | 70 | | | 71 | | | (1) | | | (1.4) | % | | 2,979 | | | 3,005 | | | (26) | | | (0.9) | % | | | Oxide 3/4" Crush | | 19 | | | 20 | | | (1) | | | (5.0) | % | | 465 | | | 505 | | | (40) | | | (7.9) | % | | | Transition ROM | | 28 | | | 29 | | | (1) | | | (3.4) | % | | 2,038 | | | 2,063 | | | (25) | | | (1.2) | % | | | Transition 3/4" Crush | | 5 | | | 5 | | | — | | | — | % | | 643 | | | 644 | | | (1) | | | (0.2) | % | | | Transition 1/2" Crush | | 496 | | | 504 | | | (8) | | | (1.6) | % | | 23,858 | | | 24,041 | | | (183) | | | (0.8) | % | | | Sulfide 1/2" Crush | | 6,929 | | | 6,932 | | | (3) | | | — | % | | 272,219 | | | 272,252 | | | (33) | | | 0.0 | % | | | Total | | 7,547 | | | 7,561 | | | (14) | | | (0.2) | % | | 302,202 | | | 302,510 | | | (308) | | | (0.1) | % | | | | | | | | | | | | | | | | | | | | | Probable Stockpile | | Sulfide 1/2" Crush | | 75 | | | 85 | | | (10) | | | (11.8) | % | | 3,139 | | | 3,281 | | | (142) | | | (4.3) | % | | | | | | | | | | | | | | | | | | | | | Proven and Probable | | Oxide ROM | | 271 | | | 276 | | | (5) | | | (1.8) | % | | 8,093 | | | 8,216 | | | (123) | | | (1.5) | % | | | Oxide 3/4" Crush | | 40 | | | 52 | | | (12) | | | (23.1) | % | | 856 | | | 1,260 | | | (404) | | | (32.1) | % | | | Transition ROM | | 208 | | | 213 | | | (5) | | | (2.3) | % | | 12,875 | | | 12,989 | | | (114) | | | (0.9) | % | | | Transition 3/4" Crush | | 28 | | | 29 | | | (1) | | | (3.4) | % | | 2,004 | | | 2,011 | | | (7) | | | (0.3) | % | | | Transition 1/2" Crush | | 1,404 | | | 1,449 | | | (45) | | | (3.1) | % | | 62,872 | | | 64,369 | | | (1,497) | | | (2.3) | % | | | Sulfide 1/2" Crush | | 9,914 | | | 9,938 | | | (24) | | | (0.2) | % | | 391,815 | | | 392,231 | | | (416) | | | (0.1) | % | | | Total | | 11,865 | | | 11,957 | | | (92) | | | (0.8) | % | | 478,515 | | | 481,076 | | | (2,561) | | | (0.5) | % |
Typical break-even individual single metal cut-off grade listed for informational reference in the Hycroft Technical Report (Table 12-7) is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Process Method | | Au (opt) | | Ag (opt) | | | ROM Oxide Leach Recovery | | 0.006 | | 0.938 | | | ROM Transitional Leach Recovery | | 0.008 | | 1.115 | | | 3/4” Crushed Oxide Leach Recovery | | 0.005 | | 0.793 | | | 3/4” Crushed Transitional Leach Recovery | | 0.007 | | 0.835 | | | 1/2” Crushed Transitional Leach Recovery | | 0.006 | | 0.420 | | | 1/2” Crushed Sulfide Leach Recovery | | 0.007 | | 0.519 | |
The NSR calculation incorporates more than the typical single metal cutoff grades shown above, and the cutoff grades above, while typical, are not utilized in the estimation or reporting of mineral reserves. The NSR calculation covers all fixed and variable costs including mining, processing, sustaining capital deemed to be directly proportional to ore tonnage, general and administration, gross royalties, transport and shipping costs, smelting and refining costs, limits to payable metals, and refining penalties for deleterious metals. The following is an example of the method used to calculate the NSR expressed in US dollars per ton (US$/t):
NSR (US$/t) is calculated from the following equation:
NSR = (((Au Price - Au Selling) * Au Grade * Recovery Au * Au Refine) + ((Ag Price - Ag Selling) * Ag Grade * Recovery Ag * Ag Refine)) * (1 - Royalty) - Mine Cost - Process Cost - Soda Ash Cost - Sustaining Cost - G&A Cost
Where:
| | | | | | | | | | | | NSR | = | Net Smelter Return | Au Price | = | Au selling price in $ per troy ounce | Au Selling | = | bullion treatment and refining cost in $ per troy ounce | Au Grade | = | Au fire grade in troy ounces per ton | Recovery Au | = | % metallurgical recovery of Au by process route & domain | Au Refine | = | % payable for Au refining losses and deductions | Ag Price | = | Ag selling price in $ per troy ounce | Ag Selling | = | bullion treatment and refining cost in $ per troy ounce | Ag Grade | = | Ag fire grade in troy ounces per ton | Recovery Ag | = | % metallurgical recovery of Ag by process route & domain | Ag Refine | = | % payable for Ag refining losses and deductions | Royalty | = | % royalty (Note due to very limited royalty remaining, no royalty has been included) | Mine Cost | = | mining cost per ton by material type | Process Cost | = | process cost per ton by process type & domain | Soda Ash Cost | = | soda ash cost per ton | Sustaining Cost | = | sustaining cost per ton | G&A Costs | = | general and administrative cost per ton |
In addition to the factors listed above, methods, material assumptions and criteria used for estimating mineral reserves, as set forth in Section 12 of the Hycroft Technical Report, are as follows:
•Costs were generated by Hycroft personnel, metallurgical recoveries were developed by M3 Engineering, and slope inputs supplied by Call and Nicholas and Golder Associates.
•An NSR was generated for each 40 ft x 40 ft x 40 ft block for each of the processing methods available at Hycroft, which are the following:
◦Run-of-Mine (ROM) Heap Leaching of oxide and transitional material;
◦3∕4” Crushed Heap Leaching of oxide and transitional material;
◦1∕2” Crushed Heap Leaching of transitional and sulfide material; and
◦Assumed gold and silver prices of $1,200 and $16.50 per ounce, respectively.
◦Economic pit limits were determined with Geovia Whittle® Strategic Planning software.
◦Open pit designs were completed utilizing Maptek Vulcan 3D mine design software.
◦Mine planning was completed using Minemax strategic and operational mine planning software and the processing method that returned the highest net value was selected. If all processing methods returned a negative value, the block was classified as waste.
Soda ash assumptions set forth in Table 12-4 in Section 12Consistent with HMC’s suspension of mining operations and conducting only care and maintenance activities on the Hycroft Mine, during 2017 and through December 2018, only drilling to obtain ore for metallurgical testing purposes was conducted. In December 2018, HMC began confirmation drilling of certain sulfide ore stockpiles that we planned to mine.
Any expansion of the Hycroft Technical Report were as follows: | | | | | | | | | | | | Soda Ash Cost | = | Cost of Soda Ash x Soda Ash Required | Cost of Soda Ash | = | $0.11 per pound | Soda Ash Required | = | % Oxidation x 2000 x % Sulfide Sulfur x 1.57 | % Oxidation | = | (Target Oxidation — ratio_au) / Liberation Rate | Target Oxidation | : | Bay = 55%; All Others = 70% | ratio_au | = | aucn block grade / aufa block grade | Liberation Rate | | if (ratio_au le 0.05) then = 1.77 | | | if (ratio_au le 0.10) then = 1.89 | | | if (ratio_au le 0.15) then = 1.99 | | | if (ratio_au le 0.20) then = 2.09 | | | if (ratio_au le 0.25) then = 2.18 | | | if (ratio_au le 0.30) then = 2.27 | | | if (ratio_au le 0.35) then = 2.36 | | | if (ratio_au le 0.40) then = 2.44 | | | if (ratio_au le 0.45) then = 2.53 | | | if (ratio_au le 0.50) then = 2.60 | | | if (ratio_au le 0.55) then = 2.68 | | | if (ratio_au le 0.60) then = 2.70 | | | if (ratio_au le 0.70) then = 2.78 |
Additional parameters usedMine necessary to calculate NSR included: (i) Whittle input parameters ofexploit any additional mineral resources that may be established through our exploration drilling program beyond the heap leach for oxide, transitional and sulfide ores and multiple cost and recovery factors by domain, as set forth in Table 12-2 of the Hycroft Technical Report; and (ii) heap leach metallurgical recoveries utilizedmineral resources in the Whittle optimization2023 Hycroft TRS, will require us to obtain all permits, approvals and consents of regulatory agencies responsible for the use and development of mines in mineral reserve determinations varying by redox, domain and process method, as set forth in Table 12-3 of the Hycroft Technical Report.Nevada.
Measured, Indicated and Inferred Mineral Resources Our mineral resource estimates are calculated in accordance with subpart 1300 of Regulation S-K and are exclusive of mineral reserves.the Modernization Rules. Measured, indicated and inferred mineral resources may not be comparable to similar information regarding mineral resources disclosed in accordance with the guidance of other countries. The estimates of Mineral Resourcesmineral resources may be materially affected if mining, metallurgical, or infrastructure factors change from those currently anticipated at the Hycroft Mine. Estimates of inferred mineral resources have significant geological uncertainty and it should not be assumed that all or any part of an inferred mineral resource will be converted to the measured or indicated categories. Mineral resources that are not mineral reserves do not meet the threshold for reserve modifying factors, such as estimated economic viability, that would allow for conversion to mineral reserves.
The Hycroft Mine contains a large precious metals deposit, based on measured and indicated mineral resource size. The mineral resource information provided below was calculatedestimates were prepared by, SRK Consulting (U.S.), Inc. ("SRK") during 2019 and also reflectsare the resource informationresponsibility of, IMC, as set forth in the 2023 Hycroft TRS. The following description of December 31, 2019the Hycroft Mine’s measured, indicated and December 31, 2020inferred mineral resources does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the 2023 Hycroft TRS, incorporated by reference as Hycroft did not deplete any resources from mining activities through December 31, 2020.Exhibit 96.1 to this 2023 Form 10-K. | | Hycroft Mine – Summary of Gold and Silver Mineral Resources as of March 27, 2023 | | Hycroft Mine – Summary of Gold and Silver Mineral Resources as of March 27, 2023 | | Classification | Classification | | Material | | Tons (kt) | | Contained Grade | | Contained Metal | Classification | Cutoff Grade $ Net of Process | Approximate Cutoff, AuEq oz/ton | Ktons | Au oz/ton | Ag oz/ton | Sulfide Sulfur% | Au Contained Ounces (000) | Ag Contained Ounces (000) | | | AuFa OPT | | AuCn OPT | | AgFa OPT | | S% | | Au (koz) | | Ag (koz) | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Heap Leach Resource | | | Measured | Measured | | Oxide | | 5,650 | | | 0.011 | | 0.008 | | 0.224 | | 1.79 | | 60 | | | 1,267 | | Measured | $0.01 | 0.002 | 94,162 | 0.008 | 0.17 | 2.14 | 753 | 15,725 | | Transitional | | 21,746 | | | 0.011 | | 0.005 | | 0.186 | | 1.80 | | 232 | | | 4,038 | | | Sulfide | | 37,512 | | | 0.010 | | 0.002 | | 0.273 | | 1.85 | | 356 | | | 10,248 | | | | 64,908 | | | 0.010 | | 0.004 | | 0.240 | | 1.83 | | 649 | | | 15,554 | | | Indicated | Indicated | | Oxide | | 2,619 | | | 0.006 | | 0.005 | | 0.229 | | 1.89 | | 17 | | | 599 | | Indicated | $0.01 | 0.002 | 59,751 | 0.007 | 0.13 | 1.78 | 436 | 7,529 | | Transitional | | 16,293 | | | 0.007 | | 0.003 | | 0.329 | | 1.79 | | 117 | | | 5,369 | | | Sulfide | | 310,102 | | | 0.009 | | 0.002 | | 0.282 | | 1.81 | | 2,916 | | | 87,470 | | | | 329,014 | | | 0.009 | | 0.002 | | 0.284 | | 1.81 | | 3,050 | | | 93,438 | | | Measured and Indicated | | Oxide | | 8,268 | | | 0.009 | | 0.007 | | 0.226 | | 1.82 | | 77 | | | 1,867 | | | Transitional | | 38,039 | | | 0.009 | | 0.004 | | 0.247 | | 1.80 | | 349 | | | 9,407 | | | Sulfide | | 347,614 | | | 0.009 | | 0.002 | | 0.281 | | 1.81 | | 3,272 | | | 97,718 | | | | 393,922 | | | 0.009 | | 0.002 | | 0.277 | | 1.81 | | 3,699 | | | 108,992 | | | Meas + Ind | | Meas + Ind | $0.01 | 0.002 | 153,913 | 0.008 | 0.15 | 2.00 | 1,189 | 23,254 | | Inferred | Inferred | | Oxide | | 6,191 | | | 0.007 | | 0.005 | | 0.267 | | 1.72 | | 44 | | | 1,651 | | Inferred | $0.01 | 0.002 | 46,118 | 0.007 | 0.14 | 1.62 | 337 | 6,549 | | | Transitional | | 20,148 | | | 0.008 | | 0.004 | | 0.276 | | 1.74 | | 156 | | | 5,570 | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Flotation Mill + Concentrate by POX and Cyanide Leach Process | | | Measured | | Measured | $0.01 | 0.010 | 402,735 | 0.013 | 0.50 | 1.78 | 5,236 | 200,965 | | Indicated | | Indicated | $0.01 | 0.010 | 346,308 | 0.012 | 0.39 | 1.58 | 4,156 | 136,445 | | Meas + Ind | | Meas + Ind | $0.01 | 0.010 | 749,043 | 0.013 | 0.45 | 1.69 | 9,391 | 337,410 | | Inferred | | Inferred | $0.01 | 0.010 | 249,494 | 0.012 | 0.36 | 1.52 | 3,019 | 89,568 | | | Sulfide | | 568,704 | | | 0.010 | | 0.002 | | 0.214 | | 1.76 | | 5,516 | | | 121,930 | | | Fill | | 4,018 | | | 0.013 | | 0.008 | | 0.150 | | 0.63 | | 53 | | | 603 | | | | 599,062 | | | 0.010 | | 0.002 | | 0.217 | | 1.76 | | 5,769 | | | 129,754 | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Combined Mineral Resources Leach Plus Process Plant | | | Measured | | Measured | $0.01 | 0.002 - 0.010 | 496,897 | 0.012 | 0.44 | 1.85 | 5,989 | 216,690 | | Indicated | | Indicated | $0.01 | 0.002 - 0.010 | 406,059 | 0.011 | 0.35 | 1.61 | 4,592 | 143,947 | | Meas + Ind | | Meas + Ind | $0.01 | 0.002 - 0.010 | 902,956 | 0.012 | 0.40 | 1.74 | 10,581 | 360,664 | | Inferred | | Inferred | $0.01 | 0.002 - 0.010 | 295,612 | 0.011 | 0.33 | 1.54 | 3,356 | 96,117 | | Total material in the Pit (tons) = | | Total material in the Pit (tons) = | 3.631 billion |
•Mineral resources are notCutoffs grades were determined by income – process cost = NPR = NSR – Process Opex. Cutoff grade is the minimum grade required for a mineral reserves and do not meet the threshold for reserve modifying factors, such as estimated economic viability, that would allow for conversion to mineral reserves. There is no certainty that any part of the mineral resources estimated will be converted into mineral reserves and no mineral resources are assumed to be converted into mineral reserveseconomically mined and processed to retrieve the metal for commercial sale. The cutoff grade for Hycroft is determined by assessing each mine block for gold and silver content and then applying a cost for extraction of these metals from that block by employing commercial mining practices and using the crushing, grinding, flotation, pressure oxidation and cyanide leaching circuit for oxidized flotation concentrate process to create a gold/silver doré bar. Process costs include the environmental practices for placing waste and tailing material in properly designed facilities that can be remediated in the Hycroft Technical Report.future.
•Open pit resources are reported based on calculated NSR block values and the cutoff therefore varies from block to block. The NSR incorporates Au and Ag sales costs of $0.75 per ounce beyond the costs used for pit optimization;
•Numbers in the table have been rounded to reflect the accuracy of the estimate and may not sum due to rounding;rounding. •Mineral resources are reported exclusivecontained within a computer-generated optimized pit. Total material in that pit is 3.631 billion tons. •All units are imperial. Ktons refers to 1,000 short tons of mineral reserves.2,000 lbs. Gold and silver grades are in troy ounces/short ton. We did not use metal or equivalent metal cut-off grades in estimating measured, indicated or inferred mineralMineral resources set forth inwere developed based on a conventional computer-based block model of the table above, as no mining of mineral resources has been incorporated into the contemplated 34-year mine plan set forth in the Hycroft Technical Report,deposit and the complexityapplication of open pit optimization software to determine the ore body resultedmineralization with reasonable expectation of economic extraction. Each block was evaluated to determine which process provides the best net return after operating cost. The two processes identified were:
•Run-of-Mine (“ROM”) cyanide heap leaching of oxide ore; and •milling, flotation and acid pressure oxidation of sulfide and transitional ores followed by cyanide leach and processing in the use of multiple metallurgical recovery factors by ore body, as reflected in the NSR calculations contained in Section 11 of the Hycroft Technical Report. NSR block calculations werea Merrill-Crowe facility. Other assumptions used as the basis forto develop measured, indicated and inferred mineral resources estimationswere: •assumed prices for gold of $1,900 per ounce and open pit mineral resources are reportedfor silver of $24.50 per ounce; •recoveries for gold and silver were estimated by process type: ◦milling, flotation and acid pressure oxidation was 76% overall of the fire assays for gold and 76% for fire assays for silver; and ◦ROM heap leaching was 75% for cyanide soluble gold and 12.2% for fire assay silver. •base mining cost of $1.45 per ton with an additional incremental $0.016/ton applied to each bench below the 4660 level; •variable ore processing costs based on calculated NSR block valuesgeometallurgical domains and the cutoff therefore varies from block to block. SRK worked with our predecessor to construct updated three-dimensional wireframes for alterationsulfur content; and oxidation zones uses geo software. Estimation of gold, silver, sulfur •general and rock hardness in a three-dimensional block model was completed by SRK and is reflectedadministrative cost $0.44 per ton. See Table 11-14 in Section 11 of the 2023 Hycroft Technical Report.TRS for a more detailed presentation of the economic parameters for mineral resource estimation. Metallurgical recoveryMineral resources are not mineral reserves and detailed economic considerations have not been applied. Modifying factors for mine and process design have not been applied.
Internal Controls and Material Assumptions IMC developed and updated the block model for the 2023 Hycroft TRS. Below is the summary of the work and checks they used to estimate measured, indicated or inferred mineral resources set forthdevelop the block model. The Hycroft Mine resource model includes data from 1981 to 2022 and includes 5,601 holes, representing 2,588,826 feet of drilling. The drill hole collar locations are shown in the table above,2023 Hycroft TRS and later in this text. In the 2023 Hycroft TRS, there are variable based upon5,323 drill holes in the domainresource model area of which 188 have been drilled to define stockpiles or the Crofoot leach pad. In addition to drilling activity, the Company has also conducted geophysical surveys, soil and processing method applied. Detailed domain specific metallurgical recoveriesrock chip sampling programs, field mapping, historical data compilation, and regional reconnaissance at the Hycroft Mine site. These efforts are designed to improve the understanding of the known mineralization, as well as provide data for further exploration of the greater property position. A soil sampling grid was conducted over the Vortex and Brimstone areas historically (1,797 samples) and was extended approximately 5,200 feet north and 29,600 feet south of the mine in 2011-2012 (1,834 samples). The soil sampling program was conducted primarily along the East Fault exposure, which is a primary ore-controlling feature at Vortex and Brimstone. Soil samples are taken on an evenly spaced grid, and screened for coarse material and wind-blown material, resulting in a fraction between 2 mm and 180 µm being prepped for analysis. These samples are considered representative of local soil geochemistry and are used to estimate measured, indicated or inferred mineral resourcesguide the regional exploration effort. Rock chip sampling has been conducted both historically in the active mine area, and on a regional basis (2008-present). A database of 2,416 samples has been compiled, covering the greater land position. Au values range from 0 to 0.372 ppm, while Ag values range from 0 to 71.8 ppm. Rock chip samples have been taken on most outcrops, with a focus on alteration and potential mineralization. These samples are set forth in Table 11-21 in Section 11 ofused as a guide to exploration and are point samples only. The land position has been surveyed with both gravity and induced polarity (“IP”) geophysical techniques by Hycroft. The current ground-based gravity survey covers approximately 130 square miles, centered on the Hycroft Technical Report, including Au and Ag recoveries by domain for ROM Heap Leach Recovery, 3∕4” Crushed Heap Leach Recovery, and 1∕2” Crushed Heap Leach Recovery.mine site. Gravity indicates
Measured, indicatedseveral structural features and inferreddensity changes. Gravity has also defined the basin edge to the west, approximately four miles west of the Brimstone Pit.
Ground IP surveys were run over the mine site and Vortex in 2007 and extended outward in 2011 to cover approximately 24 square miles. The survey results focus on chargeability anomalies, that potentially identify sulfide material (> approximately 1.5%) at depth, and resistivity anomalies, that potentially identify silicification at depth. In 2022, a hyperspectral imaging flyover of the Hycroft property was conducted by SpecTIR Advanced Hyperspectral Solutions. Both Longwave Infrared (“LWIR”) and Shortwave Infrared (“SWIR”) imaging were collected with the intent of helping identify key minerals on the surface to focus reconnaissance mapping and soils programs. Field mapping was historically carried out in all active mine areas. Mapping focuses on structure, bedding, joints, lithology, and alteration. The near-mine data is incorporated into the three-dimensional geology model, while the regional work is focused on defining exploration targets for future drilling. A regional geology map covering the land position was compiled in 2012. The drill hole database was assembled over many years by multiple companies using at least four different drill methods. There are stockpiles and historical leach pads at the Hycroft Mine that are within the block model area. Many of those have been drilled after the original excavation of hard rock by sonic or rotary methods. The stockpile holes have been used to estimate the stockpile and leach pad areas, they have not been used to estimate in-situ rock. In total, the Hycroft Mine database contains 5,601 drill holes with 500,214 sample intervals. Within the area of the block model, there are 5,532 drill holes with 490,452 drill intervals amounting to 2,537,335 feet of drilling. The block model was verified by several methods before being used to determine mineral resources were estimated based upon an open pit optimization utilizing the following assumptions:resource, including: •assumed prices for golddetailed Visual Checks of $1,400 per ounce and for silver of $18 per ounce;Drilling versus Block Estimates; •variable Au and Ag Recoveries based on geometallurgical domains; •mining cost of $1.45 per ton;
•variable ore processing costs based on geometallurgical domains;
•G&A cost of $0.65 per ton;
•pit slope of 45 degrees;swath Plots; and
•NSR incorporates AuIMC Smear Check. IMC completed visual checks on plan and Ag sales costs of $0.75 per ounce beyond the costs usedsection for pit optimization. Please see Table 11-21 in Section 11all of the estimated variables in the model. In addition to IMC visual checks, the Hycroft Technical Reportengineering and geology team on site also reviewed the model and assisted IMC with identifying and correcting coding issues prior to finalizing the block model.
Swath plots are a practice now common among resource modelers to provide a visual indication if the block model follows the grade trends indicated by the supporting data and if there is any observable local bias in the block grade estimation. Quality assurance and quality control methods utilized in the 2023 Hycroft TRS included the use of a test by IMC to understand the amount of grade smoothing within the block model and to confirm that the model grades are not high biased, referred to internally as the “smear check.” The procedure utilized by IMC was as follows: •a range of cutoff grades were selected for a more detailed tabular presentationthe check process, generally bracketing the potential planning cutoff grades; •for each cutoff grade being tested, the blocks above cutoff were identified; •all composites contained within those blocks were identified; •the average grade of the resource pit optimization parameters for oxide, transitionalcomposites and sulfide oresblocks were tabulated; and multiple cost and metallurgical recovery factors by domain that were also used in the calculation of block NSR values for reporting purposes. Below is a summary of gold and silver ounces contained in our estimated measured, indicated, and inferred resources as of December 31, 2019 and December 31, 2020, as there were no reductions to mineral resources from mining in 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Au Oz (000s) | | Ag Oz (000s) | | | | | As of December 31, | | Change in Oz | | As of December 31, | | Change in Oz | | Classification | | Material | | 2020 | | 2019 | | Au Oz | | % | | 2020 | | 2019 | | Ag Oz | | % | | Measured | | Oxide | | 60 | | | 60 | | | — | | | — | % | | 1,267 | | | 1,267 | | | — | | | — | % | | | Transitional | | 232 | | | 232 | | | — | | | — | % | | 4,038 | | | 4,038 | | | — | | | — | % | | | Sulfide | | 356 | | | 356 | | | — | | | — | % | | 10,248 | | | 10,248 | | | — | | | — | % | | | | | 649 | | | 649 | | | — | | | — | % | | 15,554 | | | 15,554 | | | — | | | — | % | | Indicated | | Oxide | | 17 | | | 17 | | | — | | | — | % | | 599 | | | 599 | | | — | | | — | % | | | Transitional | | 117 | | | 117 | | | — | | | — | % | | 5,369 | | | 5,369 | | | — | | | — | % | | | Sulfide | | 2,916 | | | 2,916 | | | — | | | — | % | | 87,470 | | | 87,470 | | | — | | | — | % | | | | | 3,050 | | | 3,050 | | | — | | | — | % | | 93,438 | | | 93,438 | | | — | | | — | % | | Measured and Indicated | | Oxide | | 77 | | | 77 | | | — | | | — | % | | 1,867 | | | 1,867 | | | — | | | — | % | | | Transitional | | 349 | | | 349 | | | — | | | — | % | | 9,407 | | | 9,407 | | | — | | | — | % | | | Sulfide | | 3,272 | | | 3,272 | | | — | | | — | % | | 97,718 | | | 97,718 | | | — | | | — | % | | | | | 3,699 | | | 3,699 | | | — | | | — | % | | 108,992 | | | 108,992 | | | — | | | — | % | | Inferred | | Oxide | | 44 | | | 44 | | | — | | | — | % | | 1,651 | | | 1,651 | | | — | | | — | % | | | Transitional | | 156 | | | 156 | | | — | | | — | % | | 5,570 | | | 5,570 | | | — | | | — | % | | | Sulfide | | 5,516 | | | 5,516 | | | — | | | — | % | | 121,930 | | | 121,930 | | | — | | | — | % | | | Fill | | 53 | | | 53 | | | — | | | — | % | | 603 | | | 603 | | | — | | | — | % | | | | | 5,769 | | | 5,769 | | | — | | | — | % | | 129,754 | | | 129,754 | | | — | | | — | % |
Cautionary Note to U.S. Investors Regarding Mineral Resources.Information concerning ourThe mineral propertiesresource estimates included herein or incorporated by reference herein, including in the 2023 Hycroft Technical Report and in this 2020 Form 10-K includes information that hasTRS, have been prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining RegistrantsRules as set forth in subpart 1300 of Regulation S-K which we elected to adopt early and became widely applicable on January 1, 2021. These standardsdisclosures differ significantlyin material respects from the previously applicable disclosureprior requirements ofset forth in Industry Guide 7, including in that mineral resource information was not permitted and mineral reservesresources have been calculated in accordance with the provision of subpart 1300 of Regulation S-K. These standards differ significantly from the disclosure requirements of Industry Guide 7 in that mineral resource information contained herein may not be comparable to similar information disclosed by U.S. companies that have not implemented the Modernization Rules promulgated by the SEC. Under SEC standards, mineralization, such asare mineral resources, may not be classified as a “mineral reserve” unless the determination has been made that the mineralization could be economically and legally producedproduce or extracted at the time of the mineral reserve determination by a qualified person as defined by subpart 1300 of Regulation S-K.determination. The term “economically,” has been interpreted to meanas was used in the SEC’s Industry Guide 7 definition of mineral reserves, means that profitable extraction or production has been established or analytically demonstrated in a pre-feasibility or feasibility study to be viable and justifiable under reasonable investment and market assumptions. The term “legally” as it relates toused in the SEC’s Industry Guide 7 definition of mineral reserves, has been interpreteddoes not to imply
that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a mineral reserve to exist, we must have a justifiable expectation, based on applicable laws and regulations, that issuance of permits or resolution of legal issues necessary for mining and processing at a particular deposit will be accomplished in the ordinary course and in a timeframe consistent with our current proposed mine plans. As used in this 2020 Form 10-K, theThe terms “mineral resource”, “measured mineral resource”, “indicated mineral resource”“Mineral Resource,” “Measured Mineral Resource,” “Indicated Mineral Resource,” and “inferred mineral resource”“Inferred Mineral Resource” are defined and used in accordance with the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K. Rules. You are specifically cautioned not to assume that any part or all of the mineral deposits (including any mineral resources) in these categories will ever be converted into mineral reserves, as defined by the SEC. You are further cautioned that, except for thatany portion of mineral resources, as applicable, classified as mineral reserves, mineral resources do not have demonstrated economic value. Inferred mineral resources have a high degree of uncertainty as to their existence as to whether they can be economically or legally mined. EstimatesUnder the Modernization Rules, estimates of inferred mineral resources may not form the basis of an economic analysis. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. A significant amount of exploration must be completed in order to determine whether an inferred mineral resource may be upgraded to a higher category. Therefore, you are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it will ever be upgraded to a higher category. Likewise, you are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be upgraded to mineral reserves. Internal ControlsTechnical Report Summaries and Material Assumptions
Seller’s drill hole database has been validated by Seller’s exploration group. A review and validation of the collar coordinate, down-hole survey, and geology data was completed in the third quarter of 2014 by Seller’s predecessor’s geologists.
SRK completed data verification and validation in advance of geological modeling and resource estimation, first between May and July 2017, for gold, silver, sulfide sulfur, and total sulfur analytical results, and for logged geological data. During this review, the analytical databases were found to be incomplete. SRK worked with Seller’s predecessor to extract all available analytical data from the acQuire database. This resulted in a 58% increase in the sulfide sulfur dataset. The compilation of gold and silver assay values in parts per million (PPM) units resulted in more intervals with valid Au CN:FA values for oxide modeling, and greater precision for grade estimation. SRK completed data verification for the new analytical database in September 2017.
Model validation was approached through visual and statistical methods. Visual comparison was done on sections and in plan for each area of the deposit. Statistical comparison was achieved using comparative population statistics and swath plots. Reconciliation of the model, excluding fill, to available production data was completed. Material mined by Seller’s predecessor between 2008 and 2015 was compared to blocks in the mined volume. Model and production data are summarized in the Hycroft Technical Report. The model compared well to historical production records for total gold ounces. The model has about 5% more tonnage, and about 4% lower gold grade, than the reported production. Reported silver grade was about 7% lower than what was predicted by the model and resulted in silver ounces produced about 12% less than what was predicted from the block model.
A visual inspection of the model in plan and section confirmed that grades were well correlated between the blocks and the composite data in each area.
Statistics by interpolation domain (grade shell) were used to compare the Au and Ag NN (polygonal) and OK and IDW, where applicable, grades against each other. The NN interpolation method provides a declustered representation of the sample grades and therefore, the resulting mean grades of any other method should be similar to the mean grade of the NN estimate at a zero-cutoff grade. For Au, the OK estimates were within acceptable tolerances of the NN; approximately ±3% for each domain.
The global mean estimated OK grade at zero cut-off was within ~1% of the NN estimate. For Ag, the OKscientific and IDW estimates were within acceptable tolerances of the NN; approximately ±5% for each domain, with the higher variances corresponding to the poorly sampled Bay and Lewis domains. The global mean estimated grade at zero cut-off was within ~1.2% of the NN estimate. A swath plot is a graphical display of the grade distribution derived from a series of bands, or swaths, generated in several directions through the deposit. Using the swath plot, grade variations from the OK and IDW (where applicable) model are compared to the distribution derived from the NN grade model.
On a local scale, the NN model does not provide reliable estimations of grade, but on a much larger scale it represents an unbiased estimation of the grade distribution based on the underlying data. Therefore, if the OK/IDW model is unbiased, the grade trends may show local fluctuations on a swath plot, but the overall trend of the OK/IDW data should be similar to the NN distribution of grade.
Swath plots were generated along east-west, north-south directions, and for elevation. Swath widths were 200 feet wide for both east-west and north-south orientations, and 80 feet wide in the vertical. Au grades were plotted by OK/IDW (red traces) and NN (blue traces) for all estimated blocks.
Based on the swath plots, it was concluded that there is a reasonable correlation between the modeling methods. The degree of smoothing in the OK/IDW model is evident in the peaks and valleys shown in some swath plots; however, this comparison shows close agreement between the OK/IDW and NN models in terms of overall grade distribution as a function of easting, northing, and elevation; especially where there are high tonnages (as shown by the vertical bars on the plots).
Given that process recoveries and costs in the resource model are grade and/or domain dependent, the application of standard cut-off grades for resource reporting purposes is not feasible. The resources are, therefore, reported with respect to a block NSR value which is calculated on a block-by-block basis. The resource is also constrained by an optimized (Whittle) resource pit, in order to demonstrate that the defined resources have reasonable prospects of eventual economic extraction, a part of the New Mining Rules criteria. All classification categories were considered in the resource pit optimization. The estimation of the NSR values and development of the Whittle resource pit requires assumptions around technical and economic parameters such as process recoveries, mining methods and operating costs.
Drilling
Our exploration model includes data from 1981 to December 2018 and includes 5,501 holes, representing 2.5 million feet of drilling. Exploration drilling was started in 1974 by Duval Corporation, and continued through various owners. Seller’s predecessor commenced systematic exploration and resource development drilling starting in late 2006. Drilling has been focused on oxide mineral reserve delineation, sulfide resource definition, sulfide exploration, condemnation drilling for facilities, silver data and both geotechnical and metallurgical core samples. A combination of rotary, reverse circulation and core drilling techniques has been utilized to verify the nature and extent of mineralization. From late-2006 to August 31, 2016, Seller and its predecessor completed 1,970 exploration holes, totaling approximately 1.45 million feet.
Seller drilled an additional 54 holes, totaling 4,706 feet starting in December 2018 through April 2019 confirming the grades of the previously mined sulfide ore stockpiles, which we have been using as the initial ore feed for Seller’s restart operations.
Drill hole collar locations are shown in the figure below.
Consistent with Seller’s suspension of mining operations and conducting only care and maintenance activities oninformation concerning the Hycroft Mine during 2017in this 2023 Form 10-K has been reviewed and through December 2018, they did not conduct additional drilling activities, other than to obtain ore for testing purposes. In December 2018, Seller began confirmation drilling of certain sulfide ore stockpiles that we planned to mine.
Any expansionapproved by third-party “Qualified Persons” under the Modernization Rules, including Ausenco, IMC, and WestLand. For a description of the Hycroft Mine necessarykey assumptions, parameters and methods used to exploit any additionalestimate mineral reserves thatresources included in this 2023 Form 10-K, as well as data verification procedures and a general discussion of the extent to which the estimates may be established through our exploration drilling program that are not located withinaffected by any known environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant factors, please review the 34-year mine plan contemplated in the2023 Hycroft Technical Report, will require us to obtain all permits, approvals and consents of regulatory agencies responsible for the use and development of mines in Nevada.TRS.
ITEM 3. LEGAL PROCEEDINGS From time to time, we arethe Company may be involved in various legal actions related to our business, some of which are class action lawsuits. We doThe Company does not believe, based on currently available information, that contingencies related to any pending or threatened legal matter will have a material adverse effect on ourthe Company’s consolidated financial statements, although a contingency could be material to ourthe Company’s results of operations or cash flows for a particular period depending on ourits results of operations and cash flows for such period. Regardless of the outcome, litigation can have ana material adverse impact on usthe Company because of defense and settlement costs, diversion of management resources, and other factors. Warrant Holder Litigation The Company has been named as a defendant in four pro se actions that assert claims for breach of contract and declaratory judgment arising from or directly relating to Warrants purportedly held by the Pro Se Plaintiffs in the Delaware Chancery Court. In various forms, they allege that the Company or its predecessor entities breached the Warrant Agreement, dated October 22, 2015, and/or related Amendment Agreement, dated February 26, 2020. In sum, in all four actions, Plaintiffs allege, by or on behalf of “Warrant holders,” that the Company or its predecessor(s) breached these agreements by failing to make proper “Mechanical Adjustments” to the Warrants in accordance with terms of the Warrant Agreement upon the occurrence of certain business transactions and events, including the May 29, 2020, Business Combination. On January 10, 2024, in response to the Company’s motion to consolidate the four pro se actions, the Delaware Chancery Court ordered the parties to submit a proposed briefing schedule for the defendant’s preliminary motions to dismiss. ITEM 4. MINE SAFETY DISCLOSURES We believe that "theThe Company believes “the miner is the most important thing to come out of a mine"mine” and we supportit supports that belief through ourits philosophy of "continuous“continuous improvement."” The CompanyCompany’s mandated mine safety and health programs include employee and contractor training, risk management, workplace inspection, emergency response, accident investigation, and program auditing. These programs are a focus for ourthe Company’s leadership and top management and are essential at all levels to ensure that ourits employees, contractors, and visitors operate safely. OurThe Company’s goal for these programs is to have zero workplace injuries and occupational illnessillnesses and weit will focus on continuous improvement of ourits programs and practices to achieve this goal and we areis implementing programs and practices to align ourits safety culture with that goal.
OneDuring the year ended December 31, 2023, the Hycroft Mine reported no lost time accidents and achieved one million work hours without a lost time incident in the second quarter of 2023. The Hycroft Mine’s TRIFR for the trailing 12 months, which includes other reportable incidents, is one of the metrics we use to measure ourassess safety performance, and it is well below industry averages and significantly below pre-2021 historical levels observed at the Hycroft Mine’s Total Reportable Incident Frequency Rate ("TRIFR").Mine. During the year ended December 31, 2023, the Company continued its critical focus on safety, including allocating additional personnel, resources, workforce time, and communications to mine safety. These actions contributed to maintaining a TRIFR of Nil (0.00) at
December 31, 2023 and December 31, 2022. The Hycroft Mine’s incident rate per 200,000 man-hours worked (including contractors) was 2.30 atCompany remains committed to adapting safety initiatives as necessary to ensure the endwell-being of 2020, as compared to 5.05 in January of 2020our workforce, contractors, and the mining industry average of approximately 1.9 for 2020. While Hycroft Mine has improved in 2020, we are determined to continue to significantly improve safety performance. Our priority and focus is to advance the safety culture by focusing on three pillars: 1) engagement; 2) innovation; and 3) ownership. We have also recruited new leadership from strong safety cultures in the mining industry that will help us rebuild the Hycroft Mine safety culture utilizing elements in advanced safety practices and management and make them the cornerstone for our safety success. Consequently, we are infusing policies, practices, and people to improve safety performance in all site activities.visitors. The operation of the Hycroft Mine is subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”)MSHA under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).Act. MSHA inspects our minethe Hycroft Mine on a regular basis and issues various citations and orders when it believes a violation has occurred under the Mine Act. Following passage of The Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the numbers of citations and orders charged against mining operations. The dollar penalties assessed for citations issued hashave also increased in recent years. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Annual Report on2023 Form 10-K.
PART II ITEM 5. MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
OurThe Company’s common stock beganis publicly trading on the Nasdaq Capital Market under the symbol “HYMC” on May 30, 2020. Prior to that time, shares of Class A common stock traded on the Nasdaq Capital Market under the symbol "MUDS".“HYMC.”
On March 22, 2021,13, 2024, the last reported sale price of ourthe Company’s common stock on the Nasdaq Capital Market was $7.11.$2.3200. As of March 22, 2021,13, 2024, there were 59,901,306 shares21,005,192 shares of ourthe Company’s common stock issued and outstanding, and we had 58there were 244 registered shareholdersstockholders of record. Dividend Policy
We haveThe Company has never paid dividends or repurchased shares of ouron its common stock and currently havehas no plans to do so. The Sprott Credit Agreement containcontains provisions that restrict ourthe Company’s ability to pay dividends and repurchase or redeem capital stock.dividends. For additional information on these restrictions, please see Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Debt covenants and Note 9 -– Debt, Net to our Consolidatedthe Notes to the Financial Statements.
Issuer Purchases of Equity Securities During the year ended December 31, 2020, we2023, the Company did not purchase any of ourits equity securities that are registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Act. The Sprott Credit Agreement contains provisions that restrict the Company’s ability to repurchase or redeem capital stock. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered salesOn November 28, 2022, the Company entered into a Note Purchase and Sale Agreement (the “Highbridge Agreement”) with Highbridge MSF International Ltd. (“Highbridge”) whereby the Company agreed to purchase and Highbridge agreed to sell, $11.1 million (including $0.2 million in accrued unpaid interest) of equity securitiesSubordinated Notes. The purchase of the Subordinated Notes was completed in two transactions: (i) cash consideration of $5.6 million; and (ii) the useissuance of such proceeds was previously provided on Form 8-K12B as filed50,000 shares of common stock with a grant date fair value of $0.4 million. In addition, the SEC on June 4, 2020.Company paid $0.1 million in legal fees related to the Highbridge Agreement. The purchase of the Subordinated Notes represented a discount of approximately 42% to the face value of the debt. See Note 9 – Debt, Net to the Notes to the Financial Statements for further details.
ITEM 6. SELECTED FINANCIAL DATA We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.[RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion which has been prepared based on information available to us as of May 12, 2021, provides information that we believe is relevant to an assessment and understanding of our consolidated operating results and financial condition. As a result of the completion of the Recapitalization Transaction, the financial statements of Seller are now the financial statements of the Company. Prior to the Recapitalization Transaction, the Company had no operating assets but, upon consummation of the Recapitalization Transaction, the business and operating assets of Seller sold to the Company became the sole business and operating assets of the Company. Accordingly, the financial statements of Seller and its subsidiaries as they existed prior to the Recapitalization Transaction and reflecting the sole business and operating assets of the Company going forward, are now the financial statements of the Company. The following discussion should be read in conjunction with our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”)SEC, as well as our consolidated financial statements (the "Financial Statements")Financial Statements and the notes thereto (the "Notes") included in this second amendment to our Annual Report on Form 10-K for the year ended December 31, 2020 ("Form 10-K/A").Notes. Terms not defined herein have the same meaning defined elsewhere in this 2023 Form 10-K. Introduction to the Company We are a gold and silver exploration and development company that owns the Hycroft Mine in the Financial Statementsprolific mining region of Northern Nevada. We are focused on exploring the Hycroft Mine’s claims comprising approximately 64,085 acres and developing the Notes. The following MD&A generally discusses our consolidated financial conditionHycroft Mine in a safe, environmentally responsible, and resultscost-effective manner. We ceased mining activities in November 2021, and as of operations for 2020December 31, 2022, we completed processing of gold and 2019silver ore previously placed on leach pads. We do not expect to generate Revenues from gold and year-to-year comparisons between 2020silver sales until after developing the Hycroft Mine and 2019.recommencing mining operations.
Introduction to the CompanyHealth and Safety
We arebelieve that safety is a U.S.-basedcore value and we support that belief through our philosophy of safe work performance. Our mandatory mine safety and health programs include employee engagement and ownership of safety performance, accountability, employee and contractor training, risk management, workplace inspection, emergency response, accident investigation, and program auditing. This integrated approach is essential to ensure that our employees, contractors, and visitors operate safely. During the year ended December 31, 2023, we reported no lost time accidents and achieved one million work hours without a lost time incident in the second quarter of 2023. The Hycroft Mine’s TRIFR for the trailing 12 months, which includes other reportable incidents, is one of the metrics we use to assess safety performance, and it is well below industry averages and significantly below pre-2021 historical levels observed at the Hycroft Mine. During the year ended December 31, 2023, we continued our critical focus on safety, including allocating additional personnel, resources, workforce time, and communications to mine safety. These actions contributed to maintaining a TRIFR of Nil (0.00) at December 31, 2023 and December 31, 2022. We remain committed to adapting our safety initiatives as necessary to ensure the well-being of our workforce, contractors, and visitors. Executive Summary During the year ended December 31, 2023, we continued Phase 2 of the 2022-2023 exploration drill program, completed portions of the metallurgical and variability test work, and continued to analyze drill assay data and information received during Phase 1 and Phase 2 of the 2022-2023 exploration drill program involving reverse circulation (“RC”) and core drilling that began in the third quarter of 2022. In March 2023, the Company completed the 2023 Hycroft TRS utilizing a conventional crushing, grinding, and flotation circuit that generates a concentrate to be fed to a POX autoclave facility commonly used for refractory gold producer thatores. Recent Developments Project Update 2022-2023 Exploration Drill Program In July 2022, the Company launched its 2022-2023 exploration drill program, which is focused on operating and developing our wholly ownedthe largest exploration program at the Hycroft Mine in nearly a safe, environmentally responsible,decade. The 2022-2023 exploration drill program is comprised of RC and cost-effective manner. Goldcore drilling. The overall focus of the 2022-2023 exploration drill program is to improve the understanding of the higher-grade intercepts, determine the sequencing of mine planning, develop opportunities to mine higher-grade ore early in the mine plan in order to enhance the project’s economics, and silver sales represent 100%test exploration targets outside the currently known deposits. To date, results are generally higher grade than reflected in the current resource model. As part of our operating revenuesPhase 2 drilling in 2023, approximately 11,000 meters of RC drilling were completed and approximately 4,000 meters of core drilling were completed on targets within the market pricesresource area focused on enhancing project economics and approximately 2,000 meters of goldcore drilling were completed on high-priority exploration targets outside the resource area. Additional exploration work completed in advance of drilling outside of the resource area includes geophysics and silver significantly impact our financial position, operating results,soil sample programs in high priority target areas highlighted from the hyperspectral work completed in 2022. Finalized Initial Assessment Technical Report The Company, along with its third-party consultants, completed and cash flows.filed the 2023 Hycroft TRS with an effective date of March 27, 2023. The 2023 Hycroft TRS included a mineral resource estimate for the Hycroft Mine is locatedas determined in accordance with the Staterequirements of Nevadathe Modernization Rules. The 2023 Hycroft TRS included measured and the corporate office is located in Denver, Colorado. The Hycroft Mine had proven and probableindicated mineral reservesresources of 11.910.6 million ounces of gold and 478.5360.7 million ounces of silver at December 31, 2020, as determined by deducting(15.2 million gold equivalent ounces) and inferred mineral reserves mined through December 31, 2020resources of 3.4 million ounces of gold and 96.1 million ounces of silver (4.6 million gold equivalent ounces), which are contained in oxide, transitional, and sulfide ores. For this study, IMC developed the Hycroft Mine resource block model which includes 1981 to 2022 data generated from 5,601 holes, representing 2,588,826 feet of drilling. Changes to the drill hole database for additional verification work completed during 2022, along with additional drilling conducted during 2021 and 2022, led to a change in the mineral reserves estimatedresource estimate, when compared with the mineral resource estimate contained in the 2022 Hycroft Technical Report at July 31, 2019.TRS. Operations restartMetallurgical and Variability Test Work
During the second quarteryear ended 2023, the Company completed a substantial portion of 2019, we restarted open pit miningthe metallurgical and flotation variability test work necessary for designing a sulfide milling operation, establishing (i) a comprehensive understanding of how each geologic domain will perform during operations, atand (ii) the Hycroft Mine,processing components and during the third quarter of 2019, produced and soldreagents required to optimize gold and silver which we have continuedrecoveries. Metallurgical and flotation tests produced promising results, with confirmed average flotation recoveries increasing to do on an approximate weekly basis since restarting. As part of the 2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels89% for gold and a loader, upgrades were made to the crushing system and leach pad space was added to the existing leach pads. During 2020, we added mobile equipment through rentals, began construction of additional leach pad space, and increased our total headcount in order to increase our mining rate and also initiated construction of a new leach pad93% for future production. As discussed throughout this MD&A, including within the Hycroft Mine section, during the year ended December 31, 2020 we have been unable to fully achieve our internal operating, processing, sales, and production cost targets, which has resulted in net operating losses and negative cash flows before financing activities creating substantial doubt about our ability to continue as a going concern. Refer to the Going concern subsection of the Recent Developments section of this MD&Asilver, up from 80% for additional details.
2020 Summary
We continued to ramp-up production at the Hycroft Mine in 2020 and to progress and develop our understanding of the requirements for implementing the proprietary two-stage sulfide heap oxidization and leach process on a commercial production scale. Following the May 29, 2020 Recapitalization Transaction, we also implemented a number of changes including hiring a new senior executive team and establishing a new leadership team at the mine with the technical talent and experience for implementing complex processing technologies. Additionally, as we operated pre-commercial test pads in 2020 we identified several important items as we worked to implement this novel processing technology.
•Senior management - We strengthened our executive management team with the addition of Diane R. Garrett, Ph.D., who was appointed as our President and Chief Executive Officer and as a director, effective as of September 8, 2020; Stanton Rideout, who was appointed as our Executive Vice President and Chief Financial Officer, effective as of October 20, 2020; Mike Eiselein, who was appointed as our Vice President, General Manager, effective as of October 27, 2020; and Jack Henris, who was appointed as our Executive Vice President and Chief Operating Officer, effective as of January 11, 2021. Refer to Executive management changes of the Recent Developments section for additional details.
•Senior operations management – We realigned our organizational structure and recruited several key individuals mostlyboth in the last three months of 2020 to bolster the on-site technical, financial, and operational teams, including:
◦James Berry, VP Exploration and Geology (former Romarco, Barrick);
◦Kenji Umeno, Process Manager (former Kinross Gold Corp., Fluor, Freeport-McMoRan Inc. (“Freeport”));
◦Jeff Griffin, Sr. Metallurgist (former Phelps Dodge, Freeport);
◦Santiago Garcia, Chief Metallurgist (former Agnico Eagle Mines Ltd., Newmont); and
◦New Mine Manager, Safety Manager, HR Manager, Controller and Project Manager.
•Technical team – We established an independent technical team comprised of2023 Hycroft personnel and industry-leading consultants including John O. Marsden (Metallurgium), Hazen Research Inc. and Forte Dynamics, Inc. (“Forte”) with expertise in metallurgy, mine plan optimization, and heap stacking designs to assist with the development of the mining andTRS. These findings inform further process plans and alternatives.
•Recapitalization Transaction – On May 29, 2020, we completed the Recapitalization Transaction, which as of the closing date, among other things, resulted in a cash balance of $68.9 million and 50,160,042 shares of our common stock issued and outstanding. In addition, upon closing, we had 34,289,999 outstanding warrants to purchase an equal number of shares of our common stock and 12,721,623 Seller Warrants to purchase 3,210,213 shares of common stock.
development and refining of crushing and grinding studies. Combined with data from the 2022-2023 exploration drill program, these results will guide mine plan design, mill circuit configuration, and ore haul truck specifications, to enhance the value of the Hycroft Mine. Balance Sheet and Equity Activities During the year ended December 31, 2023, the Company completed the following activities (discussed in further detail below) that strengthened the Company’s balance sheet: •Public offering - Maintained compliance with Nasdaq’s minimum share price rules by effecting a 1-for-10 reverse stock split effective November 14, 2023. •DuringRenegotiated cash collateral requirements for the fourth quarter of 2020, we improved our financial position through an upsized public offering for 9,583,334 units, with each unit consisting of one share of common stock and one warrant to purchase one share of common stock at a price of $10.50 per share. The public offering closed on October 6, 2020, providing us with net proceeds of approximately $83.1Company’s surety bonds which increased unrestricted cash by $9.1 million. •OuncesReactivated the “at-the-market offering” program (“ATM Program”) for aggregate gross proceeds of $1.1 million, less commissions and realized pricesoffering expenses of $0.3 million. - During 2020, 2024 Outlook The Company’s current plan is to operate safely as it continues exploration drilling, finalizing the process flow sheet for an updated technical report for recovering gold and silver from sulfide ore and maintaining the Hycroft Mine. Utilizing the assay results from the 2022-2023 drill program and variability test work program, the technical study will include trade-off studies and alternative analyses. The Company is currently considering various alternative analyses, including evaluating grinding methods, reviewing alternative flotation cell configurations, and completing a trade-off study for roasting equipment. The technical report is currently targeted for completion by the end of the first half of 2024. Results of Operations Revenues The following table provides a summary of gold and silver revenues for the Hycroft Mine produced 27,392(in thousands, except ounces and per ounce amounts): | | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Gold revenue | $ | — | | | $ | 32,249 | | | Gold ounces recovered | — | | | 14,032 | | | Gold ounces sold | — | | | 17,728 | | | Average realized price (per ounce) | $ | — | | | $ | 1,819 | | | | | | | Silver revenue | $ | — | | | $ | 980 | | | Silver ounces recovered | — | | | 37,281 | | | Silver ounces sold | — | | | 44,084 | | | Average realized price (per ounce) | $ | — | | | $ | 22.23 | |
During the year ended December 31, 2022, the Company completed processing of gold and 178,836 ounces of silver and sold 24,892 ounces of gold (average realized price of $1,779) and 136,238 ounces of silver (average realized price of $20.30). Our 2020 production levels have been negatively impacted byore previously placed on leach pads prior to ceasing mining inefficiencies and an inabilityoperations in November 2021. As a result, the Company does not expect to achieve consistent oxidation of sulfide ores consistent with the Hycroft Technical Report's commercial scale. •generate Proprietary processRevenues – During 2020, we made operational, technical staffing,from gold and reporting improvements for the two-stage, heap oxidation and subsequent leaching of transitional ores, which is discussedsilver sales until after further in the Processing section ofdeveloping the Hycroft Mine section. We also continued to enhance our understanding of the results yielded from oxidizing transitional ores, which was the primary type of ore stacked on the pre-commercial leach pads during 2020.
•Leach pad construction – During 2020, we spent $29.3 million on the leach pad expansion project. As discussed in the 2021 Outlook section, due to strategic shifts in our focus for 2021, we have temporarily deferred completing the construction and commissioning of the leach pad expansion. We expect to complete construction to the appropriate point in which we believe there would be minimal risk of adverse impacts to the leach pad. We also plan to complete the purchase of certain long-lead time items and continue to evaluate and apply value engineering for the project in 2021 with completion of construction and commissioning of the project in 2022.
•Cash flows and liquidity – Our available cash balance on December 31, 2020 was $56.4 million, following year-to-date 2020 net operating cash outflows of $110.5 million, cash outflows from investing activities of $31.1 million, and cash inflows from net financing activities of $188.7 million.
•Going concern – As of December 31, 2020, substantial doubt existed about our ability to continue as a going concern as we may need additional capital, which is contemplated based on, among other things, our current estimates of production, costs, metal prices, capital expenditures, and debt service obligations over the next twelve months from the filing date of this 2020 Form 10-K.
Recent Developments
Recapitalization Transaction
As discussed in Note 1 - Company Overview and Note 3 - Recapitalization Transaction to the Notes to the Financial Statements, on May 29, 2020, we consummated the Recapitalization Transaction as contemplated by a purchase agreement dated January 13, 2020, as amended on February 26, 2020 (the “Purchase Agreement”), by and among us, Acquisition Sub (as such term is defined herein) and Hycroft Mining Corporation ("Seller"). Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the direct subsidiaries of Seller and substantially all of the other assets of Seller and assumed substantially all of the liabilities of Seller. In conjunction with the Recapitalization Transaction, Seller’s indebtedness existing prior to the Recapitalization Transaction was either repaid, exchanged for indebtedness of the Company, exchanged for shares of our common stock or converted into shares of Seller common stock, and our post-Recapitalization Transaction indebtedness included amounts drawn under the Sprott Credit Agreement and the assumption of the newly issued Subordinated Notes (as such term is defined herein). Upon closing of the Recapitalization Transaction, our unrestricted cash available for use totaled $68.9 million and the number of shares of our common stock issued and outstanding totaled 50,160,042. In addition, upon closing, we had 34,289,999 outstanding warrants (including 10,249,000 5-Year Private Warrants (as such term is defined herein) that are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees) to purchase an equal number of shares of our common stock at $11.50 per share, and 12,721,623 warrants to purchase 3,210,213 shares of our common stock at a price of $44.82 per share (see Note 13 - Stockholders' Equity to the Notes to the Financial Statements for additional information). Upon closing of the Recapitalization Transaction and after giving effect to the terms of the business combination, the former holders of Seller’s indebtedness and common stock, including affiliated entities of such former holders, owned approximately 96.5% of our issued and outstanding common stock.
Total cost of sales and operating expenses GoingEffective January 1, 2023, the Company began reporting amounts for Mine site period concerncosts, Asset retirement obligation adjustments,
As discussedDepreciation and amortization, and Write-down of supplies inventories as Operating Expenses as this presentation aligns with how the business will be viewed and managed until such time that the Company develops the Hycroft Mine and recommences mining operations. Prior to January 1, 2023, Mine site periodcosts, Asset retirement obligation adjustments,Depreciation and amortization, and Write-down of supplies inventories were presented as Cost of sales. (The following notes are in Note 2 - Summary of Significant Accounting Policiesreference to the Notes to the Financial Statements, events and conditions exist that, when considered individually or in the aggregate, raise substantial doubt about our ability to continue as a going concern because without additional funding we may be unable to meet our obligations as they become due within one year after the date that the year-end 2020 financial statements were issued. Although we completed the Recapitalization Transaction during the 2020 second quarter and completed the underwritten public offering on October 6, 2020, for estimated proceeds net of discount and equity issuance costs of $83.1 million, using our internal forecasts and cash flow projection models, we currently project we will likely require additional cash from financing activities in less than 12 months from the date of this report to meet our operating and investing requirements and future obligations as they become due.Statements)
Our ability to continue as a going concern is contingent upon securing additional funding for working capital, capital expenditures and other corporate expenses so that we can increase sales by achieving higher cost-effective operating tonnages and recovery rates and generate positive cash flows.
COVID-19
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, which continues to spread throughout the United States. Efforts implemented by local and national governments, as well as businesses, including temporary closures, have had adverse impacts on local, national and global economies. We have implemented health and safety policies for employees, contractors, and visitors that follow guidelines published by the Center for Disease Control (CDC) and the Mine Safety and Health Administration (MSHA). During 2020, especially the fourth quarter, our operations were limited by COVID-19 related absences, however the impact did not significantly adversely affect our operations. The extent of the impact of COVID-19 on our operational and financial performance going forward will depend on certain developments, including but not limited to the duration and continued spread of the outbreak and strand mutations, the availability and use of vaccines, the development of therapeutic drugs and treatments, and the direct and indirect impacts on our employees, vendors, and customers, all of which are uncertain and cannot be fully anticipated or predicted. Since the Hycroft Mine represents the entirety of our operations, any further COVID-19 outbreaks at the mine site or any governmental restrictions implemented to combat the pandemic could result in a partial or an entire shutdown of the Hycroft Mine itself, which would negatively impact our financial position, operating results, and cash flows.
As a result of COVID-19, we have implemented numerous policies and initiatives, including, but not limited to:
•General travel and site access restricted to business-critical needs; discretionary travel strongly discouraged;
•Health and temperature checks required prior to boarding mine site transportation buses and prior to entering the mine site for all other employees and visitors;
•Increased cleaning and disinfecting of common areas, including mobile mining equipment cabs;
•Use of face coverings and social distancing, including limiting meetings to essential people with increased use of conference calls and webinars;
•Communications informing employees of their ability to take paid-leave for COVID-19-related matters;
•Employees who can have been permitted to work remotely; and
•Regularly monitoring local, state, and national publications and guidance for routine discussion among executives and management.
To date, COVID-19 related absences have limited our operations, but this did not materially disrupt our operations. Additionally, we have not experienced any material disruptions to our supply chain because of COVID-19. However, we can provide no assurance that as COVID-19 case spikes continue across the country, including in the vicinity of the Hycroft Mine, that our operations will not be materially adversely affected.
Executive management changes
Diane R. Garrett, Ph.D., was appointed as the Company’s President and Chief Executive Officer and as a director, effective as of September 8, 2020, succeeding Stephen Jones, the former interim CEO. Dr. Garrett has over 25 years of senior executive management experience in the mining industry and an exceptional track record for developing projects and building companies and received her Ph.D. in Engineering and her Masters in Mineral Economics from the University of Texas at Austin.
Stanton Rideout was appointed as the Company's Executive Vice President and Chief Financial Officer, effective as of October 20, 2020, succeeding Jeffrey Stieber, as former interim CFO. Mr. Rideout is a seasoned financial executive and has more than 30 years of senior executive experience in the mining and manufacturing industries and earned his Master’s in Business Administration from the University of Evansville and his Bachelor of Science, Business/Finance, from Western Kentucky University. Mr. Rideout is a Certified Public Accountant.
Jack Henris was appointed as the Company's Executive Vice President and Chief Operating Officer, effective as of January 11, 2021. Mr. Henris is a highly experienced mining operations executive with more than 35 years of experience in senior operations positions with major mining firms and holds a Bachelor of Science in Geological Engineering from the South Dakota School of Mines and Technology.
Technical review summary
The new leadership team established at the mine launched into an extensive and detailed review of the Hycroft Mine and took immediate steps to rectify operational shortcomings, significantly reduce costs, and put in place an operating team aligned with the Company’s long-term strategy to establish the Hycroft Mine as a long-life, low-cost gold and silver producer. To date, the team has made significant strides at the Hycroft Mine through elevating the safety performance, improving the culture at Hycroft, establishing operational improvements, reducing spend, and identifying several areas for continued enhancement. The 2020 actions were quickly implemented and, in the fourth quarter alone, we saw significant improvement in costs as we reassigned our workforce to reduce our reliance on contractors as well as improved safety performance with a more than 50% year-over-year reduction in the TRIFR alone. Incident and near miss reporting increased as expected as the team initiated numerous campaigns to recognize, report, and eliminate safety hazards. In 2021, we expect to continue to see additional benefits from these 2020 actions.
In the fourth quarter of 2020, we formed a technical team to support the new leadership team in ongoing data analysis, developing processing models for future larger-scale sulfide leach operations and incorporating data and results from the pre-commercial leach pads. The team is comprised of industry leading consultants with expertise in metallurgy, open pit mining and heap leach processing, heap leach stacking and modeling and other process technologies, and the team also has access to a leading research and development laboratory. The mine site’s process team and leadership in conjunction with the technical team focused its efforts on identifying and investigating opportunities for improvements in operating parameters in the sulfide heap oxidation and leach process resulting in additional work plans as described in the following 2021 Outlook section.
2021 Outlook
During 2021, we intend to focus our efforts on placing the Hycroft Mine in a position for a future ramp up of production at the appropriate time. Our focus for 2021 will entail mining and processing run-of-mine oxide and transitional ores aimed at maximizing ounce production and cash flows and preserving our cash. Compared to sulfide ore, run-of-mine oxide and transitional ore can be processed at a lower cost because this material does not require crushing, rehandling, or soda ash reagent application, and the shorter recovery cycle reduces working capital. The run-of-mine operating plan for 2021 will provide us the opportunity to complete and evaluate the results of the ongoing technical and optimization work for the proprietary two-stage heap oxidation and leach process. Based upon the findings and results of this evaluation process, we may update or file a new technical report. We currently have established goals and budgeted estimated costs for this work in 2021 or 2022.
Production outlook
Although the 2021 run-of-mine operating plan reduces annual mining activity from 2020, we expect to increase total annual production to 45,000 - 55,000 ounces of gold and 400,000 - 450,000 ounces of silver by drawing down inventory that has been previously stacked on the leach pads and stacking run-of-mine oxide and transitional material with a shorter recovery cycle. We anticipate that mining in the first four months of 2021 will be performed using the existing Hycroft fleet and a rental fleet, moving approximately 1.5 million tons per month of ore and waste. For the remainder of the year, we intend to mine approximately 500,000 tons of oxide and transitional ore and waste per month with a more cost-effective mining fleet. The run-of-mine operating plan will allow us to maintain our existing workforce while allowing time to optimize the mining plan, take additional steps to define the ore body, and resolve technical issues related to developing processes and procedures for the efficient and effective recovery of gold and silver from the two-stage heap oxidation and leaching of sulfide ore, thereby positioning the mine site for the first phase ramp up and future growth. At current metal prices, our full-year 2021 production costs are expected to exceed gold and silver revenues due to fixed costs and lower planned run-of-mine volumes. The run-of-mine volumes reflect the current processing capacity which is limited until we can complete expenditures necessary to refurbish the North Merrill-Crowe plant and construct the second refinery.
Technical activities
During the last few months of 2020 and into 2021, we have worked alongside our industry leading consultants to identify and investigate opportunities for improvements in operating parameters for the two-stage sulfide heap oxidization and leach process. The result of the work to date has identified a number of items that were not considered or included in the original plan and design but are critical to the success of this process. These findings included:
(1)adding a forced air injection system for the leach pad which is a key component of the oxidation process;
(2)developing a system for segregating solution flows to and from the heap leach pad to avoid co-mingling of solutions among heap lifts and ore processing stages that negatively impact recoveries and conditions on the leach pads;
(3)identifying that the finer crushed material requires agglomeration in order to achieve optimal permeability and gold and silver recoveries;
(4)understanding that higher soda ash, caustic soda, and cyanide consumption will be required which we experienced throughout the 2020 pre-commercial test pad programs and recently confirmed through the review of the test work;
(5)determining that some transitional ores are more economically attractive when processed as direct leach, run-of-mine material; and
(6)concluding that additional variability metallurgical and mineralogy studies will be required to better understand each of the geometallurgical domains in the ore body. While there was some variability work completed in the past, the recent test work has revealed that additional variability test work and compositing is necessary to fully understand the geometallurgy of each domain, and that additional sampling, including sampling below the water table where the predominance of the sulfide resources exist, is required given the complexity and variability of the large ore body.
The additional variability test work will also include detailed mineralogy studies as it is important to understand the role other minerals may play in the overall oxidation process and to enhance our ability to measure oxidation rates accurately and consistently. We have developed an approximate $10.0 million program for drilling and additional metallurgical and mineralogical studies in 2021. This program of work has been approved by our Board of Directors and is expected to be funded from existing cash and our current operating plans.
Based on our recent understanding of the two-stage heap oxidation and leach process, and consistent with our strategy to position the Hycroft Mine for a ramp up at the appropriate time, much of our technical efforts for 2021 will include focusing on achieving the below items:
•Pre-commercial leach pads – We expect to mine and stockpile at least 300,000 tons of sulfide ore in 2021 that, once sufficient additional work on the proprietary two-stage heap oxidation and leach process has been completed, will be available for testing to further refine operating parameters and measure its performance for large scale application of the oxidation heap leach.
•Leach pad expansion – We developed a stacking plan for the 2021 run-of-mine plan that utilizes existing leach pads, preserving the new leach pad for sulfide ores, and facilitates deferring the capital expenditures to complete and commission the new leach pad into 2022. During the upcoming year, in conjunction with the technical team, we plan to engage with engineering firms to assess value engineering opportunities and evaluate potential design changes to the current leach pad plans to better support the sulfide oxidation process.
•Technical analyses – The technical work programs taking place in 2021 may provide information for evaluating enhancements, updates, and opportunities for the novel process, while also considering processing technologies for certain ores that may generate enhanced value.
•Mine planning and exploration – The mining team was expanded to include a professional with expertise in geologic modeling and a track record for establishing successful exploration and geology programs. The mining team, together with Forte and the exploration team, are working to identify additional opportunities to explore areas with higher grade potential and identify mine plan enhancements for improved cash flows.
•Constraints to growth – The Hycroft Mine’s future ramp up is dependent on eliminating current mining and processing constraints. As it relates to mining, when we are ready to ramp up production, we will need to acquire a mining fleet capable of achieving targeted production, and recruit and train operators and maintenance staff. For processing, we will need to: (i) complete planned repairs to the Brimstone Merrill-Crowe plant and refinery; (ii) restore and recommission the North Merrill-Crowe plant, and complete detailed engineering, permitting, and installation for the adjacent refinery; (iii) ensure we have sufficient reagent availability and storage, handling, and application systems; and (iv) evaluate other supporting process plant and equipment required for future growth, namely material handling systems and crusher capacity.
Although the above items set forth our current expectations of focus during 2021, as information, test results, and data becomes available to us during the upcoming year, such findings may modify the scope, nature, and timing of technical, testing, engineering, and growth planning work actually performed.
Hycroft Mine
Operations
The following table provides a summary of operating results for the Hycroft Mine, which was restarted in April 2019:
| | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | | 2020 | | 2019 | | Ore mined - crusher feed | (ktons) | | 4,941 | | 3,147 | | Ore mined - run of mine | (ktons) | | 1,873 | | 939 | | Total ore mined | (ktons) | | 6,814 | | 4,086 | | Waste mined | (ktons) | | 4,815 | | 321 | | Total mined and rehandled | (ktons) | | 11,629 | | 4,407 | | | | | | | | Waste tons to ore tons strip ratio | (#) | | 0.71 | | 0.08 | | | | | | | | Ore grade mined - gold | (oz/ton) | | 0.014 | | 0.019 | | Ore grade mined - silver | (oz/ton) | | 0.261 | | 0.122 | | | | | | | | Production - gold | (oz) | | 27,392 | | 9,561 | | Production - silver | (oz) | | 178,836 | | 70,332 | | | | | | | | Ounces sold - gold | (oz) | | 24,892 | | 8,593 | | Ounces sold - silver | (oz) | | 136,238 | | 52,036 | | | | | | | | Average realized sales price - gold | ($/oz) | | $ | 1,779 | | | $ | 1,490 | | | Average realized sales price - silver | ($/oz) | | $ | 20.30 | | | $ | 17.41 | |
As shown above, tons mined, ounces produced, and ounces sold significantly increased during the year ended December 31, 2020, compared to the prior year due to restarting mining and operations in 2019. During the second quarter of 2019, we restarted open pit mining operations at the Hycroft Mine, and, during the third quarter of 2019, we produced and sold gold and silver, which we have continued to produce with sales occurring on an approximate weekly basis since restarting.
Mining
As shown in the table above, tons mined, ounces produced, and ounces sold significantly increased during the year ended December 31, 2020 compared with the prior year as we benefited from a full year of operations in 2020 and only eight months of mining in 2019. Operations were restarted in the second quarter of 2019 and, each quarter since restarting, generally there has been an increase in tonnage mined and placed on the leach pads, most notably in the second quarter of 2020 following the arrival and commissioning of mobile mining equipment rentals (nine haul trucks and one loader).
The gold grades of ore mined during 2020 were as planned and decreased from the comparable period of 2019 in which existing higher grade stockpile ore was mined prior to starting any drilling and blasting. During the first quarter of 2020, we commenced in-pit contractor drilling and blasting activities that continued through the fourth quarter of 2020, to provide fresh ore feed for the crusher, run-of-mine hauling, and waste removal in support of the full year plan.
Crushing
The crusher performed well during the second half of 2020, generally meeting internal targets for product fraction size, tonnage rates, and availability, as we continued to improve equipment and operating systems to ensure ongoing reliability. In the fourth quarter of 2020, tons crushed decreased as we moved to processing transitional ore as run-of-mine material and direct leaching.
Processing
During the second half of 2020, we made the following progress on the existing pre-commercial leach pad operations: (1) improved the reagent island including upgrading the agitator system to allow for more soda ash concentration in solution thereby increasing the application rate; (2) technical staffing additions; and (3) improved leach pad data gathering and reporting protocols. These improvements combined with the new technical leadership resulted in improved control and management of the leach pads during the second half of 2020. Accordingly, we did not experience any metallurgical balancing write-downs of recoverable gold ounces on the leach pads, which was an improvement from the first half of 2020 in which we wrote-off 10,492 ounces of gold.
During 2020, a majority of the ore placed on the pre-commercial leach pads was transitional ore, which based on studies and processing results in the second half of 2020, indicate this ore is more amenable to direct leach, as the costs and time associated with oxidizing transitional ore do not yield significantly better recoveries than routing transitional ore as direct leach. We expect a substantial portion of the ore mined over the next twelve months to be run-of-mine oxide ore and transitional ore before entering larger sulfide ore mining phases. Our recent understanding resulted in the decision to route transitional ore as run-of-mine direct leach.
Production and sales
Our 2020 production and sales levels increased over 2019 due to higher operating levels after renting nine haul trucks and a shovel in April 2020. Production and sales in 2020 were negatively impacted by the write-off of 10,492 ounces of gold during the first half of 2020. Average realized gold prices per ounce increased during 2020 and combined with the higher volumes resulted in revenue of $47.0 million as compared to $13.7 million in 2019.
Leach pad expansion project
During the second quarter of 2020, we commenced a leach pad expansion project on the north side of the Hycroft Mine property to provide us with leach pad space required for future operations. The initial stage of the leach pad project is being constructed in two phases by a contractor, with the first phase consisting of approximately 4.0 million square feet of pad space and infrastructure for ponds, pipes, and electrical controls, and the second phase consisting of approximately 4.6 million square feet. With respect to the first phase, we initially expected construction and commissioning to be completed by the end of 2020, but due to shifts in our focus for 2021, we have pushed back completing construction and commissioning of the leach pad expansion project.
During 2020 we spent $29.3 million on the leach pad expansion project, and now expect total phase one leach pad project spending to approximate $41.0 million, which is $5.0 million higher than our previous estimate. The leach pad expansion project represented approximately 87.7% of our total capital spending during the year ended 2020 and is expected to represent the largest percentage of capital spending for the first half of 2021. We expect to complete construction of the leach pad to the appropriate point in which we believe there would be minimal risk of adverse impacts to the leach pad.
2019 Hycroft Technical Report
M3 Engineering and Technology Corporation (“M3 Engineering”), in conjunction with SRK and the Company, completed the Hycroft Technical Report for a two-stage, heap oxidation and subsequent leaching of sulfide ores. The Hycroft Technical Report projects the economic viability and potential future cash flows for the Hycroft Mine when mining operations expand to levels presented in the Hycroft Technical Report.
The Hycroft Technical Report provides the results of the Hycroft Mine heap leach feasibility study that evaluated the possibility of oxidizing and leaching transitional and sulfide ores in a heap leach application. The feasibility analyzes a full-scale operation including construction of new leach pads and expanded mining activities. Key components of the process that currently exist onsite include heap leach pads, a crushing facility consisting of primary, secondary, and tertiary crushing, two Merrill-Crowe plants having a total capacity of 26,000 gallons per minute, and associated support facilities.
The Hycroft Technical Report presents a mineral reserve estimate as of June 30, 2019 of 12.0 million ounces of gold and 481.4 million ounces of silver contained in oxide, transitional and sulfide ores, which is projected to be mined over 34 years using typical truck and shovel open pit mining methods. The mine plan presented in the Hycroft Technical Report requires a range of approximately 85 to 100 million tons per year to be mined (both ore and waste) through the mine life. Over the course of the contemplated mine plan, 1.1 billion tons of ore are mined with a strip ratio of 1.17.
The Hycroft Technical Report outlines the test work done to demonstrate the viability of the two-stage, heap oxidation and subsequent leaching of sulfide ores. As outlined in the Hycroft Technical Report, a significant portion of the ore is crushed to a P80 of ½” and then mixed with soda ash to induce an alkaline oxidation process. After the ore has been oxidized to the desired extent, we will rinse the ore with fresh water and saturated lime solution and then cyanide leach the ore to extract the gold and silver. This process is the subject of a pending patent application.
The crushing system is initially designed to run at nominal capacity of 2.0 million tons per month ramping up to 3.0 million tons per month with the addition of two additional tertiary crushers. Soda ash is added during the crushing circuit to begin the oxidation process. The ore proceeds through three stages of crushing and exits into the fine ore stockpile, which is then hauled to leach pads.
The pH and alkalinity of the ore is managed on the leach pad using a soda ash solution that is applied to the material to achieve alkalinity levels for optimal oxidation characteristics. The process solutions are regularly sampled for reagent addition control and the soda ash solution in the heap is replenished on a regular basis to offset evaporation and carbonate consumption. The duration of the pre-oxidation is expected to take between 30 and 120 days, which is determined by the characteristics of the ore and the measured extent of oxidation based upon sulfate production.
When the pre-oxidation cycle has been completed, we rinse the ore first with fresh water and then with a saturated lime solution prior to the commencement of cyanidation leach. This is necessary to remove sulfate and bicarbonate from the heap and reduce cyanide loss during leaching. The alkalinity of the solution in the heap is monitored to ensure rinse completion prior to the start of cyanidation. The pH is controlled during cyanidation using lime. As the ore has already been oxidized and rinsed, it undergoes a nominal 60-day primary leach cycle.
Due to the high silver content of the pregnant solution, gold and silver are recovered by zinc cementation. We have two existing Merrill-Crowe plants that are used to process pregnant solution from the heap leach operation. The older plant has a capacity of 4,500 gallons per minute. The newer plant is considerably larger, with a nameplate capacity of 21,500 gallons per minute.
Overall, the Hycroft Technical Report shows 7.8 million ounces of payable gold and 344.1 million ounces of payable silver produced and sold.
Results of Operations
Revenues
Gold revenue
The table below summarizes gold sales, ounces sold and average realized prices for the following periods (dollars in thousands, except ounce amounts):
| | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | Gold revenue | $ | 44,279 | | | $ | 12,803 | | | Gold ounces sold | 24,892 | | | 8,593 | | | Average realized price (per ounce) | $ | 1,779 | | | $ | 1,512 | |
During the year ended December 31, 2020, our gold revenue was $44.3 million, compared to $12.8 million for the comparable period of 2019. The significant increase in revenue during the 2020 period was attributable to the mine operating for the entire period, whereas in 2019 revenue was first recorded in the third quarter following the operations restart. We also benefited from favorable gold prices, which increased $267 per ounce, or 18% for the year ended December 31, 2020, compared to the prior year period. While production increased and we benefited from favorable gold prices, gold revenues were adversely affected during the year ended December 31, 2020 by write-downs of recoverable gold ounces on the leach pads during the first half of 2020.
Silver revenue
The table below summarizes silver sales, ounces sold and average realized prices for the following periods (dollars in thousands, except ounce amounts):
| | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | Silver revenue | $ | 2,765 | | | $ | 906 | | | Silver ounces sold | 136,238 | | | 52,036 | | | Average realized price (per ounce) | $ | 20.30 | | | $ | 17.41 | |
During the year ended December 31, 2020, our silver revenue was $2.8 million compared to $0.9 million for the comparable period of 2019. Similar to gold revenue, the increase in silver revenue during 2020 compared to the 2019 period was primarily attributable to mining operations ongoing for the full year of 2020. We also benefited from favorable silver prices, which increased $2.89 per ounce for the year ended December 31, 2020, compared to the prior year. During 2020, silver revenue was negatively impacted from write-downs of recoverable silver ounces on the leach pads during the first half of 2020.
Total cost of sales
Total cost of sales consists of Production costs, Depreciation and amortization, Mine site period costs, and Write-down of production inventories. The table below summarizes total cost of sales for the following periods (dollars in thousands):
| | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2020 | | 2019 | | Production costs | | $ | 41,688 | | | $ | 11,041 | | | Depreciation and amortization | | 2,894 | | | 1,011 | | | Mine site period costs | | 47,115 | | | 2,174 | | | Write-down of production inventories | | 17,924 | | | 16,443 | | | Total cost of sales | | $ | 109,621 | | | $ | 30,669 | |
| | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2023 | | 2022 | | Cost of sales: | | | | | | Production costs | | $ | — | | | $ | 30,756 | | | Mine site period costs – Note 2 | | — | | | 13,720 | | | Asset retirement obligation adjustments – Notes 2 and 8 | | — | | | 4,701 | | | Depreciation and amortization – Note 2 | | — | | | 3,361 | | | Write-down of supplies inventories – Notes 2 and 4 | | — | | | 1,051 | | | Total cost of sales | | — | | | 53,589 | | | Operating expenses: | | | | | | Projects, exploration, and development | | 20,637 | | | 18,355 | | | General and administrative | | 12,673 | | | 14,367 | | | Mine site period costs – Note 2 | | 11,886 | | | — | | | Depreciation and amortization – Note 2 | | 2,814 | | | — | | | Accretion – Note 8 | | 1,087 | | | 408 | | | Write-down of supplies inventories – Notes 2 and 4 | | 495 | | | — | | | Gain on settlement of accrued liability – Note 10 | | (1,151) | | | — | | | Asset retirement obligation adjustments – Notes 2 and 8 | | (2,887) | | | — | | | Total cost of sales and operating expenses | | $ | (45,554) | | | $ | 86,719 | |
Production costs For the year ended December 31, 2020, we2023, the Company recognized $41.7 millionNil in Production costs, or $1,675 per ounce of gold sold, compared to $11.0$30.8 million, in Production costsrespectively, or $1,285$1,735 per ounce of gold, sold during 2019. the same period of 2022. As the Company did not generate Revenues during 2023, the Company did not have Production costs or Cost of sales. The increase in total productionCompany does not expect to incur Production costs was duerelated to an increase in gold ounces soldCost of 16,299 duringsales until after it begins generating Revenues, as discussed above. Mine site period costs During the year ended December 31, 2020 compared2023, the Company recorded $11.9 million of Mine site period costs for costs related to maintaining and operating the sameHycroft Mine, including environmental, maintenance, and administration costs. Effective January 1, 2023, the Company began reporting amounts for Mine site period costs as Operating expenses as this presentation aligns with how the business will be viewed and managed until the Company develops the Hycroft Mine and recommences mining operations. During the year ended December 31, 2022, the Company recorded $13.7 million of 2019Cost of sales for costs that were in conjunction with higher cost per ounce produced, which was primarily driven by an increase in contracted labor and equipment costs to meet the operational needsexcess of the mine. Throughout 2020, and as discussed below, our high operating cost structure and low levels of production have resulted in write-downs to the inventory value per ounce of gold that approximate the net realizable value per ounce of gold after considering costs to complete and sell as determined in accordance with our accounting policies. Accordingly, our inventory value per ounce has been partially limited for the impact of recognizing Mine site period costs, which lowers the carrying value of leach pad inventories. Depreciation and amortization
Depreciation and amortization was $2.9 million, or $116 per ounce of gold sold for the year ended December 31, 2020, compared to $1.0 million, or $118 per ounce of gold sold for year ended December 31, 2019. The increase in total depreciation and amortization costs was due to an increase in gold ounces sold of 16,299 during the year ended December 31, 2020 compared to the same period of 2019, in which incremental equipment was placed into service during the year, and existing equipment incurred a full year of depreciation, as compared to depreciation in 2019 that was only incurred after the restart of the mine in April of 2019.
Mine site period costs
During the year ended December 31, 2020, inclusive of depreciation and amortization, we recorded $47.1 million of Mine site period costs for costs that were in excess of net realizable value per ounce of gold less costs to complete. During the year ended December 31, 2019, inclusive of depreciation and amortization, we recorded $2.2 million of Mine site period costs. Such period costs arewere generally the result of costs related to activities at the Hycroft Mine that do not qualify for capitalization to Production-related inventories or adjustments to production inventories that were the result of recurring or significant downtime or delays, unusually high levels of repairs, inefficient operations, overuse of processing reagents, inefficient cost-volume structures, or other unusual costs and activities.activities, and cannot be recorded to Production-related inventories based on the threshold established by the calculation of the estimated net realizable value per ounce of gold.
Asset retirement obligation adjustments During the year ended December 31, 2023, the Company recorded a change in estimate to its Asset retirement obligation of $2.9 million. The change in estimate during the year ended December 31, 2023, reflected a net decrease in estimate attributable to the completion of part of the Crofoot leach pad re-sloping and the change in timing of water treatment Phases 2 and 3, and evaporation over a three-year period at the end of the mine life, partly offset by increased labor and equipment costs. Effective
Write-downJanuary 1, 2023, the Company began reporting amounts for Asset retirement obligation adjustments as Operating expenses as this presentation aligns with how the business will be viewed and managed until such time that the Company develops the Hycroft Mine and recommences mining operations. In accordance with the change in estimate, the Company recorded a reduction in operating expense of production inventories$2.9 million as the Company does not have mineral reserves and accordingly all costs are expensed or credited as incurred.
During the year ended December 31, 2022, the Company recorded a change in estimate to its Asset retirement obligation of $4.7 million. The change in estimate was the result of updated cost assumptions related to regulatory changes requiring additional sloping and expected timing of reclamation activities associated with the Crofoot leach pad prior to recommencing operations. As discussed in Note 2 - Summarythe preceding paragraph, the Company recorded an expense of Significant Accounting Policies$4.7 million for the change in estimate as the Company did not have mineral reserves in 2022. Depreciation and amortization Depreciation and amortization expense was $2.8 million for the year ended December 31, 2023, compared to $3.4 million during the same period of 2022. The decrease in total Depreciation and amortizationNote 4 - Inventories expense was largely due to the Notesconclusion of depreciation of the test leach pads in July 2022, following their full depreciation. Effective January 1, 2023, the Company began reporting amounts for Depreciation and amortization as Operating expenses as this presentation aligns with how the business will be viewed and managed until such time that the Company develops the Hycroft Mine and recommences mining operations. Prior to January 1, 2023, Depreciation and amortization was presented as Cost of sales. Write-down of supplies inventories For the Financial Statements, based onyear ended December 31, 2023, the Company recorded a Write-down of supplies inventories of $0.5 million for obsolete and slow-moving supplies inventories as compared with $1.1 million for the year ended December 31, 2022. The Company evaluates its supplies inventories and records write-downs for items not expected to be used in the next 12 months. Effective January 1, 2023, the Company began reporting amounts for Write-down of supplies inventories as Operating expenses as this presentation aligns with how the business will be viewed and managed until the Company develops the Hycroft Mine and recommences mining operations. Prior to January 1, 2023, Write-down of supplies inventories was presented as Cost of sales. Projects, exploration, and development During the years ended December 31, 2023 and 2022, Projects, exploration, and development costs totaled $20.6 million and $18.4 million, respectively. Projects, exploration, and development were related to: (i) completing technical studies; (ii) conducting geological studies; (iii) oversight and project management; and (iv) exploration drilling, engineering, and metallurgical balancing results,activities. The increase of $2.2 million during the year ended December 31, 2020, we determined that 10,492 ounces2023, was primarily the result of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result, during 2020, the Company recognized a Write-down of production inventories on the consolidated statements of operations, which included Production costs of $16.7 million, and capitalized depreciation and amortization costs of $1.3 million. During the first half of 2020, we (1) were unable to consistently maintain leach pad conditions required to produce allPhase 2 of the estimated recoverable ounces placed on the leach pads, and (2) experienced instances of solution mismanagement2022-2023 exploration program that was initiated in which pregnant metal-bearing solutions were circulated to areas of leach pads not currently in operation, thus making such ounces unrecoverable. During the second half of 2020, we did not experience any metallurgical balancing write-downs of recoverable gold ounces on the leach pads.April 2023. During the 2019 fourth quarter, based on metallurgical balancing results, the Company determined that 11,680 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result of the write-off the Company recognized a Write-down of production inventories on the consolidated statements of operations of $16.4 million. Cash production costs written-off were $15.1 million and capitalized depreciation and amortization costs written-off were $1.3 million. The write-off of these ounces was primarily a result of mismanagement of solution flows. The lost gold and silver ounces were leached and captured in solution. However, prior to the solution being processed through the Merrill-Crowe plant, it was inadvertently commingled with barren solution and pumped to leach pads no longer in use, which will prevent it from being recovered in the future.
General and administrative General and administrative totaled $21.1$12.7 million and $6.1$14.4 million, respectively, during the years ended December 31, 2023 and 2022. The decrease of $1.7 million during the year ended December 31, 2020 and 2019, respectively. The increase of $15.0 million during 20202023, was primarily due to: (1)to decreases in contractor services, investor relations expense, and legal expense, that was partially offset by an increase of $5.4 million in bonus compensation largely related to the completion of the Recapitalization Transaction; (2) a $3.1 million increase in additional compensation related to salary continuation costs for severance and separation agreements to our former executives; (3) $3.4 million of insurance costs primarily related to a directors and officers run-off policy for Seller as a result of the Recapitalization Transaction; and (4) $3.0 million of additional legal and professional service feesexpense associated with general corporate matters and obligations as a public company.additional staffing in 2023. Accretion We recorded $1.1 million and $0.4 million of Accretion during the yearyears ended December 31, 20202023 and 2019,2022, respectively, which related to our assetAsset retirement obligation and future reclamation costs. Refer to SeeNote 12 -8 – Asset Retirement Obligation withinto the Notes to the Consolidated Financial Statements for further detail. Project and developmentGain on settlement of accrued liability
ForDuring the year ended December 31, 2019, Project and development was $7.7 million, while no such costs were incurred for the year ended December 31, 2020. In late 2018,2023, the Company began the process of restarting mining operationsreached an agreement with a supplier regarding a consignment agreement for crusher liners. The settlement resulted in a $1.2 million gain, see Note 10 – Accounts Payable and restarted active mining at the Hycroft Mine in April 2019. During 2019, project and development costs were incurred related Accrued Expenses to the restart of the Hycroft Mine, such as maintenance and repair of mobile mining equipment and processing equipment (crusher, and Merrill-Crowe facility), to prepare for use after sitting idle for several years. During 2019, project and development costs also relatedNotes to the preparation of the feasibility study and metallurgical test work, including costs incurred to prepare the Hycroft Technical Report.
Pre-production depreciation and amortization
Pre-production depreciation and amortization represents expense recognized prior to the restart of mining operations at the Hycroft Mine andFinancial Statements for the year ended December 31, 2019 was $1.1 million. Upon the April 2019 restart of the Hycroft Mine, we began capitalizing to inventory depreciation and amortization for ore on the leach pads. Due to the restart of the Hycroft Mine, no pre-production depreciation and amortization costs were incurred during the second half of 2019 or in 2020.further detail.
Care and maintenance
Care and maintenance totaled $3.5 million for the year ended 2019 was incurred from January to March of 2019 prior to the Hycroft Mine’s April 2019 restart, after which we no longer recorded such costs.
Interest expense net As discussed and detailed in Note 9 -– Debt, Net, Interest expense to the Notes to the Financial Statements totaled $18.5 million for both years ended December 31, 2023 and 2022. The net change during the year ended December 31, 2023, was the result of a decrease in the outstanding obligation for the Sprott Credit Agreement as the Company repaid portions of the balance in March 2022 and November 2022. This decrease was offset by an increase in the balance outstanding on the
Subordinated Notes at December 31, 2023 as compared to the same periods in 2022. The higher outstanding balance for the Subordinated Notes was due to quarterly interest payments that are paid in-kind as additional indebtedness. Interest income Interest expense, net of capitalized interestincome totaled $43.5$8.3 million and $64.8$2.3 million, respectively, during the years ended December 31, 20202023 and 2019, respectively. Interest expense decreased by $21.32022. In July 2022, the Company invested a portion of its cash balances in AAAm rated U.S. Government Money Market Funds that are readily convertible to cash. These investments earned the Company $5.9 million and $1.9 million, respectively, in interest during the years ended December 31, 2023 and 2022. In addition, the Company earned $1.6 million and $0.4 million, respectively, on its Restricted cash during the years ended December 31, 2023 and 2022.During the year ended December 31, 20202023, the company also earned Interest income of $0.8 million from the prior year. The year-over-year decrease was a result of completing the Recapitalization Transaction on May 29, 2020, which caused the exchange or conversion of the majority of Seller's $627.8 million debt outstandingEquipment Purchase Agreement related to equity, thus resulting in post-Recapitalization Transaction indebtedness totaling $159.8 millionAssets held for the Sprott Credit Agreement and Subordinated Notes. For the year ended December 31, 2020, our average debt balance was $350.9 million compared to $492.3 million for the prior year period.sale. Fair value adjustment to Warrants
For the year ended December 31, 2020, we recorded $3.8 millionGain on sale of expense resulting from the adjustment in the fair valueassets, net of Warrant liabilities.
Interest incomecommissions
Interest income totaled approximately $0.2 million and $0.8 million during 2020 and 2019, respectively.The Company recognized a Interest incomeGain on sale of assets, net of commissions was lower in 2020 primarily due to decreases in interest rate yields from the comparable periods of 2019.
Reorganization items
On March 10, 2015, the predecessor to Seller filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and incurred legal and professional fees of $0.9$0.5 million for the year ended December 31, 2019 related2023, compared to such matters. No such costs were incurred during$3.9 million for the year ended December 31, 2020.2022. Subsequent to ceasing mining operations in November 2021, the Company implemented an asset recovery program in order to monetize non-core assets and excess supplies inventories. In addition, the Company sold an uninstalled regrind mill and ball mill that are not expected to be needed for a future milling operation.
Income taxesFair value adjustments to warrants
There was no income tax benefit or expense, net, recognizedDuring the years ended December 31, 2023 and 2022, the Fair value adjustments to warrants resulted in a non-cash loss of $0.2 million and non-cash gain of $0.2 million, respectively, as the market trading values of the publicly listed warrants decreased and increased during the periods, respectively.
See Note 14 – Warrant Liabilities to the Notes to the Financial Statements for further detail. Gain on extinguishment of debt During the year ended December 31, 2020 or 2019. Seller’s gain from2022, the Recapitalization TransactionCompany recognized a Gain on extinguishment of debt of $5.0 millionrelated to the purchase of $11.1 million of the Subordinated Notes (such amount included accrued interest of $0.2 million) in two transactions: (i) the Company paid cash consideration of $5.6 million; and (ii) the Company issued 50,000 shares of common stock with a grant date fair value of $0.4 million. In addition, the Company paid $0.1 million in legal fees.Total consideration, including legal fees, of $6.1 million was fully offset bypaid which represented a discount of approximately 42% to the face value of the debt. Income taxes The Company incurred Nil Income tax expense (benefit) for both years ended December 31, 2023 and 2022. Section 382 of the Internal Revenue Code (“IRC”) imposes limitations on the use of Seller’s deferred tax assets. We have not recorded any future income tax benefits forU.S. federal net operating losses generated after(“NOLs”) upon a more than 50% change in ownership in the completionCompany (as defined in the IRC) within a three-year period. In connection with its at-the-market equity offering, the Company underwent an IRC § 382 ownership change on March 25, 2022. As a result, utilization of the Recapitalization Transaction, dueCompany’s NOLs and certain unrealized losses are limited on an annual basis. If the IRC § 382 annual limitation amount is not fully utilized in a particular tax year, then the unused portion from that tax year is added to a full valuation allowance recorded against our net operating loss carryforward earned after the Recapitalization Transaction. IRC § 382 annual limitation in subsequent years. The Company’s annual limitation under IRC § 382 is estimated to be approximately $1.3 million. For additional details, refer tosee Note 16 -18 – Income Taxes to the Notes to the Financial Statements. Net loss
For the reasons discussed above, we recorded a net loss of $136.4 million for the year ended December 31, 2020, compared to a net loss of $98.9 million for the year ended December 31, 2019, which included a $3.8 million loss attributable to the change in fair value of the warrant liability.
Liquidity and Capital Resources General PriorThe Company’s unrestricted cash position at December 31, 2023, was $106.2 million as compared with $142.0 million at December 31, 2022. As discussed in Note 15 – Stockholders’ Equity in the Notes to the closingFinancial Statements, the Company raised gross proceeds of approximately $194.4 million in March 2022.
Beginning on November 17, 2023, the Company again began accessing the ATM Program, and as of December 31, 2023, sold an additional 523,328 shares of common stock for aggregate gross proceeds of $1.1 million, less commissions and offering expenses of $0.3 million. As of December 31, 2023, there were $360.3 million shares of common stock available for issuance under the ATM Program. The Company also renegotiated cash collateral requirements for the Company’s surety bonds, which increased unrestricted cash by $9.1 million. As of January 5, 2024, the Company voluntarily pre-paid $34.7 million of the Recapitalization Transaction, our primary sourcefirst lien loan, along with $3.3 million for the
additional interest balance, totaling $38.0 million with a remaining outstanding balance of $15.0 million. As a result of this payment, the issuance of related-partyapplicable margin will be reduced by 100 basis points through the final payment. Hycroft is evaluating alternatives to strengthen its balance sheet and reduce debt. The Company may make additional debt instruments, which were usedprepayments or take other actions to financereduce its outstanding debt. As the 2019 restart of mining operations at the Hycroft Mine and all working capital and capital expenditures thereafter. During the second half of 2019, we began to produce and sellCompany completed recovering gold and silver atounces previously placed on the Hycroft Mineleach pad in 2022, the Company does not expect to generate net positive cash for the foreseeable future. Accordingly, the Company will be dependent on its unrestricted cash and other sources of cash to fund the business. Historically, the Company has been dependent on various forms of debt and equity financing to fund its business. While the Company has been successful in the past raising funds through equity and debt financings, no assurance can be given that provided a source of revenue and related cash flow. On May 29, 2020, we completedadditional financing will be available to it in amounts sufficient to meet the Recapitalization Transaction that provided cash available for use of $68.9 million. As part of the Recapitalization Transaction, Seller’s indebtedness existing priorCompany’s needs or on terms acceptable to the Recapitalization Transaction was either repaid, exchanged for indebtedness ofCompany. In the event that funds are not available, the Company exchanged for shares of our common stock or converted into shares of Seller common stock, and our post-Recapitalization Transaction indebtedness included amounts drawn under the Sprott Credit Agreement and the assumption of the newly issued Subordinated Notes. Additionally, on October 6, 2020, the Company issued 9,583,334 units in an underwritten public offering at an offering pricemay be required to of $9.00 per unit (the "Public Offering"), with each unit consisting of one share of our common stock and one warrant to purchase one share of our common stock at an exercise price of $10.50 per share, for total proceeds net of discount and equity issuance costs of $83.1 million.materially change its business plan. OurThe Company’s future liquidity and capital resources management strategy entails a disciplined approach to monitor the timing and amountextent of any operational tonnage ramp-up of the Hycroft Minedrilling, metallurgical, and mineralogical studies while attempting to remain in a position that allows usthe Company to
respond to changes in ourthe business environment, such as a decrease in metal prices or lower than forecasted future cash flows, and changes in other factors beyond ourthe Company’s control. Our primary cash requirements during 2020 related to the leach pad expansion project, of which $29.3 million of the revised estimated total cost of $41.0 million The Company has been spent, and $110.5 million of cash was used in the operations of the Hycroft Mine, which was higher than planned due to leach pad inventory write downs and higher production costs, the mechanical limitations for mixing soda ash, and corporate and transactional expenses associated with becoming a public entity and completing the Recapitalization Transaction. We have yet to generate positive cash flow from operations and we do not expect to do so for the full year 2021.
As discussed in the Going concern subsection of the Recent Developments section of this MD&A, using estimates of future production costs, and operational metrics, at current metal spot prices, we do not expect the Hycroft Mine to generate positive net operating monthly cash flows during 2021. However, we have undertaken efforts aimed at managing ourits liquidity and preserving ourits capital resources by, among other things: (1)(i) monitoring metal prices and the impacts (near-term and future) they have on our business; (2) developing plansthe business and forecasts that we expectcash flows; (ii) ceasing open pit mining operations to be reliable and achievable considering historical operational and processing challenges encounteredreduce net cash outflows; (iii) reducing the size of the workforce to date; (3)reflect the cessation of mining operations; (iv) controlling our working capital and managing discretionary spending; (v) reviewing contractor usage and (4)rental agreements for more economic options, including termination of certain agreements in accordance with their terms; (vi) decreasing Restricted Cash balances that collateralize bonds, as available; and (vii) planning the timing and amounts of capital expenditures and drilling, metallurgical, and mineralogical study costs at the Hycroft Mine and deferring such items that are not expected to benefit our near term operating plans. The Company has undertaken and continues to undertake additional efforts including: (i) monetizing non-core fixed assets and excess supplies inventories; (ii) returning excess rental and leased equipment; (iii) selling uninstalled mills that are not expected to be needed for a future milling operation; and (iv) working with existing debt holders to adjust debt service requirements.
In addition, the Company will continue to evaluate alternatives to raise additional capital necessary to fund the future exploration and development of the Hycroft Mine and will continue to explore other strategic initiatives to enhance stockholder value. Cash and liquidity We haveThe Company has placed substantially all of ourits cash in operating and investment accounts with a well-capitalized financial institution,institutions, thereby ensuring balances remain readily available. The Company uses AAAm rated U.S. Government Money Market Funds for its cash investments. Due to the nature of ourits operations and the composition of our current assets, our Cash and cash equivalents, Accounts receivable, Income tax receivable, , andMetal inventories Assets held for sale represent substantially all of ourthe liquid assets on hand. Additionally, we are provided with additional liquidity as ounces are recovered from the Ore on leach pads, current, processed into finished goods, and sold at prevailing spot prices to our customers.
The following table summarizes our projected sources of future liquidity, as recorded within our financial statements (dollars inthe Financial Statements (in thousands): | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Cash | $ | 56,363 | | | $ | 6,220 | | | Accounts receivable | 426 | | | 97 | | Metal inventories(1) | 6,418 | | | 1,894 | | Ore on leach pads, current(2) | 38,041 | | | 22,062 | | | Total projected sources of future liquidity | $ | 101,248 | | | $ | 30,273 | |
| | | | | | | | | | | | | December 31, 2023 | | December 31, 2022 | | Cash and cash equivalents | $ | 106,210 | | | $ | 141,984 | | | Accounts receivable | — | | | 2,771 | | | Income tax receivable | 1,530 | | | 1,530 | | | Interest receivable | 667 | | | 459 | | | | | | | | | | Assets held for sale, net of payments received of $1.6 million(1) | 5,598 | | | 6,098 | | | Total projected sources of future liquidity | $ | 113,338 | | | $ | 152,383 | |
(1)Metal inventories contained approximately 3,463 recoverable ouncesIn August 2022, the Company entered into an Equipment Purchase Agreement, as amended to sell one ball mill and one semi-autogenous (“SAG”) mill, and amended that agreement in December 2022 to also sell one sub-station transformer for a total of gold that are expected to be sold within$13.6 million of which the next 12 months. Assuming a gold selling priceCompany has received payments totaling $1.1 million. Under the terms of $1,888 per ounce (thethe agreement, the final payment for the ball mill and SAG mill was due December 31, 2020 P.M. fix)2022 and excludingthe buyer was permitted to extend the payment of all or any proceedsportion of the final payment of $12.5 million up to and including June 30, 2023, provided that the buyer pays the Company interest at a rate of 5% per annum on any outstanding balance for the ball mill and SAG mill from silver sales,January 1, 2023, through March 31, 2023, and 7.5% per annum on any outstanding balance from April 1, 2023, until June 30, 2023. The Equipment Purchase Agreement was subsequently amended three additional times in 2023 (January 27, 2023, May 15, 2023, and December 29, 2023). Together the original agreement and the four amendments make up the entire agreement and allows for the sale of some or all gold ounces estimatedof the Equipment to be recovered from our metal inventories would provide us with $6.5 million of revenue. See Note 4 - Inventoriesthird parties and for the Buyer to the Notes to the Financial Statements for additional information. (2)Ore on leach pads, current contained approximately 21,869 ounces of gold that are expected to be processed into finished goods and then sold within the next 12 months. Assuming a gold selling price of $1,888 per ounce (the December 31, 2020 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from our ore on leach pads would provide us with $41.3 million of revenue. We also have ore on leach pads that is not expected to be processed into finished goods within the next 12 months of $7.9 million; accordingly, we exclude this inventory from our projected sources of future liquidity. See Note 4 - Inventories to the Notes to the Financial Statements for additional information.
Twelve monthsterminate the Existing Agreement. Total payment period has been extended up to and including June 30, 2024. The Company also received $0.5 million in payments within 2023 for a total of $1.6 million received to date. Effective March 1, 2024, the buyer terminated a portion of the agreement. For additional information, see Note 26 – Subsequent Events in the Notes to the Financial Statements.
Year ended December 31, 20202023, compared to the twelve monthsyear ended December 31, 20192022 The following table summarizes our sources and uses of cash for the following periods (dollars in(in thousands): | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | | | (as restated) | | | | Net loss | $ | (136,392) | | | $ | (98,895) | | | Net non-cash adjustments | 76,809 | | | 76,099 | | | Net change in operating assets and liabilities | (50,925) | | | (36,975) | | | Net cash used in operating activities | (110,508) | | | (59,771) | | | Net cash used in investing activities | (31,124) | | | (12,296) | | | Net cash provided by financing activities | 188,705 | | | 68,173 | | | Net increase (decrease) in cash | 47,073 | | | (3,894) | | | Cash and restricted cash, beginning of period | 48,967 | | | 52,861 | | | Cash and restricted cash, end of period | $ | 96,040 | | | $ | 48,967 | |
| | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2023 | | 2022 | | | | | Net loss | | $ | (55,024) | | | $ | (60,828) | | | Net non-cash adjustments | | 14,286 | | | 16,304 | | | Net change in operating assets and liabilities | | (709) | | | 9,669 | | | Net cash used in operating activities | | (41,447) | | | (34,855) | | | Net cash provided by (used in) investing activities | | (507) | | | 8,337 | | | Net cash provided by (used in) financing activities | | (1,461) | | | 155,849 | | | Net increase (decrease) in cash | | (43,415) | | | 129,331 | | | Cash, cash equivalents and restricted cash, beginning of period | | 175,966 | | | 46,635 | | | Cash, cash equivalents and restricted cash, end of period | | $ | 132,550 | | | $ | 175,966 | |
Cash used in operating activities ForDuring the year ended December 31, 2020, we2023, the Company used $110.5$41.4 million of cash in operating activities primarily attributable to a Net loss of $55.0 million, the cash impact of which was equal to $40.7 million, and $0.7 million was provided by working capital and other operating activities, driven primarily by cash used to reduce Accounts payable and accrued expenses of $2.3 million and Prepaids and deposits of $2.0 million, partly offset by cash from Accounts receivable of $2.8 million. The largest non-cash items included in Net loss during the year ended December 31, 2023, included a Non-cash portion of interest expense of $12.3 million, non-cash Stock-based compensation of $2.9 million and Depreciation and amortization of $2.8 million, partly offset by Asset retirement obligation adjustments of $3.4 million.
During the year ended December 31, 2022, the Company used $34.9 million of cash in operating activities primarily attributable to a net loss of $136.4$60.8 million, the cash impact of which was equal to $59.6$44.5 million, and $50.9$9.7 million used forwas provided by working capital largely due toand other adjustment, which included a $17.3 million decrease for inventories including $15.8 million reduction in Production-related inventories as the $43.8 millionCompany processed the remaining gold and silver ore on its leach pads and in its drain down solutions. These sources were partly offset by cash used to increase production related inventories.reduce Accounts payable of $3.8 million and $2.8 million for Accounts receivable. The largest non-cash items included in net loss during the year ended December 31, 20202022, included the non-cash Non-cash portion of interest expense of $38.8$13.1 million, Asset retirement obligation adjustments of $4.7 million, Depreciation and amortization of $3.4 million and write-downsnon-cash Stock-based compensation of production inventories$2.5 million, all partly offset by $5.0 million Gain on extinguishment of $17.9 million, which is discussed in debtNote 4 - Inventories, to the Notes to the Financial Statements.and $3.9 million Gain on sale of assets, net of commissions. ForCash (used in) provided by investing activities
During the year ended December 31, 2019, we2023, investing activities used $59.8$0.5 million primarily due to $1.1 million for the purchase of equipment that was partly offset by $0.6 million from the sale of assets. During the year ended December 31, 2022, investing activities provided cash of $8.3 million primarily from the sale of assets previously held for operating activities primarily attributable to asale, for net lossproceeds of $98.9 million, a reduction in the asset retirement obligations of $1.9 million, the cash impact of which was equal to $22.8$6.6 million and $37.0 million used for working capital largely due to increases in the following operating assets; production-related inventories ($38.6 million), materialsother mobile mine equipment and supplies inventories ($1.0 million) and prepaids and other, current and non-current ($0.5 million). The cash outflows caused byfor net proceeds of $2.7 million. In addition, the items described above were partially offset by certain non-cash expenses such as $54.8 million non-cash portionCompany purchased equipment of interest expense, $18.6 million write-down of production inventories, $2.1 million depreciation and amortization, $1.1 million stock-based compensation and $0.4 million of accretion. There were also increases in accounts payable ($3.4 million) that partially offset the cash outflows.$1.0 million. Cash used in investing(used in) provided by financing activities ForDuring the year ended December 31, 2020 and 2019, we2023, cash used $31.1in financing activities of $1.5 million and $12.3 million, respectively, in investing activities. For 2020, expenditureswas primarily related to constructionthe payment of a large leach pad expansion projectadditional interest (which is classified as debt) payments under the Sprott Credit Agreement of $2.2 million. These amounts were partially offset by gross proceeds of $1.1 million, less commissions and totaled $29.3 million. For 2019, the vast majorityoffering expenses of the costs related to (1) construction of new leach pad space for the restart of $6.2 million, (2) the purchase and installation of four new cone crushers for $4.0 million and (3) replacement and significant repairs of existing processing equipment for $0.8$0.3 million.
Cash provided by financing activities
ForDuring the year ended December 31, 2020, Seller issued $44.8 million in aggregate principal amount of 1.25 Lien Notes (net of issuance costs) which were used to fund the operations and capital needs through May 29, 2020. The remainder of the financing activities primarily related to the Public Offering of units, which was comprised of one share of our common stock and one warrant to purchase one share of our common stock. The Public Offering was completed on October 6, 2020, and resulted in proceeds net of discount and equity issuance costs of approximately $83.1 million. Additional financing activities primarily related to the Recapitalization Transaction, which provided $210.0 million in net cash flows and was used to repay Seller’s $125.5 million First Lien Agreement, a $6.9 million promissory note, and transaction costs and other issuance costs. See Note 3 - Recapitalization Transaction to the Notes to the Financial Statements for further discussion.
The amount of2022, cash provided by financing activities of $155.8 million was $68.2 million for the year ended December 31, 2019, which was due to $71.8 million in aggregate principal amount of 1.25 Lien Notes (net of issuance costs) issued to fund the restart of mining operations. Seller spent $2.9 million for legal and consulting feesprimarily related to the Recapitalization Transactionequity offerings completed during the period: (i) the Private Placement Offering completed on March 15, 2022, for net cash proceeds of $55.4 million, and $0.8(ii) the ATM Program completed on March 25, 2022, for net cash proceeds of $133.5 million. These amounts were partially offset by prepayments under the Sprott Credit Agreement of $25.0 million, to extendadditional interest (which is classified as debt) payments under the maturitySprott Credit Agreement of $2.2 million, the First Lien Credit Agreement.purchase of $11.1 million Subordinated Notes for $5.6 million and payments on equipment notes payables of $0.1 million.
Future capital and cash requirements The following table provides ourthe Company’s gross contractual cash obligations as of December 31, 2020,2023, which are grouped in the same manner as they wereare classified in the cash flowsConsolidated Statement of Cash Flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information. We believeThe Company believes that the following provides the most meaningful presentation of near-term obligations expected to be satisfied using current and available sources of liquidity (dollars in(in thousands): | | Payments Due by Period | | Total | | Less than
1 Year | | 1 - 3
Years | | 3 - 5
Years | | More than
5 Years | | | Payments Due by Period | | | Payments Due by Period | | Total | | | Total | | Less than
1 Year | | 1 - 3
Years | | 3 - 5
Years | | More than
5 Years | | Operating activities: | Operating activities: | | | | | | | | | | Net smelter royalty(1) | | Net smelter royalty(1) | | Net smelter royalty(1) | Net smelter royalty(1) | $ | 345,558 | | | $ | 1,316 | | | $ | 5,270 | | | $ | 16,042 | | | $ | 322,930 | | Remediation and reclamation expenditures(2) | Remediation and reclamation expenditures(2) | 62,032 | | | — | | | — | | | — | | | 62,032 | | Interest payments(3) | Interest payments(3) | 15,707 | | | 3,728 | | | 9,676 | | | 2,303 | | | — | | Operating lease requirements(4) | 4,957 | | | 4,947 | | | 10 | | | — | | | — | | Crofoot royalty(5) | 4,870 | | | 240 | | | 480 | | | 480 | | | 3,670 | | Consignment inventory(6) | 2,188 | | | 1,355 | | | 833 | | | — | | | — | | Crofoot Royalty(4) | | | Financing activities: | Financing activities: | | Repayments of debt principal(7) | 212,974 | | | 3,756 | | | 37,558 | | | 171,660 | | | — | | Additional interest payments(8) | 9,348 | | | 1,650 | | | 4,399 | | | 3,299 | | | — | | Repayments of debt principal(5) | | Repayments of debt principal(5) | | Repayments of debt principal(5) | | Additional interest payments(6) | | | Total | Total | $ | 657,634 | | | $ | 16,992 | | | $ | 58,226 | | | $ | 193,784 | | | $ | 388,632 | |
(1)Under the Sprott Royalty Agreement, we arethe Company is required to pay a perpetual royalty equal to 1.5% of the Net Smelter Returns from ourthe Hycroft Mine, payable monthly.monthly that also includes an additional amount for withholding taxes payable by the royalty holder. Amounts presented above incorporate mineral resource estimates of our current life-of-mine plan, and are based on consensus pricing for gold and silver. See Note 10 - Royalty Obligation toas reported in the Notes to the Financial Statements for additional information.2023 Hycroft TRS. (2)Mining operations are subject to extensive environmental regulations in the jurisdictions in which they are conducted and we are required, upon cessation of operations, to reclaim and remediate the lands that our operations have disturbed. The estimated undiscounted and inflated cash outflows of these remediation and reclamation obligations are reflected here. In the above presentation, no offset has been applied for the $59.9$58.3 million of our collateralized reclamation bonds.bonds or for the $26.3 million of cash collateral for those bonds included in Restricted Cash. (3)UnderInterest payments consist of monthly payments for the Sprott Credit Agreement we must pay(as amended by the Second A&R Agreement) at the minimum annual interest beginning in the 13th month after the initial advance on May 29, 2020 to Sprott Private Resource Lending II (Collector), LP. See Note 9 - Debt, Net to the Notes to the Financial Statementsrate of 8.5% and monthly interest payments for additional information.other debt. (4)As noted below in the Off-balance sheet arrangements section of this MD&A, we have operating leases for mine equipment and office space. (5)We areThe Company is required to pay a 4% net profits royalty, including advance royalty payments of $120,000 in any year where mining occurs on the Crofoot claims and an additional $120,000 if tons mined from the Crofoot claim blocks exceed 5.0 million tons.tons (“Crofoot Royalty”). See Note 22 -24 – Commitments and Contingencies. to the Notes to the Financial Statements for additional information. Amounts shown represent ourthe current estimates of cash payment timing using consensus pricing for gold and silver.
(6)As noted below in the Off-balance sheet arrangements section of this MD&A, and as discussed in Note 5 - Prepaids and Other to the Notes to the Financial Statements, we have future purchase obligation for consignment inventory.
(7)(5)Repayments of debt principal on debt consists of amounts due under the Sprott Credit Agreement and(as amended by the Second A&R Agreement), the Subordinated Notes.Notes and notes payable for equipment purchases. Included in the repayment of the Subordinated Notes principal is payable in-kind interest that has been capitalized asand payable in-kind on a quarterly basis, and on a monthly basisinterest expected to be capitalized through maturity. Additionally, the repayments of debt principal include the outstanding principal for the Sprott Credit Agreement for(as amended by the Second A&R Agreement). As of January 5, 2024, the Company voluntarily pre-paid $34.7 million of the first 12 months after the initial advance. lien loan. See Note 9 -– Debt, Net to the Notes to the Financial Statements for additional information.
(8)(6)Additional interest payments consist of repayments of additional interestas determined under the Sprott Credit Agreement commencing February 28, 2021 and(as amended by the Second A&R Agreement) are accounted for as debt with quarterly payments ending onMay 31, 2025. As of January 5, 2024, the maturity date. Company voluntarily pre-paid $3.3 million of additional interest related to the first lien loan. See Note 9 -– Debt, Net to the Notes to the Financial Statements for additional information.
In addition, the Company may enter into service agreements from time-to-time with drilling contractors or other consultants to perform work on or related to the Hycroft Mine. In general, these agreements are on an as-needed basis and do not have ongoing commitments and, as such, have not been included in the table above. Debt covenants OurThe Company’s debt agreements contain representations and warranties, events of default, restrictions and limitations, reporting requirements, and covenants that are customary for agreements of these types.
The Sprott Credit Agreement (as defined herein)amended by the Second A&R Agreement) contains covenants that, among other things, restrict or limit the ability of the Company to enter into encumbrances (other than Permitted Encumbrances), incur indebtedness (other than Permitted Indebtedness), dispose of its assets (other than Permitted Disposals), pay dividends, and purchase or redeem shares, as such terms are defined in the Sprott Credit Agreement.Agreement (as amended by the Second A&R Agreement). The
Sprott Credit Agreement (as amended by the Second A&R Agreement) requires the Company to ensure that, at all times, both its Working Capital and Unrestricted Cash areis at least $15.0 million and its Working Capital is at least $10.0 million, as such terms are defined in the Sprott Credit Agreement (as amended by the Second A&R Agreement), and that at least every six months we demonstrate ourthe Company demonstrates its ability to repay and meet all present and future obligations as they become due with a financial Modelmodel that uses consensus gold prices discounted by 5.0%, as such terms are defined in the Sprott Credit Agreement.. The Subordinated Notes (as defined herein) include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents. As of December 31, 2020,2023, the Company was in compliance with all covenants.covenants under its debt agreements. Off-balance sheet arrangements As of December 31, 2020, our2023, the Company’s off-balance sheet arrangements consisted of operating lease agreements (see Note 22 - Commitments and Contingencies to our Notes to the Financial Statements), a net profit royalty arrangement and a net smelter royalty arrangement (see Note 22 -24 – Commitments and Contingencies to the Notes to the Financial Statements), and a future purchase obligation for consignment inventory (see Note 5 - Prepaids and Other to the Notes to the Financial Statements). Accounting developments
For a discussion of any recently issued and/or recently adopted accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to the Notes to the Financial Statements.
Critical Accounting Estimates MD&A is based on our Financial Statements, that have been prepared in accordance with GAAP. The preparation of these statements requires us to make assumptions and estimates that affect the reported amounts. We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable at the time our estimates are made. Actual results may differ from amounts estimated in these statements, and such difference could be material. As such, future events and their effects cannot be determined with certainty. Although other estimates are used in preparing our financial statements, we believe that the following accounting estimates are the most critical to understanding and evaluating our reported financial results. For information on all of our significant accounting policies, see Note 2 -– Summary of Significant Accounting Policies to the Notes to the Financial Statements. Ore on leach pads
Estimate Required:
The recovery of gold and silver at the Hycroft Mine is accomplished through a proprietary two-stage heap oxidation and leach process, the nature of which limits our ability to precisely determine the recoverable gold ounces in ore on leach pads. We estimate the quantity of recoverable gold ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, and estimated recovery rates based on ore type and domain and level of oxidation actually achieved or expected to be achieved prior to leaching. The quantity of recoverable gold ounces and recovery rates varies based on ore mineralogy, steps in the leach process, ore grade, ore particle sizes and the percentage of cyanide soluble gold. The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore to the actual gold ounces recovered (metallurgical balancing). The ultimate recoverable gold ounces or life-of-mine recovery rate is unknown until mining operations cease. A change in the recovery rate or the quantity of recoverable gold ounces in our stockpiles or ore on leach pads could materially impact our financial statements.
Impact of Change in Estimate:
Changes in recovery rate estimates or estimated recoverable gold ounces that do not result in write-downs are accounted for on a prospective basis. If a write-down is required, ore on leach pads would be adjusted to market values before prospectively accounting for the remaining costs and revised estimated recoverable gold ounces. During the year ended December 31, 2020, based on our metallurgical balancing results, we determined that 10,492 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces, which resulted in write-downs of production costs of $16.7 million and capitalized depreciation and amortization of $1.3 million. During the second half of 2020, we determined that no metallurgical balancing adjustment was needed and as such did not recognize write-downs of production inventories. The write-off of these ounces in the first and second quarters of 2020 was primarily due to the mismanagement of the oxidation process including inadequately adjusting variables in the oxidation process for changes in the ore type based on domain. As a result, we determined that we would recover fewer ounces than planned from those affected sections of the leach pads.
At December 31, 2020, if our estimate of recoverable gold ounces on the leach pad decreased by 2.5% or 5.0%, recoverable gold ounces in ore on leach pads would decrease by approximately 651 ounces or 1,302 ounces, respectively, which would require a write-down of $1.1 million or $2.3 million, respectively, of our ore on leach pad costs before prospectively accounting for the remaining costs. A 2.5% or 5.0% increase to our estimate of recoverable gold ounces in ore on leach pads would increase the estimated recoverable ounces by the aforementioned amounts and reduce our weighted average cost per ounce by approximately $42 per ounce or $83 per ounce, respectively, which would be accounted for on a prospective basis.
Proven and probable mineral reserves
Estimate Required:
Proven and probable mineral reserves are the part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. Our mineral reserve estimates are calculated in accordance with subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Estimated recoverable gold ounces in our proven and probable mineral reserves at the Hycroft Mine are used in units-of-production amortization calculations and are the basis for future cash flow estimates utilized in impairment calculations. When determining proven and probable mineral reserves, we must make assumptions and estimates of future commodity prices and demand, the mining methods we use and intend to use in the future, and the related costs incurred to develop, mine, and process our mineral reserves. Our estimates of recoverable gold ounces in proven and probable mineral reserves are prepared by and are the responsibility of our employees. Any change in estimate or assumption used to determine our proven and probable mineral reserves could change our estimated recoverable gold ounces in such mineral reserves, which may have a material impact on our financial statements.
Impact of Change in Estimate:
Our proven and probable mineral reserves are periodically updated, usually on an annual basis. Estimated recoverable gold ounces used in our units-of-production amortization and impairment calculations are based on proven and probable mineral reserves that were determined as of December 31, 2020 using gold and silver selling prices of $1,200 per ounce and $16.50 per ounce, respectively. Resulting changes in estimates of recoverable gold ounces are used in our units-of-production calculations and impairment calculations on a prospective basis.
Impairment of long-lived assets Estimate Required: Our long-lived assets consist of Property, plant, and equipment, and mine development.net. We review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that may trigger a test for recoverability include, but are not limited to, significant adverse changes to projected revenues,Revenues, costs, or future expansion plans or changes to federal and state regulations (with which we must comply) that may adversely impact our current or future operations. An impairment is determined to exist if the total projected future cash flows on an undiscounted basis are less than the carrying amount of a long-lived asset group. An impairment loss is measured and recorded based on the excess carrying value of the impaired long-lived asset group over fair value.
To determine fair value, we useutilize a discounted cash flow model basedmarket-based approach considering comparable sales transactions from the past five years and estimates of enterprise value. Based on quantitiesthe comparable sales transactions identified, we estimated a range of estimated recoverable mineralsvalues for measured and incorporate projections and probabilities involving metal prices (considering current and historical prices, price trends, and related factors), production levels, operating and production costs, and the timing and capital costsindicated mineral resources per equivalent ounce of expansion and sustaining projects, all of which are based on life-of-mine plans. The term “recoverable minerals” refers to the estimated amount of gold and silver that will be sold after taking into account losses during ore processing and treatment. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independentgold. Our estimates of future cash flows from other asset groups. Our estimatesthe potential sale of future cash flowsour assets are based on numerous assumptions that are consistent or reasonable in relation to internal budgets and projections,transaction occurring in the market and actual future cash flows may be significantly different than the estimates as actual future quantities of recoverable gold and silver, metal prices, operating and production costs, and the timing and capital costs of expansion and sustaining projectseach are each subject to significant risks and uncertainties. Impact of Change in Estimate: The estimatesmarket-based approach utilizing sales transactions of comparable assets and assumptions usedenterprise value resulted in our impairment testan estimated fair value range for long-lived assets of $73.5 million to $981.6 million as of December 31, 2020 were based on2023. After allocating fair value to other assets and liabilities, this range of fair values exceeded the Hycroft Technical Report. The Hycroft Technical Report was prepared using prices of $1,200 per ounce for gold and $16.50 per ounce for silver, which when using sales prices of $1,300 per ounce for gold and $17.33 per ounce for silver, resulted in an after tax net present value of $2.1 billion. We compared the estimated after tax net present value of $2.1 billion to the$55.0 million carrying value of our plant, equipment, and mine development of $60.2 million, and givenMining Assets. Given the large surplus between the estimated after tax net presentfair value of the Hycroft Mine and the carrying value of our plant, equipment, and mine developmentthe Mining Assets, we can also confirm no indicators of possible impairment exist for the Company’s long-lived assets under this methodology. We believe a change in the estimates used in the Hycroft Technical Reporteither approach would be unlikely to result in an impairment as of December 31, 2020.2023. Asset retirement obligation ("ARO") Estimate Required: We will be required to perform reclamation activity at the Hycroft Mine in the future. As a result of this requirement, an AROAsset retirement obligation has been recorded on our consolidated balance sheetsConsolidated Balance Sheets that is based on our expectation of the costs that will be incurred years in the future. Any underestimate or unanticipated reclamation costs or any changes in governmental reclamation requirements could require us to record or incur additional reclamation costs. ARO liabilities are accruedWe accrue an Asset retirement obligation when they become known, are probable, and can be reasonably estimated. Whenever a previously unrecognized ARO liabilityAsset retirement obligation becomes known, or a previously estimated reclamation cost is increased or decreased, the amount of that liability and any additional cost will be recorded at that time and could materially reduce our consolidated net income attributable to stockholders. Impact of Change in Estimate:
Based on our current proposed 34-year mine plan set forth in the Hycroft Technical Report, no significant reclamation activity will be made until 2047. However, if the significant reclamation activity were to begin in 2042 or 2045 our reclamation liability would increase by approximately $1.8 million and approximately $0.7 million, respectively.
Warrant liability
Estimate Required:
We account for the 5-Year Private Warrants to purchase shares of our common stock that are not indexed to our own stock as liabilities at fair value on the balance sheet. The warrants are subject to remeasurement at each balance sheet date, and any change in fair value is recognized as a component of Other income (expense), net on the statement of operations. We will continue to adjust the liability for changes in fair value of the 5-Year Private Warrants until the earlier of the (i) exercise or expiration of the 5-Year Private Warrants or (ii) the transfer of any 5-Year Private Warrants to any person who is not a permitted transferee, at which time the applicable warrant liability will be extinguished. The terms of the 5-Year Private Warrants are substantially identical to the 5-Year Public Warrants except the 5-Year Private Warrants, while held by the SPAC sponsor and/or SPAC underwriter and their permitted transferees, are precluded from mandatory redemption and are entitled to exercise on a cashless bases at the holder’s election. Accordingly, we use a Black-Scholes model with an appropriate estimate of volatility considering volatility of the 5-Year Public Warrants and using a Monte Carlo simulation model to incorporate the redemption and cashless exercise features in the 5-Year Private Warrants. Increases (decreases) in the assumptions result in a directionally similar impact to the fair value of the warrant liability.
Impact of Change in Estimate:
A $0.01 increase or decrease in the fair value estimate of 5-Year Private Warrants would increase or decrease the warrant liability, by $0.3 million with the offset in Other income (expense).
Based on the proposed 34-year mine plan which was the basis of our operations when we ceased mining activities in November 2021, and which we believe remains the best estimate for the life of mine, the Company expects to perform a substantial portion of its reclamation beginning in 2047 upon the estimated closure of the Hycroft Mine. In addition, the Company expects to perform reclamation activities for earthworks and solutions management from 2024 through 2026. If the reclamation activities expected to be performed upon the estimated closure of the mine were to begin ten years earlier or later than currently assumed our reclamation liability would increase or decrease by approximately $5.2 million and $2.7 million, respectively. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As the Company qualifies as a smaller reporting company under Item 10(f) of Regulation S-K, quantitative and qualitative disclosures about market risk are not required, and such are omitted from this filing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
| | | | | | | Page | | Consolidated Financial Statements | | | Report of Independent Registered Public Accounting Firm, PCAOB ID 659 | | Consolidated Balance Sheets at December 31, 2020 and 2019 | | Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019 | | Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 | | Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2020 and 2019 | | | Notes to Consolidated Financial Statements | |
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Hycroft Mining Holding Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetssheet of Hycroft Mining Holding Corporation (the “Company”) as of December 31, 20202023 and 2019,2022, the related consolidated statements of operations, stockholders'stockholders’ equity and cash flows for each of the years in the two-year periodthen ended, December 31, 2020, and the related notes (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 20202023 and 2019,2022, and the consolidated results of its operations and its cash flows for each of the years in the two-year periodyear then ended, December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Restatement to Correct 2020 MisstatementBasis for Opinion
As discussed in Note 25 to the financial statements, the 2020 financial statements have been restated to correct a misstatement.
Going Concern
The accompanyingThese consolidated financial statements have been prepared assuming thatare the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements,responsibility of the Company’s significant recurring operating losses, lack of liquidity and capital, and significant capital needed to expand operations raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
The Company's management is responsible for these financial statements.management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures thatto respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Emphasis of Matter
As discussed in Note 3 Recapitalization Transaction and Note 23 Related Party Transactions to the financial statements, the Company completed a significant recapitalization transaction involving related parties. Our opinion is not modified with respect to this matter.
/s/ Plante & Moran PLLC - Moss Adams LLP Dallas, Texas March 14, 2024
We have served as the Company’s auditor since 2015 Denver, Colorado
March 24, 2021, except as to the effect of the restatement described in Note 25, which is dated May 14, 20212022.
HYCROFT MINING HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands, except share and per share amounts) | | | | | | | | | | | | | December 31,
2020 | | December 31,
2019 | | (as restated) | | | | Assets: | | | | | Cash | $ | 56,363 | | | $ | 6,220 | | | Accounts receivable | 426 | | | 97 | | | Inventories - Note 4 | 12,867 | | | 4,453 | | | Ore on leach pads, current - Note 4 | 38,041 | | | 22,062 | | | Prepaids and other - Note 5 | 4,303 | | | 2,648 | | | Restricted cash - Note 6 | 0 | | | 3,270 | | | Current assets | 112,000 | | | 38,750 | | | Ore on leach pads, non-current - Note 4 | 7,243 | | | 0 | | | Other assets, non-current - Note 5 | 13,483 | | | 24,886 | | | Plant, equipment, and mine development, net - Note 7 | 60,223 | | | 31,524 | | | Restricted cash - Note 6 | 39,677 | | | 39,477 | | | Total assets | $ | 232,626 | | | $ | 134,637 | | | Liabilities: | | | | | Accounts payable | $ | 12,280 | | | $ | 10,746 | | | Other liabilities, current - Note 8 | 4,157 | | | 3,939 | | | Debt, net, current - Note 9 | 5,120 | | | 553,965 | | | Royalty obligation, current - Note 10 | 124 | | | 0 | | | Interest payable | 0 | | | 846 | | | Current liabilities | 21,681 | | | 569,496 | | | Other liabilities, non-current - Note 8 | 1,650 | | | 0 | | | Warrant liabilities, non-current - Note 11 | 15,389 | | | 18 | | | Debt, net, non-current - Note 9 | 142,665 | | | 0 | | | Royalty obligation, non-current - Note 10 | 29,839 | | | 0 | | | Asset retirement obligation, non-current - Note 12 | 4,785 | | | 4,374 | | | Total liabilities | 216,009 | | | 573,888 | | | Commitments and contingencies - Note 21 | 0 | | 0 | Stockholders' (deficit) equity:(1) - Note 13 | | | | | Common stock, $0.0001 par value; 400,000,000 shares authorized; 59,901,306 issued and outstanding at December 31, 2020; and 345,431 issued and 323,328 outstanding at December 31, 2019 | 6 | | | 0 | | | Additional paid-in capital | 537,370 | | | 5,187 | | | Accumulated deficit | (520,759) | | | (444,438) | | | Total stockholders' equity (deficit) | 16,617 | | | (439,251) | | | Total liabilities and stockholders' equity (deficit) | $ | 232,626 | | | $ | 134,637 | |
(1)Retroactively restated for the reverse recapitalization as described in Note 2 - Summary of Significant Accounting Policies. | | | | | | | | | | | | | December 31,
2023 | | December 31,
2022 | | Assets: | | | | | Cash and cash equivalents | $ | 106,210 | | | $ | 141,984 | | | Prepaids and deposits – Note 3 | 3,326 | | | 2,840 | | | Supplies inventories, net – Note 4 | 1,834 | | | 2,808 | | | Income tax receivable | 1,530 | | | 1,530 | | | Interest receivable | 667 | | | 459 | | | | | | | Accounts receivable | — | | | 2,771 | | | Current assets | 113,567 | | | 152,392 | | | Property, plant, and equipment, net – Note 5 | 53,091 | | | 54,832 | | | Restricted cash – Note 6 | 26,340 | | | 33,982 | | | Assets held for sale – Note 7 | 7,148 | | | 7,148 | | | Prepaids – Note 3 | 1,547 | | | 600 | | | Total assets | $ | 201,693 | | | $ | 248,954 | | | Liabilities: | | | | | Asset retirement obligation – Note 8 | $ | 3,172 | | | $ | — | | | Debt, net – Note 9 | 2,330 | | | 2,328 | | | Accounts payable and accrued expenses – Note 10 | 1,631 | | | 5,644 | | | Contract liabilities – Note 11 | 1,550 | | | 1,050 | | | Other liabilities – Note 12 | 3,063 | | | 3,011 | | | Current liabilities | 11,746 | | | 12,033 | | | Debt, net – Notes 9 and 21 | 142,617 | | | 132,690 | | | Deferred gain on sale of royalty – Note 13 | 29,839 | | | 29,837 | | | Asset retirement obligation – Note 8 | 4,801 | | | 10,302 | | | Warrant liabilities – Notes 14 and 21 | 26 | | | 786 | | | Other liabilities – Note 12 | 8 | | | — | | | Total liabilities | $ | 189,037 | | | $ | 185,648 | | Commitments and contingencies – Note 23 | | | | Stockholders’ equity – Note 15 | | | | | Common stock, $0.0001 par value; 1,400,000,000 shares authorized; 20,736,612 issued and outstanding at December 31, 2023, and 20,027,060 issued and outstanding at December 31, 2022 | $ | 21 | | | $ | 20 | | | Additional paid-in capital | 737,810 | | | 733,437 | | | Accumulated deficit | (725,175) | | | (670,151) | | | Total stockholders’ equity | 12,656 | | | 63,306 | | | Total liabilities and stockholders’ equity | $ | 201,693 | | | $ | 248,954 | |
The accompanying notes are an integral part of these consolidated financial statements.
HYCROFT MINING HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (U.S. dollars in thousands, except per share amounts) | | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2020 | | 2019 | | | (as restated) | | | | Revenues - Note 14 | | $ | 47,044 | | | $ | 13,709 | | | Cost of sales: | | | | | | Production costs | | 41,688 | | | 11,041 | | | Depreciation and amortization | | 2,894 | | | 1,011 | | | Mine site period costs - Note 4 | | 47,115 | | | 2,174 | | | Write-down of production inventories - Note 4 | | 17,924 | | | 16,443 | | | Total cost of sales | | 109,621 | | | 30,669 | | | Operating expenses: | | | | | | General and administrative | | 21,084 | | | 6,072 | | | Impairment on equipment not in use - Note 5 | | 5,331 | | | 63 | | | Accretion - Note 12 | | 374 | | | 422 | | | Project and development | | 0 | | | 7,708 | | | Pre-production depreciation and amortization | | 0 | | | 1,067 | | | Care and maintenance | | 0 | | | 3,529 | | | Reduction in asset retirement obligation | | 0 | | | (1,880) | | | Loss from operations | | (89,366) | | | (33,941) | | | Other income (expense): | | | | | | Interest expense, net of capitalized interest - Note 10 | | (43,458) | | | (64,846) | | | Fair value adjustment to Warrants - Note 19 | | (3,767) | | | 0 | | | Interest income | | 199 | | | 797 | | | Loss before reorganization items and income taxes | | (136,392) | | | (97,990) | | | Reorganization items | | 0 | | | (905) | | | Loss before income taxes | | (136,392) | | | (98,895) | | | Income taxes - Note 16 | | 0 | | | 0 | | | Net loss | | $ | (136,392) | | | $ | (98,895) | | | | | | | | Loss per share: | | | | | | Basic - Note 17 | | $ | (3.92) | | | $ | (327.95) | | | Diluted - Note 17 | | $ | (3.92) | | | $ | (327.95) | | Weighted average shares outstanding(1): | | | | | | Basic - Note 17 | | 34,833,211 | | | 301,559 | | | Diluted - Note 17 | | 34,833,211 | | | 301,559 | |
| | | | | | | | | | | | | | | | | Year Ended
December 31, | | | 2023 | | 2022 | Revenues – Note 15 | | $ | — | | | $ | 33,229 | | | Cost of sales: | | | | | | Production costs | | — | | | 30,756 | | | Mine site period costs – Note 2 | | — | | | 13,720 | | | Asset retirement obligation adjustments – Notes 2 and 8 | | — | | | 4,701 | | | Depreciation and amortization – Note 2 | | — | | | 3,361 | | | Write-down of supplies inventories – Notes 2 and 4 | | — | | | 1,051 | | | Total cost of sales | | — | | | 53,589 | | | Operating expenses: | | | | | | Projects, exploration, and development | | 20,637 | | | 18,355 | | | General and administrative | | 12,673 | | | 14,367 | | | Mine site period costs – Note 2 | | 11,886 | | | — | | | Depreciation and amortization – Note 2 | | 2,814 | | | — | | | Accretion – Note 8 | | 1,087 | | | 408 | | | Write-down of supplies inventories – Notes 2 and 4 | | 495 | | | — | | | Gain on settlement of accrued liability – Note 10 | | (1,151) | | | — | | | Asset retirement obligation adjustments – Notes 2 and 8 | | (2,887) | | | — | | | | | | | | Loss from operations | | (45,554) | | | (53,490) | | | Other (expense) income: | | | | | | Interest expense – Note 9 | | (18,467) | | | (18,481) | | | Interest income | | 8,278 | | | 2,313 | | | Gain on sale of assets, net of commissions | | 544 | | | 3,948 | | | Fair value adjustment to warrants – Notes 14 and 21 | | 175 | | | (159) | | | Gain on extinguishment of debt – Note 9 | | — | | | 5,041 | | | | | | | | | | | | | | | | | | | | | | | Net loss | | $ | (55,024) | | | $ | (60,828) | | | | | | | Loss per share(1) | | | | | | Basic – Note 19 | | $ | (2.61) | | | $ | (3.58) | | | Diluted – Note 19 | | $ | (2.61) | | | $ | (3.58) | | Weighted average shares outstanding(1) | | | | | | Basic – Note 19 | | 21,113,516 | | | 16,977,306 | | | Diluted – Note 19 | | 21,113,516 | | | 16,977,306 | |
(1)Retroactively restated forOn November 14, 2023, the Company effectuated a reverse stock split with a ratio of 1-for-10. All share and per share information has been retroactively adjusted to give effect to the reverse recapitalization. Refer to Note 2 - Summary of Significant Accounting Policies and Note 17 - Loss Per Sharestock split for further information.all periods presented. The accompanying notes are an integral part of these consolidated financial statements.
HYCROFT MINING HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands) | | | | | | | | | | | | | Years Ended December 31, | | 2020 | | 2019 | | (as restated) | | | | Cash flows from operating activities: | | | | | Net loss | $ | (136,392) | | | $ | (98,895) | | | Adjustments to reconcile net loss for the period to net cash used in operating activities: | | | | | Non-cash portion of interest expense - Note 10 | 38,843 | | | 54,810 | | | Write-down of production inventories - Note 4 | 17,924 | | | 18,617 | | | Impairment on equipment not in use - Note 5 | 5,331 | | | 63 | | | Depreciation and amortization | 5,886 | | | 2,078 | | | Stock-based compensation - Note 15 | 2,380 | | | 1,102 | | | Salary continuation and compensation costs | 2,116 | | | 0 | | | Fair value adjustment to Seller Warrants - Note 19 | 3,767 | | | 0 | | | Accretion - Note 12 | 374 | | | 422 | | | Phantom share compensation | 225 | | | 706 | | | Amortization reduction of Sprott Royalty Obligation - Note 10 | (37) | | | 0 | | | Reduction in asset retirement obligation | 0 | | | (1,880) | | | Change in value of phantom shares | 0 | | | 181 | | | Changes in operating assets and liabilities: | | | | | Accounts receivable | (329) | | | (97) | | | Production-related inventories | (43,756) | | | (38,627) | | | Materials and supplies inventories | (3,891) | | | (977) | | | Prepaids and other assets, current and non-current | (2,946) | | | (507) | | | Accounts payable | 372 | | | 3,384 | | | Other liabilities, current and non-current | 443 | | | 52 | | | Interest payable | (818) | | | (203) | | | Net cash used in operating activities | (110,508) | | | (59,771) | | | Cash flows used in investing activities: | | | | | Additions to plant, equipment, and mine development | (33,439) | | | (12,296) | | | Proceeds from sales of equipment | 2,315 | | | 0 | | | Net cash used in investing activities | (31,124) | | | (12,296) | | | Cash flows from financing activities: | | | | | Proceeds from Public Offering | 83,515 | | | 0 | | | Proceeds from private placement - Note 3 | 75,963 | | | 0 | | | Proceeds from Sprott Credit Agreement - Note 3 and 9 | 68,600 | | | 0 | | | Proceeds from Sprott Royalty Obligation - Note 3 and 10 | 30,000 | | | 0 | | | Proceeds from forward purchase contract - Note 3 | 25,000 | | | 0 | | | Proceeds from Recapitalization Transaction - Note 3 | 10,419 | | | 0 | | | Proceeds from 1.25 Lien Note Issuances | 44,841 | | | 71,831 | | | Proceeds from warrant exercise | 1 | | | 0 | | | Repayment of First Lien Agreement - Note 9 | (125,468) | | | 0 | | | Repayment of First Lien Agreement from permissible disposal proceeds | (1,158) | | | 0 | | | Transaction and issuance costs | (16,094) | | | (3,658) | | | Repayment of Promissory Note - Note 3 | (6,914) | | | 0 | | | Net cash provided by financing activities | 188,705 | | | 68,173 | | | Net increase (decrease) in cash and restricted cash | 47,073 | | | (3,894) | | | Cash and restricted cash, beginning of period | 48,967 | | | 52,861 | | | Cash and restricted cash, end of period | $ | 96,040 | | | $ | 48,967 | | | Reconciliation of cash and restricted cash: | | | | | Cash | $ | 56,363 | | | $ | 6,220 | | | Restricted cash - current | 0 | | | 3,270 | | | Restricted cash - non-current | 39,677 | | | 39,477 | | | Total cash and restricted cash | $ | 96,040 | | | $ | 48,967 | |
| | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Cash flows used in operating activities: | | | | | Net loss | $ | (55,024) | | | $ | (60,828) | | | Adjustments to reconcile net loss for the period to net cash used in operating activities: | | | | | Non-cash portion of interest expense – Note 9 | 12,255 | | | 13,149 | | | Depreciation and amortization – Notes 2 and 5 | 2,814 | | | 3,356 | | | Stock-based compensation – Note 17 | 2,920 | | | 2,469 | | | Accretion – Note 8 | 1,087 | | | 408 | | | Impairment charges and write-downs – Notes 4, 5, and 7 | 495 | | | 1,051 | | | Non-cash (gain) loss on fair value adjustment for warrant liabilities – Notes 14 and 21 | (175) | | | 159 | | | Gain on sale of assets, net of commissions | (544) | | | (3,948) | | | Gain on settlement of accrued liability | (1,151) | | | — | | | Asset retirement obligation adjustments – Note 8 | (3,416) | | | 4,701 | | | Gain on extinguishment of debt – Note 9 | — | | | (5,041) | | | Changes in operating assets and liabilities: | | | | | Accounts receivable | 2,774 | | | (2,774) | | | Contract liabilities – Note 11 | 500 | | | 1,050 | | | | | | | Supplies inventories – Note 4 | 479 | | | 1,464 | | | Interest receivable | (208) | | | (459) | | | Prepaids and deposits – Note 3 | (1,991) | | | (498) | | | Accounts payable and accrued expenses – Note 10 | (2,330) | | | (3,786) | | | Production-related inventories | — | | | 15,808 | | | Other liabilities – Note 12 | 67 | | | (1,136) | | | Net cash used in operating activities | (41,448) | | | (34,855) | | | Cash flows (used in) provided by investing activities: | | | | | Additions to property, plant, and equipment | (1,070) | | | (951) | | | Proceeds from sale of assets – Note 5 | 563 | | | 2,714 | | | Proceeds from assets held for sale, net of commissions expense – Note 7 | — | | | 6,574 | | | Net cash (used in) provided by investing activities | (507) | | | 8,337 | | | Cash flows (used in) provided by financing activities: | | | | | Proceeds from issuance of common stock and warrants, net of issuance expenses – Note 15 | 867 | | | 188,859 | | | | | | | | | | | Principal payments on debt and finance leases – Note 15 | (2,328) | | | (33,010) | | | Net cash (used in) provided by financing activities | (1,461) | | | 155,849 | | | Net (decrease) increase in cash, cash equivalents, and restricted cash | (43,416) | | | 129,331 | | | Cash, cash equivalents, and restricted cash, beginning of period | 175,966 | | | 46,635 | | | Cash, cash equivalents, and restricted cash, end of period | $ | 132,550 | | | $ | 175,966 | | | Reconciliation of cash, cash equivalents, and restricted cash: | | | | | Cash and cash equivalents | $ | 106,210 | | | $ | 141,984 | | | Restricted cash | 26,340 | | | 33,982 | | | Total cash, cash equivalents, and restricted cash | $ | 132,550 | | | $ | 175,966 | |
See Note 20 -22 – Supplemental Cash Flow Information for additional details. The accompanying notes are an integral part of these consolidated financial statements.
HYCROFT MINING HOLDING CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS'STOCKHOLDERS’ EQUITY (DEFICIT) (U.S. dollars in thousands, except share amounts)thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock(1) | | Treasury Stock(1) | | Additional Paid-in Capital(1) | | Accumulated
Deficit | | Total
Stockholders'
Equity (Deficit) | | Shares | | Amount | | Shares | | Amount | | | | | Balance at January 1, 2019 | 307,831 | | | $ | 0 | | | 17,927 | | | $ | 0 | | | $ | 5,187 | | | $ | (345,543) | | | $ | (340,356) | | | Shares issued | 37,600 | | | — | | | — | | | — | | | — | | | — | | | — | | | Share repurchased | — | | — | | 4,176 | | — | | — | | — | | | — | | | Net loss | | | | | | | | | | | (98,895) | | | (98,895) | | | Balance at December 31, 2019 | 345,431 | | | $ | 0 | | | 22,103 | | | $ | 0 | | | $ | 5,187 | | | $ | (444,438) | | | $ | (439,251) | | | | | | | | | | | | | | | | | Common Stock(1) | | Treasury Stock(1) | | Additional Paid-in Capital(1) | | Accumulated
Deficit | | Total
Stockholders'
Equity (Deficit) | | Shares | | Amount | | Shares | | Amount | | | | | | | | | | | | | (as restated) | | (as restated) | | (as restated) | | Balance at January 1, 2020 | 345,431 | | | $ | 0 | | | 22,103 | | | $ | 0 | | | $ | 5,187 | | | $ | (444,438) | | | $ | (439,251) | | Conversion of Seller's 2.0 Lien Notes to common shares of Seller and distribution of HYMC common stock(2) | 14,795,153 | | | 2 | | | (22,103) | | | — | | | 146,217 | | | 74,640 | | | 220,859 | | | Exchange of Seller's 1.5 Lien Notes for HYMC common stock | 16,025,316 | | | 2 | | | — | | | — | | | 160,252 | | | (14,569) | | | 145,685 | | | Common shares issued in private placement | 7,596,309 | | | 1 | | | — | | | — | | | 75,962 | | | — | | | 75,963 | | | Exchange of Seller's 1.25 Lien Notes for HYMC common stock | 4,845,920 | | | — | | | — | | | — | | | 48,459 | | | — | | | 48,459 | | Shares issued pursuant to forward purchase agreement with SPAC sponsor, including conversion of Class B shares, less fair value of 5-Year Private Warrants(3) | 4,813,180 | | | — | | | — | | | — | | | 12,814 | | | — | | | 12,814 | | | Unredeemed SPAC shares of MUDS public stockholders | 1,197,704 | | | — | | | — | | | — | | | 3,723 | | | — | | | 3,723 | | | Common shares issued pursuant to Sprott Credit Agreement | 496,634 | | | — | | | — | | | — | | | 6,282 | | | — | | | 6,282 | | | Common shares issued to underwriter | 44,395 | | | — | | | — | | | — | | | 444 | | | — | | | 444 | | Vesting of restricted stock(4) | — | | | — | | | — | | | — | | | 1,802 | | | — | | | 1,802 | | | Equity issuance costs | — | | | — | | | — | | | — | | | (8,255) | | | — | | | (8,255) | | | Shares issued | 101 | | | — | | — | | | — | | | 1 | | — | | 1 | | | Stock-based compensation costs | — | | | — | | — | | | — | | | 388 | | | — | | 388 | | | Shares issued pursuant to Public Offering | 9,583,334 | | | 1 | | | — | | | — | | | 83,513 | | | — | | | 83,514 | | 5-Year Private Warrants transferred to 5-Year Public Warrants(5) | — | | | — | | | — | | | — | | | 581 | | | — | | | 581 | | | Shares issued under stock-based compensation program | 157,829 | | | — | | | — | | | — | | | — | | | — | | | — | | | Net loss | — | | | — | | — | | | — | | | — | | | (136,392) | | (136,392) | | | Balance at December 31, 2020 | 59,901,306 | | | $ | 6 | | | 0 | | | $ | 0 | | | $ | 537,370 | | | $ | (520,759) | | | $ | 16,617 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | Additional
Paid-in Capital | | Accumulated
Deficit | | Total Stockholders’
Equity | | Shares(1) | | Amount | | | | Balance at January 1, 2023(2) | 20,027,065 | | | $ | 20 | | | $ | 733,437 | | | $ | (670,151) | | | $ | 63,306 | | | Issuance of common stock and warrants – Note 15 | 523,329 | | | 1 | | | 866 | | | — | | | 867 | | | Vesting of restricted stock units – Note 17 | 186,218 | | | — | | | — | | | — | | | — | | | 5-Year Private Warrants transferred to 5-Year Public Warrants – Notes 13 and 15 | — | | | — | | | 585 | | | — | | | 585 | | | Stock-based compensation costs | — | | | — | | | 2,922 | | | — | | | 2,922 | | | Net loss | — | | | — | | | — | | | (55,024) | | | (55,024) | | | December 31, 2023 | 20,736,612 | | | $ | 21 | | | $ | 737,810 | | | $ | (725,175) | | | $ | 12,656 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Total Stockholders’
(Deficit) Equity | | Shares(1) | | Amount | | | | | Balance at January 1, 2022 | 6,043,340 | | | $ | 6 | | | $ | 540,823 | | | $ | (609,323) | | | $ | (68,494) | | | Issuance of common stock and warrants – Note 15 | 13,687,006 | | | 14 | | | 187,482 | | | — | | | 187,496 | | | Vesting of restricted stock units – Note 17 | 111,496 | | | — | | | 727 | | | — | | | 727 | | | 5-Year Private Warrants transferred to 5-Year Public Warrants – Notes 13 and 15 | — | | | — | | | 42 | | | — | | | 42 | | | Stock issuance – other – Note 15 | 185,218 | | | — | | | 1,907 | | | — | | | 1,907 | | | Stock-based compensation costs | — | | | — | | | 2,456 | | | — | | | 2,456 | | | Net loss | — | | | — | | | — | | | (60,828) | | | (60,828) | | | Balance at December 31, 2022 | 20,027,060 | | | $ | 20 | | | $ | 733,437 | | | $ | (670,151) | | | $ | 63,306 | |
(1)Retroactively restated forOn November 14, 2023, the Company effectuated a reverse stock split with a ratio of 1-for-10. All share and per share information has been retroactively adjusted to give effect to the reverse recapitalization as described in Note 2 - Summary of Significant Accounting Policies.stock split for all periods presented. (2)Includes 3,511,820The opening balance of shares of HYMC common stock received by Seller that were surrendered by the Company. (3)Includes forward purchase contract proceedsoutstanding for both periods presented reflects an increase of $25.0 million less $12.2 millionsix shares of common stock for the fair value of 5-Year Private Warrants.
(4)As of December 31, 2020 there were 21,256 unissued shares underlying restricted stock units that had vested.
(5)5-Year Private Warrants totaling 351,585 warrants were transferred to an Unrelated Third-Party (as such term is defined herein) in the 2020 third quarter. The terms of the warrant once transferredadjustment made to the Unrelated Third Party are substantially the same as 5-Year Public Warrants and were reclassified fromCompany’s share ledger by its recordkeeper related to a liability to Stockholders’ Equity.transaction that occurred in May 2020.
The accompanying notes are an integral part of these consolidated financial statements.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements
1. Company Overview Hycroft Mining Holding Corporation (formerly known as Mudrick Capital Acquisition Corporation ("MUDS")) and its subsidiaries (collectively, “Hycroft”,“Hycroft,” the “Company”, “we”, “us”, “our”, "it", "HYMC"“Company,” “we,” “us,” “our,” “it,” or “HYMC”) is a U.S.-based gold producerand silver company that is focused on operatingexploring and developing its wholly ownedthe Hycroft Mine in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of the Company’s operating revenues and the market prices of gold and silver significantly impact the Company’s financial position, operating results, and cash flows. The Hycroft Mine is located in the State of Nevada and the Company’s corporate office is located in Denver, Colorado.Winnemucca, Nevada. Restart of the Hycroft Mine
During the second quarter of 2019, theThe Company restarted pre-commercial scale open pit mining operations at the Hycroft Mine during the second quarter of 2019 and began producing and selling gold and silver during the third quarter of 2019, produced and sold gold and silver, which it has continued to do on an approximate weekly basis since restarting. As part of the 2019 restart of mining operations, existing equipment was re-commissioned, including haul trucks, shovels and a loader, upgrades were made to the crushing system and new leach pad space was added to the existing leach pads. During 2020, the2019. The Company continued to increase its operations by mining more tons, procuring additional mobile equipment rentals, and increasing its total headcount. Through May 29, 2020, the Company obtained all of its financing from related party debt issuances (see Note 23 - Related Party Transactions), which were extinguished in connection with the Recapitalization Transaction with MUDS (discussed below).
M3 Engineering and Technology Corporation (“M3 Engineering”), in conjunction with SRK Consulting (U.S.), Inc. (“SRK”) and the Seller, completed the Hycroft Technical Report, Heap Leaching Feasibility Study, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants, with an effective date of July 31, 2019 (the “Hycroft Technical Report”), for a two-stage, heap oxidation and subsequent leaching of sulfide ores. The Hycroft Technical Report projects the economic viability and potential future cash flows foroperated the Hycroft Mine until November 2021, when it discontinued active mining operations expand to levels presented inas a result of the then-current and expected ongoing cost pressures for many of the reagents and consumables used at the Hycroft Mine and to further determine the most effective processing method for the sulfide ore. In March 2023, the Company, along with its third-party consultants, completed and filed the Hycroft Property Initial Assessment Technical Report.
Recapitalization Transaction with MUDS
As discussed in Note 3 - Recapitalization Transaction,Report Summary Humboldt and Pershing Counties, Nevada (“2023 Hycroft TRS”) that included a mineral resource estimate utilizing a pressure oxidation (“POX”) process for sulfide and transition mineralization and heap leaching process for oxide mineralization. The Company will continue to build on May 29, 2020, pursuantthe work and investigate opportunities identified through progressing the technical and data analyses leading up to the Purchase Agreement (defined herein), Seller2023 Hycroft TRS.
In March 2022, the Company completed a business combination Recapitalization Transaction with MUDS, a publicly traded blank check special purpose acquisition corporation or “SPAC,”sale to selected investors (the “Private Placement Offering”), and Acquisition Sub (as eachan at-the-market public offering program (“ATM Program”) that raised gross proceeds of such terms are defined herein). The Recapitalization Transaction was completed upon receiving regulatory approvals$194.4 million before issuance costs. Beginning on November 17, 2023, the Company again began accessing the ATM Program, and stockholder approvals from eachas of MUDS and Seller. Following the close of the Recapitalization Transaction, MUDS and the entities purchased from Seller were consolidated under Hycroft Mining Holding Corporation, by amending and restating the Company's certificate of incorporation to reflect the Company’s change in name. Pursuant to the consummation of the Recapitalization Transaction, theDecember 31, 2023 sold an additional 523,328 shares of common stock for aggregate gross proceeds, before commissions and offering expenses, of Hycroft Mining Holding Corporation$1.1 million. As of December 31, 2023, there were listed on the Nasdaq Capital Market under the ticker symbol “HYMC”. Upon closing of the Recapitalization Transaction, the Company’s unrestricted cash available for use totaled $68.9$360.3 million and the number of shares of common stock issuedavailable for issuance under the ATM Program. The net proceeds from the ATM Program are expected to be used for general corporate purposes, which may include the repayment, refinancing, redemption, or repurchase of existing indebtedness, exploration, working capital, or capital expenditures and outstanding totaled 50,160,042. In addition, upon closing,other investments. On November 14, 2023, the Company had 34,289,999 outstanding warrantseffectuated a 1-for-10 reverse stock split. The reverse stock split was intended to purchase an equal numberincrease the price per share of shares ofthe Company’s common stock at $11.50 per share and 12,721,623 warrants to purchase 3,210,213 shares of common stock at aallow the Company to demonstrate compliance with the $1.00 minimum bid price of $44.82 per share. For more informationrequirement for continued listing on the consummation of the Recapitalization Transaction with MUDS, see Note 3 - Recapitalization TransactionNasdaq Stock Market LLC (“Nasdaq”).
Restatement of Previously Issued Financial Statements
The Company has restated its financial statements as of and for the year ended December 31, 2020, and will be prospectively restating the unaudited consolidated condensed financial statements for the three and six month periods ended June 30, 2020 and the three and nine month periods ended September 30, 2020, to correct misstatements in those prior periods primarily related to misstatements identified in improperly applying accounting guidance on certain warrants, recognizing them as equity instead of a warrant liability, under the guidance of Accounting Standards Codification (“ASC”) 815-40, Contracts in Entity’s Own Equity.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
See Note 25 - Restatement of Previously Issued Financial Statements for additional information regarding the misstatements identified and the restatement adjustments made to the financial statements.
COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States. Efforts implemented by local and national governments, as well as businesses, including temporary closures, have had adverse impacts on local, national and global economies. The Company has implemented health and safety policies for employees that follow guidelines published by the Center for Disease Control (CDC) and the Mine Safety and Health Administration (MSHA). While our operations during 2020 were impacted by COVID-19, the impact did not significantly adversely affect our operations. The extent of the impact of COVID-19 on our operational and financial performance going forward will depend on certain developments, including the duration and continued spread of the outbreak, and the direct and indirect impacts on our employees, vendors, and customers, all of which are uncertain and cannot be fully anticipated or predicted. Since the Company's Hycroft Mine represents the entirety of its operations, any COVID-19 outbreak at the mine site or any governmental restrictions implemented to combat the pandemic could result in a partial or entire shutdown of the Hycroft Mine itself, which would negatively impact the Company's financial position, operating results, and cash flows. As of the date of these financial statements, the extent to which COVID-19 may impact our financial condition, results of operations or cash flows is uncertain, but could be material and adverse.
2. Summary of Significant Accounting Policies Basis of presentation These consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain reclassifications have been made toDuring the prior periods presented in these financial statements to conform toyear ended December 31, 2022, the current period presentation, which had no effectCompany completed processing of gold and silver ore previously placed on previously reported total assets, liabilities, cash flows, or net loss.
References to “$” refers to United States currency.
Recapitalization Transaction
The Recapitalization Transaction (see Note 3 - Recapitalization Transaction) was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, for financial reporting purposes, MUDS has been treated as the “acquired” company and Hycroft Mining Corporation (“Seller”) has been treated as the “acquirer”. This determination was primarily based on (1) stockholders of Seller immediatelyleach pads prior to ceasing mining operations in November 2021. As a result, the Recapitalization Transaction having a relative majorityCompany did not generate Revenues or incur Cost of sales during the voting poweryear ended December 31, 2023. Accordingly, effective January 1, 2023, the Company began reporting amounts for Mine site periodcosts, Asset retirement obligation adjustments,Depreciation and amortization, and Write-down of the combined entity; (2) the operations of Seller prior to the Recapitalization Transaction comprising the only ongoing operations of the combined entity; (3) four of the seven members of the Board of Directors immediately following the Recapitalization Transaction were directors of Seller immediately prior to the Recapitalization Transaction; and (4) executive and senior management of Seller comprises the same for the Company.supplies inventories
Based on Seller being the accounting acquirer, the financial statements of the combined entity represent a continuation of the financial statements of Seller, as Operating expenses as this presentation aligns with the acquisition treatedmanner in which the business is currently viewed and managed while the Company conducts activities for developing the Hycroft Mine and recommencing mining operations.
Liquidity As of December 31, 2023, the Company had available unrestricted cash on hand of $106.2 million and net working capital of $101.8 million, which is expected to provide it with the necessary liquidity to fund its operating and investing requirements and future obligations as they become due within the equivalent of Seller issuing stock for the net assets of MUDS, accompanied by a recapitalization. The net assets of MUDS were recognized at historical cost as ofnext 12 months from the date of this filing. On November 17, 2023, the Recapitalization Transaction,Company again began accessing the ATM Program, and as of December 31, 2023, sold an additional 523,328 shares of common stock for aggregate gross proceeds, before commissions and offering expenses, of $1.1 million. As of December 31, 2023, there were $360.3 million shares of common stock available for issuance under the ATM Program. The Company also made additional voluntary prepayments of $38.0 million in January 2024, with no goodwill or other intangible assets recorded. Comparative information prior$34.7 million related to the Recapitalization Transaction in these financial statements are those of Sellerfirst lien loan and the accumulated deficit of Seller has been carried forward after the Recapitalization Transaction. The shares and net loss per common share prior$3.3 million related to the Recapitalization Transaction have been retroactively restated as shares reflecting the exchange ratio established in the Recapitalization Transaction to effect the reverse recapitalization (1 Seller share for 0.112 HYMC share).additional interest. See Note 3 - Recapitalization Transaction26 – Subsequent Events for additional information.details.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Going concern
The financial statementsCompany will continue to evaluate alternatives to raise additional capital necessary to fund the future exploration and development of the Company have been prepared on a “going concern” basis, which contemplates the presumed continuation ofHycroft Mine and will continue to explore other strategic initiatives to enhance stockholder value. Historically, the Company even though eventshas been dependent on various forms of debt and conditions exist that, when considered individually orequity financing to fund its business. While the Company has been successful in the aggregate, raise substantial doubt aboutpast raising funds through equity and debt financings, no assurance can be given that additional financing will be available to it in amounts sufficient to meet the Company’s abilityneeds or on terms acceptable to continue as a going concern because it is probablethe Company. In the event that without additional capital injections,funds are not available, the Company may be unablerequired to meetmaterially change its obligations as they become due within one year after the date that these financial statements were issued. For the year ended December 31, 2020, the Company incurred a net loss of $136.4 million and net cash used in operating activities was $110.5 million. As of December 31, 2020, the Company had available cash on hand of $56.4 million, working capital of $90.3 million, total liabilities of $216.0 million, and an accumulated deficit of $520.8 million. Although the Company completed the Recapitalization Transaction during the second quarter of 2020 and the Public Offering (as defined herein) on October 6, 2020, for proceeds net of discount and equity issuance costs of approximately $83.1 million, based on its internal cash flow projection models, the Company currently forecasts it will likely require additional cash from financing activities in less than 12 months from the issuance of this report to meet its operating and investing requirements and future obligations as they become due, including the estimated $9.1 million in cash payments required pursuant to the Credit Agreement among MUDS, MUDS Holdco Inc., Allied VGH LLC, Hycroft Mining Holding Corporation, Hycroft Resources and Development, LLC Sprott Private Resource Lending II (Collector) Inc., and Sprott Resources Lending Corp. (“Sprott Credit Agreement”).
The Company’s ability to continue as a going concern is contingent upon securing additional funding for working capital, capital expenditures and other corporate expenses so that it can increase sales by achieving higher cost-effective operating tonnages and recovery rates and generate positive free cash flows.
These financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of any liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern. As such, recorded amounts in these financial statements (including without limitation, stockholders’ equity) have been prepared in accordance with GAAP on a historical-cost basis, as required, which do not reflect or approximate the current fair value of the Company’s assets or management’s assessment of the Company’s overall enterprise or equity value.business plan.
Use of estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in these consolidated financial statements and accompanying notes. The more significant areas requiring the use of management estimates and assumptions relate to: recoverable gold and silver on the leach pads and in-process inventories; timing of near-term ounce production and related sales; the useful lives of long-lived assets; probabilities of future expansion projects; estimates of mineral reserves;resources; estimates of life-of-mine production timing, volumes, costs, and prices; current and future mining and future processing plans; environmental reclamation and closure costs and timing; deferred taxes and related valuation allowances; estimates of the fair value of liability classified warrants; and estimates of fair value for asset impairmentslong-lived assets and financial instruments. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable at the time the estimate is made. Actual results may differ from amounts estimated in these consolidated financial statements, and such differences could be material. Accordingly, amounts presented in these consolidated financial statements are not indicative of results that may be expected for future periods. Reclassification of prior year presentation During the year ended December 31, 2022, the Company completed processing of gold and silver ore previously placed on leach pads prior to ceasing mining operations in November 2021. As a result, the Company did not generate Revenues or incur Cost of sales during the year ended December 31, 2023. Accordingly, effective January 1, 2023, the Company began reporting amounts for Mine site period costs and Depreciation and amortization as Operating expenses as this presentation aligns with the manner in which the business is currently viewed and managed while the Company conducts activities for developing the Hycroft Mine and recommencing mining operations. CashOn November 14, 2023, the Company effectuated a reverse stock split with a ratio of 1-for-10. All share and per share information has been retroactively adjusted to give effect to the reverse stock split for all periods presented. The shares of Common Stock retained a par value of $0.0001 per share. The total number of authorized shares of Common Stock and preferred stock will not be reduced and remain at 1,400,000,000 and 10,000,000 shares, respectively.
Cash consisted ofand cash balancesequivalents During 2022, the Company invested in the AAAm rated U.S. Government Money Market Funds that are readily convertible to cash and, as such, the Company has included them in Cash and cash equivalents. As of December 31, 2020.2023, cash consisted of the Company’s cash and money market fund balances. The Company has not experienced any losses on cash balances and believes that no significant risk of loss exists with respect to its cash. As of December 31, 2020, and December 31, 2019, the Company held 0 cash equivalents. Restricted cash is held as collateral to provide financial assurance that the Company will use to fulfill obligations and commitments related to reclamation activity (see Note 10 - Asset Retirement Obligation for further detail) that is excluded from cash and is listed separately on the consolidated balance sheets. As of December 31, 2020, and December 31, 2019, the Company held $39.7 million and $42.7 million in restricted cash, respectively. See Note 6 - Restricted Cash for additional information.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
Accounts receivable
Accounts receivable consists of amounts due from customers for gold and silver sales. The Company has evaluated the customers’ credit risk, payment history and financial condition and determined that no allowance for doubtful accounts is necessary. The entire accounts receivable balance is expected to be collected during the next twelve months.
Ore on leach pads and inventories
The Company’s production-related inventories include: ore on leach pads; in-process inventories; and doré finished goods. Production-related inventories are carried at the lower of average cost or net realizable value. Cost includes mining (ore and waste); processing; refining costs incurred during production stages; and mine site overhead and depreciation and amortization relating to mining and processing operations. Corporate general and administrative costs are not included in inventory costs. Net realizable value represents the estimated future sales price of production-related inventories computed using the London Bullion Market Association’s (“LBMA”) quoted period-end metal prices, less any further estimated processing, refining, and selling costs.
In-process inventories
In-process inventories represent gold-bearing concentrated materials that are in the process of being converted to a saleable product using a Merrill-Crowe plant or carbon-in-column processing method. As gold ounces are recovered from in-process inventories, costs, including conversion costs, are transferred to precious metals inventory at an average cost per ounce of gold.
Precious metals inventory
Precious metals inventory consists of doré and loaded carbon containing both gold and silver, which is ready for offsite shipment or at a third party refiner before being sold to a third party. As gold ounces are sold, costs are recognized in Production costs and Depreciation and amortization in the consolidated statements of operations at an average cost per gold ounce sold.
Materials and supplies
Materials and suppliesSupplies are valued at the lower of average cost or net realizable value. Cost includes applicable taxes and freight. The Company monitors its supplies for turnover and obsolescence and records losses for excess and obsolete inventory, as appropriate.
Ore on leach pads, current and non-currentAccounts receivable
Ore on leach pads represents ore that is being treated with a chemical solution to dissolve the containedAccounts receivable consists of amounts due from customers for gold and silver. Costs are added to ore on leach pads based on current mining costs, including reagents, leaching supplies, and applicable depreciation and amortization relating to mining operations. As gold-bearing materials are further processed, costs are transferred from ore on leach pads to in-process inventories at an average cost per estimated recoverable ounce of gold.
Prepaids and other assets, non-current
Equipment not in use
From time to time, the Company may determine that certain of its property and equipment no longer fit into its strategic operating plans and may either contemplate or commence activities to sell such identified assets.silver sales. The Company evaluates equipment not in usethe customers’ credit risk, payment history, and financial condition to determine whether an allowance for held-for-sale classification in accordance with ASC Topic 360doubtful accounts is necessary. The Company collected the outstanding Property, Plant, and EquipmentAccounts receivable ("ASC 360"). If propertybalance during the first three months of 2023.
Property, plant, and equipment, do not meet the held-for-sale criteria in ASC 360, but have been taken out of service for sale or were never placed into service, the carrying value of such assets is included in Other assets, non-current. In accordance with its impairment policy, the Company reviews and evaluates its equipment and facilities not in use for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. During the year ended December 31, 2020, the Company determined that the fair value of equipment not in use was less the carrying amount and recorded an impairment loss of $5.3 million.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
Plant, equipment, and mine development, net
Expenditures for new facilities and equipment, and expenditures that extend the useful lives or increase the capacity of existing facilities or equipment are capitalized and recorded at cost. Such costs are depreciated using either the straight-line method over the estimated productive lives of such assets or the units-of-production method (when actively operating) at rates sufficient to depreciate such costs over the estimated proven and probable mineral reserves as gold ounces are recovered.. For equipment and facilities that are constructed by the Company, interest is capitalized to the cost of the underlying asset while being constructed until such asset is ready for its intended use. See Note 7 -5 – Property, Plant, Equipment, and Mine Development,Equipment, Net for additional information.
Mine development costs include the costDrilling, engineering, metallurgical, and other related costs are capitalized for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body, converting non-reserve mineralization to proven and probable mineral reserves, infrastructure planning, or supporting the environmental impact statement. All other exploration drilling costs are expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to production-related inventories and upon the sale of gold ounces are included in Cost of sales on the consolidated statements of operations.Contents
Mine development costs are amortized using the units-of-production method based upon estimated recoverable ounces in proven and probable mineral reserves. To the extent such capitalized costs benefit an entire ore body, they are amortized over the estimated life of that ore body. Capitalized costs that benefit specific ore blocks or areas are amortized over the estimated life of that specific ore block or area. Recoverable ounces are determined by the Company based upon its proven and probable mineral reserves and estimated metal recoveries associated with those mineral reserves.HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements Impairment of long-lived assets The Company’s long-lived assets consist of plant, equipment,Note 5 – Property, Plant, and mine development.Equipment, Net. The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that may trigger a test for recoverability include, but are not limited to, significant adverse changes to projected revenues,Revenues, costs, or future expansion plans or changes to federal and state regulations (with which the Company must comply) that may adversely impact the Company’s current or future operations. An impairment is determined to exist if the total projected future cash flows on an undiscounted basis are less than the carrying amount of a long-lived asset group. An impairment loss is measured and recorded based on the excess carrying value of the impaired long-lived asset group over fair value. To determine fair value, the Company uses a discounted cash flow model based on quantities of estimated recoverable minerals and incorporates projections and probabilities involving metal prices (considering current and historical prices, price trends, and related factors), production levels, operating and production costs, and the timing and capital costs of expansion and sustaining projects, all of which are based on life-of-mine plans. The term “recoverable minerals” refers to the estimated amount of gold and silver that will be sold after taking into account losses during ore processing and treatment. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows and estimates of fair value are based on numerous assumptions whichand are consistent or reasonable in relation to internal budgets and projections, and actual future cash flows may be significantly different than the estimates, as actual future quantities of recoverable gold and silver, metal prices, operating and production costs, and the timing and capital costs of expansion and sustaining projects are each subject to significant risks and uncertainties. See Note 7 -5 – Property, Plant, Equipment, and Mine Development,Equipment, Net for additional information.
During the year ended December 31, 2020, as part of the Company's recurring quarterly analysis,2023, the Company determined a triggering event had occurred as the Company'sCompany does not expect to have significant revenue or cash flows from operations have continued to generate operating cash flow losses.for the foreseeable future. In addition, the 2023 Hycroft TRS does not include estimates of mineral reserves. As a result, the Company performeddoes not have a recoverability testbasis for projecting future cash flows on an undiscounted basis. The Company used a market-based approach for determining fair value based on sales transactions of comparable assets. Because the Company’s estimated fair value of long-lived assets held and used exceeded their carrying value, the Company determined no impairment of long-lived assets was necessary at December 31, 2023. During the year ended December 31, 2022, the Company determined a triggering event had occurred as the Company completed processing of gold and silver ore previously placed on leach pads prior to ceasing mining operations and, as such, the Company does not expect to have significant revenue or cash flows from operations during 2023. In addition, the 2023 Hycroft TRS does not include estimates of mineral reserves. As a result, the Company does not have a basis for projecting future cash flows on an undiscounted basis. The Company used a market-based approach for determining fair value based on sales transactions of comparable assets. Because the Company’s estimated fair value of long-lived assets held and used exceeded their carrying value, the Company determined no impairment of long-lived assets was necessary at December 31, 2022. Restricted cash The Restricted cash balance is primarily held as collateral for surety bonds that the Company uses to fulfill financial assurance obligations related to reclamation activity (see Note 8 – Asset Retirement Obligation for further detail). Additionally, interest received on cash collateral balances is restricted as to its use and is included as an increase to Restricted cash with a corresponding recognition of Interest income when earned. Restricted cash is excluded from cash and is listed separately on the Consolidated Balance Sheets. As of December 31, 2023 and December 31, 2022, the Company held $26.3 million and $34.0 million in Restricted cash, respectively. See Note 6 – Restricted Cash for additional information. Assets held for sale The Company classifies long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: (i) management, having the authority to approve the action, commits to a plan to sell the asset or disposal group; (ii) the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or disposal groups; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the asset or disposal group have been initiated; (iv) the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond one year; (v) the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. The Company initially measures a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale. The Company assesses the fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held for sale and report any subsequent changes as an adjustment to the carrying value of its plant, equipment, and mine developmentthe asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at December 31, 2020, and determinedthe time it was initially classified as held for sale. Upon determining that 0 impairments were necessary.a long-lived asset or disposal group meets the criteria to be classified as held for sale, the Company
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Mineral properties
Mineral properties are tangibleceases depreciation and reports long-lived assets recorded at cost and include royalty interests, asset retirement costs, and land and mineral rights to explore and extract minerals from properties. Once a property is in the production phase, mineral property costs are amortized using the units-of-production method based upon the estimated recoverable gold ounces in proven and probable reserves at such properties. Costs to maintain mineral properties are expensed in the period they are incurred. As of December 31, 2020 and 2019, there was $0.04 million and $0 recorded for mineral properties, respectively, which was included in Plant, equipment, and mine development, net in the consolidated balance sheets.
Royalty obligation
The Company's royalty obligation is carried at amortized cost with reductions calculated by dividing actual gold and silver production by the estimated total life-of-mine production from proven and probable mineral reserves. Any updates to proven and probable mineral reserves and/or the estimated life-of-mine production profile would result in prospective adjustments to the amortization calculation used to reduce the carrying valueassets and liabilities of the royalty obligation. Amortization reductions to the royalty obligation are recorded todisposal group as Production costsAssets held for sale which is included, in Cost of sales. A portion of the Company’s royalty obligation is classified as current based upon the estimated gold and silver expected to be produced over the next 12 months, using the current proposed 34-year mine plan, and current proven and probable mineral reserves. The royalty obligation and its embedded features do not meet the requirements for derivative accounting.our Consolidated Balance Sheets.
Asset retirement obligation The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. The Company’s assetAsset retirement obligation (“ARO”), associated with long-lived assets are those for which there is a legal obligation to settle under existing law, statute, written or oral contract, or by legal construction. The Company’s ARO relates to its operating property, the Hycroft Mine and was recognized as a liability at fair value in the period incurred. An ARO, which is initially estimated based on discounted cash flow estimates, is accreted to full value over time using the expected timing of future payments through charges to Accretion in the consolidated statementsConsolidated Statements of operations. In addition,Operations. As the Company’s 2023 Hycroft TRS did not include mineral reserves, the Company’s policy is to expense all asset retirement costs (“ARC”) areas incurred. In addition, once the Company establishes mineral reserves, asset retirement costs will be capitalized as part of the related asset’s carrying value and are depreciated on a straight-line method or units of productionunits-of-production basis over the related long-lived asset’s useful life. The Company’s ARO is adjusted annually, or more frequently if necessary, to reflect changes in the estimated present value resulting from revisions to the timing or amount of reclamation and closure costs. Estimated mine reclamation and closure costs may increase or decrease significantly in the future as a result of changes in regulations, mine plans, cost estimates, or other factors. Contract liabilities The Company’s Contract liabilities consist of deposits received toward the purchase of Assets held for sale. The Company records the deposits as Contract liabilities until: (i) risk of loss and title to the equipment is transferred to the buyer and the sale is considered complete; (ii) there are no remaining performance obligations, and substantially all of the consideration received is non-refundable; or (iii) the contract has been terminated, and the consideration received from the customer is nonrefundable. Deferred gain on sale of royalty The Company’s Deferred gain on sale of royalty is carried at amortized cost with reductions calculated by dividing actual gold and silver production by the estimated total life-of-mine production from mineral reserves. Any updates to mineral reserves or the estimated life-of-mine production profile would result in prospective adjustments to the amortization calculation used to reduce the carrying value of the royalty obligation. Amortization reductions to the Deferred gain on sale of royalty are recorded to Production costs, which is included in Cost of sales. A portion of the Company’s Deferred gain on sale of royalty was previously classified as current based upon the estimated gold and silver expected to be produced over the next 12 months. The Deferred gain on sale of royalty and its embedded features do not meet the requirements for derivative accounting. Revenue recognition The Company recognizes revenue for gold and silver sales when it satisfies the performance obligation of transferring finished inventory to the customer, which generally occurs when the refiner notifies the customer that gold has been credited or irrevocably pledged to their account, at which point the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits of ownership of the asset. The transaction amount is determined based on the agreed upon sales prices and the number of ounces delivered. Concurrently, the payment date is agreed upon, which is usually within one week of the sale date. TheHistorically, the majority of sales arehave been in the form of doré bars, but the Company also sells loadedgold and silver laden carbon and slag, a by-product. During the year ended December 31, 2022, a majority of sales were attributable to the latter. All sales are final. Projects, exploration, and development Costs incurred for exploration, development and other project related expenses that do not qualify for capitalization are expensed within Projects, exploration, and development, which is included in Operating expenses on the Consolidated Statements of Operations. Projects, exploration, and development costs include expenditures for: (i) publishing technical studies; (ii) conducting geological studies; (iii) oversight and project management; and (iv) drilling, engineering, and metallurgical activities related to exploration and development. Mine site period costs The Company evaluates its mine site costs incurred, which are normally recorded to the carrying value of production-related inventories, to determine if costs incurred during the period qualify as Mine site period costs are costs related to care and maintenance activities at the Company performs an analysisHycroft Mine, costs of activities that do not qualify for capitalization to determine the net realizable value of its inventoryProduction-related inventories and determines whether costs incurredadjustments to production inventories that are in excess of future estimated revenues are athe result of recurring or significant downtime or delays, unusually high levels of repairs, inefficient operations, overuse of processing reagents, inefficient cost-volume structures, or other costs orand activities, that significantly increase the cost per ounce of production-related inventories and are considered unusual. If costs are determined to meet the criteria and, therefore, cannot be recorded to the carrying value of production-relatedProduction-related inventories then the Company recognizes such costs in the period incurred as Mine site period costs, which is included in Cost of sales based on the consolidated statementsthreshold established by the calculation of operations.the estimated net realizable value per ounce of gold, which incorporates estimated future processing, refining, and selling costs, as well as the value for silver by-product. Effective January
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Write-down of production inventories
The recovery of gold1, 2023, the Company began reporting amounts for Mine site period costs as Operating expenses as this presentation aligns with the manner in which the business is currently viewed and silver atmanaged while the Company conducts activities for developing the Hycroft Mine is currently accomplished through a heap leaching process,and recommencing mining operations.
The following table summarize the naturecomponents of which limits the Company’s ability to precisely determine the recoverable gold ounces in ore on leach pads. The Company estimates the quantity of recoverable gold ounces in ore on leach pads using surveyed volumes of material, ore grades determined through sampling and assaying of blastholes, crushed ore sampling, solution sampling, and estimated recovery percentages based on ore type and domain. The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore gold contents to the actual gold ounces recovered (metallurgical balancing). Changes in recovery rate estimates from metallurgical balancing that do not result in write-downs are accounted for on a prospective basis. When a write-down is required, production-related inventories are adjusted to net realizable value with adjustments recorded as Write-down of production inventories, which is included in Cost of salesMine site period costs in the consolidated statements of operations. See (in thousands):Note 4 - Inventories for additional information on the Company's write-downs. | | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Production related costs | $ | — | | | $ | 13,328 | | | Capitalized depreciation and amortization | — | | | 392 | | | Total | $ | — | | | $ | 13,720 | | | | | | | Operating expense related costs | $ | 11,886 | | | $ | — | | | | | | | | | |
Stock-based compensation Stock-based compensation costs for non-employee Directorsdirectors and eligible employees are measured at fair value on the date of grant. Stock-based compensation costs are charged to General and administrative on the consolidated statementsConsolidated Statements of operationsOperations over the requisite service period. The fair value of awards is determined using the stock price on either the date of grant (if subject only to service conditions) or the date that the Compensation Committee of the Board of Directors establishes applicable performance targets (if subject to performance conditions). The Company estimatesrecords forfeitures at the time of grant and revises those estimates in subsequent periods through the final vesting date.as they occur. See Note 15 -17 – Stock-Based Compensation for additional information. Phantom shares
Non-employee members of Seller’s Board of Directors received phantom shares of stock pursuant to a Non-Employee Director Phantom Stock Plan. For grants issued during the years ended 2015 and 2016, the cash payment was equal to the fair market value of 1 share of common stock of Seller at the date of payment. Under the grant agreements, each phantom share vested on the date of grant and entitled the participant to a cash payment. For grants issued during 2020, 2019 and 2018, the cash payment was equal to the greater of the (1) grant date value, or (2) the fair market value of 1 share of common stock of Seller at the date of payment. All phantom shares issued by Seller were terminated and paid in connection with the Recapitalization Transaction. See Note 15 - Stock-Based Compensation and Note 19 - Fair Value Measurements for additional information.
Reorganization items
On March 10, 2015, a predecessor of the Company filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). Expenses directly associated with finalizing the Chapter 11 cases before the Bankruptcy Court are reported as Reorganization items in the consolidated statements of operations.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
Income taxes
The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect at the anticipated time of reversal. The Company derives its deferred income tax provision or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. See Note 16 - Income Taxes for additional information.
The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. Evidence evaluated includes past operating results, forecasted earnings, estimated future taxable income, and prudent and feasible tax planning strategies. The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates used to manage the underlying business.
As necessary, the Company also provides reserves against the benefits of uncertain tax positions taken on its tax filings. The necessity for and amount of a reserve is established by determining, based on the weight of available evidence, the amount of benefit that is more likely than not to be sustained upon audit for each uncertain tax position. The difference, if any, between the full benefit recorded on the tax return and the amount more likely than not to be sustained is recorded as a liability on the Company’s consolidated balance sheets unless the additional tax expense that would result from the disallowance of the tax position can be offset by a net operating loss, a similar tax loss, or a tax credit carryforward. In that case, the reserve is recorded as a reduction to the deferred tax asset associated with the applicable net operating loss, similar tax loss, or tax credit carryforward.
Derivative instruments
The Company recognizes all derivatives as either assets or liabilities and measures those instruments at fair value. Changes in the fair value of derivative instruments, together with any gains or losses on derivative settlements and transactions, are recorded in earnings in the period in which they occur. In estimating the fair value of derivative instruments, the Company is required to apply judgments and make assumptions that impact the amount recorded for such derivative instruments. The Company does not hold derivative instruments for trading purposes.
As of December 31, 2020, the Company’s only recorded derivatives were for the Seller Warrants and Private Warrants (as defined herein) (see Note 19 - Fair Value Measurements for additional detail).
Fair value measurements The Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements, defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis; Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain financial instruments, including Cash, Restricted cash, Accounts receivable, Prepaids and other, net, and Accounts payable and Interest payableaccrued expenses, are carried at cost, which approximates their fair value due to the short-term nature of these instruments. See Note 19 -21 – Fair Value Measurements for additional information. Warrants Warrant liabilities The Company accounts for certain warrants to purchase shares of the Company’s common stock that were issued to the special purpose acquisition company (“SPAC”) sponsor and/or underwriter in a private placement and/or pursuant to a forward purchase contract (the “5-Year Private Warrants”) that are not indexed to the Company’s own stock as Warrant liabilities at fair value on the Consolidated Balance Sheets. These warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized as a component of Other expenses on the Consolidated Statements of Operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the (i) exercise or expiration of the 5-Year Private Warrants or (ii) the transfer of any 5-Year Private Warrants to any person who is not a permitted transferee, at which time the warrant liability will be reclassified to Additional paid-in capital on the Consolidated Balance Sheets with no subsequent remeasurement of the fair value.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Equity classified warrants Warrants that are considered indexed to the Company’s own stock, which are not required to be recorded as a liability, are measured at fair value at the date of issuance and included in Additional paid-in capital on the Consolidated Balance Sheets and do not require subsequent remeasurement of the fair value. Income taxes The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company’s liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect at the anticipated time of reversal. The Company derives its deferred income tax provision or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. See Note 18 – Income Taxes for additional information. The Company’s deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized. Evidence evaluated includes past operating results, forecasted earnings, estimated future taxable income, and prudent and feasible tax planning strategies. The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates used to manage the underlying business. As necessary, the Company also provides reserves against the benefits of uncertain tax positions taken on its tax filings. The necessity for and amount of a reserve is established by determining, based on the weight of available evidence, the amount of benefit that is more likely than not to be sustained upon audit for each uncertain tax position. The difference, if any, between the full benefit recorded on the tax return and the amount more likely than not to be sustained is recorded as a liability on the Company’s Consolidated Balance Sheets unless the additional tax expense that would result from the disallowance of the tax position can be offset by a net operating loss, a similar tax loss, or a tax credit carryforward. In that case, the reserve is recorded as a reduction to the deferred tax asset associated with the applicable net operating loss, similar tax loss, or tax credit carryforward. Recently adopted accounting pronouncements In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements (“ASU 2018-13”), which amends the disclosure requirements for fair value measurements in Topic 820 based on the considerations of costs and benefits. Under ASU 2018-13, certain disclosures were modified or eliminated, while other disclosures were added. The Company's adoption of ASU 2018-13 on January 1, 2020 did not materially affect its financial statement disclosures. Accounting pronouncements not yet adopted
In FebruaryJune 2016, the FASB issued ASU No. 2016-02, Leases ("ASU 2016-02"). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability2016-13, Measurement of Credit Losses on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations and classification within the consolidated statement of cash flows. In October 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) ("ASU 2019-10") that amends the effective date of ASU 2016-02 for emerging growth companies, such that the new standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. As the Company qualifies as an emerging growth company, the Company has elected to take advantage of the deferred effective date afforded to emerging growth companies. A modified retrospective transition approach is required to either the beginning of the earliest period presented or the beginning of the year of adoption. The Company has compiled its leases and is in the process of estimating the impact of adopting this ASU.
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity(“ASU 2020-06”2016-13”). ASU 2020-06 simplifies guidance on accounting2016-13 changes the way entities measure credit losses for convertiblemost financial assets and certain other instruments and contracts in an entity’s own equity including calculating diluted earnings per share.that are not measured at fair value through net income. For emerging growth companies, the new guidance is effective for annual periods beginning after January 1, 2023. The Company adopted ASU 2016-13 as of January 1, 2023, with no material impact on its Financial Statements or the related disclosures, as all outstanding Accounts receivable have been collected.
In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses; Topic 815, Derivatives and Hedging; and Topic 825, Financial Instruments (“ASU 2019-04”). ASU 2019-04 clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments. For emerging growth companies, the new guidance is effective for annual periods beginning after January 1, 2023. The Company adopted ASU 2019-04 as of January 1, 2023, with no impact on its Financial Statements or the related disclosures, as all outstanding Accounts receivable have been collected, and as such, there is no need to assess allowance for doubtful accounts. In March 2020, the FASB issued authoritative guidance which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform and was effective for all entities upon issuance on March 12, 2020, through December 15,31, 2022. ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, defers the expiration date of Topic 848 to December 31, 2024 to realign with the revised cessation date for LIBOR. The guidance permits a company to elect certain optional expedients and exceptions when affected by the changes in reference rate reform. As of July 1, 2023, the Company qualifiesamended the Second Amended and Restated Credit Agreement, dated as an emerging growth company,of March 30, 2022, by and between the Company plans to take advantage of the deferred effective date afforded to emerging growth companies. The Company is currently evaluating the impact that adopting this update will have on its consolidated financial statements and related disclosures.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
3. Recapitalization Transaction
On May 29, 2020, the Company, formerly known as Mudrick Capital Acquisition Corporation, consummated a business combination transaction (the “Recapitalization Transaction”) as contemplated by a purchase agreement dated January 13, 2020, as amended on February 26, 2020 (the “Purchase Agreement”)Sprott Private Resource Lending II (Collector), byLP, Sprott Resource Lending Corp., and among the Company, MUDS Acquisition Sub, Inc. (“Acquisition Sub”) and Hycroft Mining Corporation (“Seller”). Pursuant to the Purchase Agreement, Acquisition Sub acquired all of the issued and outstanding equity interests of the directcertain subsidiaries of Seller and substantially all of the other assets of Seller and assumed substantially all of the liabilities of Seller. In conjunction with the Recapitalization Transaction, Seller’s indebtedness existing prior to the Recapitalization Transaction was either repaid, exchanged for indebtedness of the Company exchangedas guarantors (“Second A&R Agreement”), to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) by entering into the Second Amendment to Second A&R Agreement (“Second Amendment to Second A&R Agreement”). The Company has elected to adopt the optional expedients, which allow for shares of common stock or converted into shares of Seller common stock, and the Company’s post-Recapitalization Transaction indebtedness included amounts drawn underupdate from LIBOR to SOFR in the Sprott CreditSecond A&R Agreement and the assumption of the newly issued Subordinated Notes (as such are defined herein). Upon closing of the Recapitalization Transaction, the Company’s unrestricted cash availableto be accounted for use totaled $68.9 million, and the number of shares of common stock issued and outstanding totaled 50,160,042. In addition, upon closing, theas a modification rather than an extinguishment. The Company had 34,289,999 outstanding warrants to purchase an equal number of shares of common stock at $11.50 per share and 12,721,623 warrants to purchase 3,210,213 shares of common stock at a price of $44.82 per share.
Priordoes not expect any further impact to the Recapitalization Transaction, the Company was a blank check special purpose acquisition corporation (“SPAC”) with no business operations and on May 29, 2020 had assets and liabilities consisting primarily of $10.4 million of cash and $6.9 million of liabilities for accounts payable, accrued expenses, and deferred underwriting fees. As described in Note 2 - Summary of Significant Accounting Policies, the Company accounted for the Recapitalization Transaction as a reverse recapitalization in which the Company’s financial statements reflect a continuation of Seller.
The material financial effects and actions arising from the Recapitalization Transaction, which are described in detail elsewhere in these financial statements, were as follows (the defined terms that follow are included elsewhere in these financial statements):
Common stock and warrant transactions
a.The Company issued, in a private placement transaction, an aggregate of 7.6 million shares of common stock and 3.25 million warrants to purchase shares of common stock at a price of $10.00 per share for aggregate gross cash proceeds of $76.0 million. The warrants were exercisable into 3.25 million shares for $11.50 per warrant. These warrants are included with the 5-Year Public Warrants because they may be mandatorily redeemed under the terms in the warrant agreement. Refer to Note 13 - Stockholders' Equity for further detail.
b.Pursuant to a forward purchase contract, the Company issued 3.125 million shares of common stock and 2.5 million warrants to purchase shares of common stock having substantially the same termsFinancial Statements as the private placement warrants for gross cash proceeds of $25.0 million. The Company also converted 5.2 million shares of MUDS Class B common stock intoSecond A&R Agreement is the same number of shares of common stock, of which 3.5 million shares were surrendered to Seller as transaction consideration. The 2.5 million warrants were exercisable into 2.5 million shares at an exercise price of $11.50 per warrant. These warrants are included with the 5-Year Private Warrants because they cannot be mandatorily redeemed under the terms of the warrant agreement. Refer to Note 11 - Warrant Liabilities for further detail.
c.The Company received $10.4 million of cash proceeds from the SPAC trust associated with the 1.2 million shares of common stockonly debt instrument that were not redeemed by the Company's public stockholders. Additionally, the Company has outstanding 27.9 million warrants to purchase shares of common stock at a price of $11.50 per share that were issued in a unit offering to the Company's public stockholders at the time of the SPAC’s initial public offering and the Company has outstanding 7.74 million warrants to purchase shares of common stock at a price of $11.50 per share that were sold to the Sponsor and underwriter, Cantor Fitzgerald & Co. These warrants are included with the 5-Year Private Warrants because they cannot be mandatorily redeemed under the terms of the warrant agreement. Refer to Note 11 - Warrant Liabilities for further detail.references LIBOR.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements d.Accounting pronouncements not yet adopted
In March 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities to Contractual Sale Restrictions (“ASU 2022-03”). For emerging growth companies, the new guidance is effective for annual periods beginning after December 15, 2023. The Company assumedis currently evaluating the obligations with respectimpact that adopting this update will have on its financial statement disclosures. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280)—Improvements to 12.7 million Seller Warrants (as defined herein), which Seller Warrants became exercisable to purchase shares of common stock atReportable Segment Disclosures. The ASU requires that an exercise price as of July 1, 2020entity disclose significant segment expenses impacting profit and December 31, 2020, of $44.82 per share (see Note 11 - Warrant Liabilities). Since July 1, 2020, each Seller Warrant was exercisable into approximately 0.2523 shares of common stock for a total of 3,210,213 shares of common stock. The exercise price and the conversion factor were further adjusted during the year ended December 31, 2020 to an exercise price of $41.26 per share and each Seller Warrant was exercisable for 0.27411 shares of common stock for a total of 3,487,168 shares of common stock. Subsequently, as of January 19, 2020, the Seller Warrants were subject to a further adjustment to an exercise price of $40.31 per share and each Seller Warrant was exercisable for 0.28055 shares of common stock for a total of 3,569,051 shares of common stock. Refer to Note 11 - Warrant Liabilities for further detail. Seller’s pre-Recapitalization Transaction indebtedness
a.Seller’s $125.5 million First Lien Agreement with the Bank of Nova Scotia, as agent, and $6.9 million promissory note plus accrued and unpaid interest were repaid with cash (see Note 9 - Debt, Net).
b.$48.5 million of Seller’s 1.25 Lien Notes were exchanged, and subsequently cancelled, for 4.85 million shares of common stock and the remaining $80.0 million of Seller’s 1.25 Lien Notes were exchanged for $80.0 million in aggregate principal of new Subordinated Notes of the Company (see Note 9 - Debt, Net).
c.After giving effectloss that are regularly provided to the 1.5 Lien Notes’ 110% repurchase feature, $145.7 millionchief operating decision maker. The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of Seller’s 1.5 Lien Notes plus accruedadoption. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and unpaid interest were exchanged, and subsequently cancelled, for 16.0 million shares of common stock (see Note 9 - Debt, Net).
d.Prior to close, a total of $221.3 million of Seller’s 2.0 Lien Notes were converted into 132.8 million shares of Seller common stock and, together with the existing 2.9 million shares of Seller’s common stock issued and outstanding, received transaction consideration of 15.1 million shares of common stock distributed by Seller, including 3.5 million surrendered shares received by Seller from the Company (see Note 9 - Debt, Net). The consideration initially received by Seller was promptly distributed to the its stockholders on a pro rata basis pursuant to Seller’s plan of dissolution.
Sprott entity transactions
a.interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company assumedis currently evaluating the amended Sprott Credit Agreement and was advanced $70.0 million of cash, subject to an original issue discount of 2.0% (see Note 9 - Debt, Net). Pursuant to the Sprott Credit Agreement, the Company issued approximately 0.5 million shares of common stock to the Lender, which was equal to 1.0% of the Company’s post-closing shares of common stock issued and outstanding.
b.The Company entered into the Royalty Agreement among Hycroft Mining Holding Corporation,impact that adopting this update will have on its wholly subsidiary Hycroft Resources and Development, LLC and Sprott Private Resource Lending II (CO) Inc. ("Sprott Royalty Agreement"), pursuant to which the Company received $30.0 million of cash proceeds and incurred a 1.5% net smelter royalty payment obligation, payable monthly, relating to the Hycroft Mine’s monthly production (see Note 10 - Royalty Obligation).
Other items
a.Seller retained a reserve of $2.3 million in cash for use in the dissolution of Seller.
b.A $2.5 million cash payment was made and approximately 0.04 million shares of common stock were issued to the Company’s underwriter, Cantor Fitzgerald & Co. (“Cantor”), pursuant to an underwriting agreement. Additionally, a $2.0 million payment was made to Cantor at closing in connection with shares of common stock held by Cantor, which were not redeemed from the SPAC trust balance prior to closing.
c.The Company remitted $1.8 million of cash to holders of Seller’s deferred phantom units (see Note 19 - Fair Value Measurements) and paid $7.4 million of cash for additional transaction costs.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
Upon closing of the Recapitalization Transaction and after giving effect to the terms of the business combination, the former holders of Seller’s indebtedness and common stock, including affiliated entities of such former holders, owned approximately 96.5% of the issued and outstanding common stock. The following table summarizes the ownership of the Company’s common stock issued and outstanding upon closing of the Recapitalization Transaction:
| | | | | | | | | | | | | Shares | | Ownership % | | Former Seller stockholders and affiliated entities | 48,421,309 | | | 96.5 | % | Former MUDS public stockholders(1) | 1,197,704 | | | 2.4 | % | | Lender to Sprott Credit Agreement | 496,634 | | | 1.0 | % | | Cantor Fitzgerald & Co. | 44,395 | | | 0.1 | % | | Total shares issued and outstanding | 50,160,042 | | | 100.0 | % |
(1)Includes 200,000 shares held by Cantor.financial statement disclosures.
4. Inventories
The following table provides the components of inventories and the estimated recoverable gold ounces therein (in thousands, except ounces):
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Amount | | Gold Ounces | | Amount | | Gold Ounces | | Materials and supplies | $ | 6,449 | | | 0 | | | $ | 2,559 | | | 0 | | | Merrill-Crowe process plant | 4,810 | | | 2,587 | | | 1,004 | | | 691 | | | Carbon-in-column | 299 | | | 166 | | | 478 | | | 474 | | | Finished good (doré) | 1,309 | | | 710 | | | 412 | | | 278 | | | Total | $ | 12,867 | | | 3,463 | | | $ | 4,453 | | | 1,443 | |
As of both December 31, 2020 and December 31, 2019, in-process Inventories included $0.3 million of capitalized depreciation and amortization costs.
The following table summarizes Ore on leach pads and the estimated recoverable gold ounces therein (in thousands, except ounces):
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2020 | | December 31, 2019 | | Amount | | Gold Ounces | | Amount | | Gold Ounces | | Ore on leach pads, current | $ | 38,041 | | | 21,869 | | | $ | 22,062 | | | 17,019 | | | Ore on leach pads, non-current | 7,243 | | | 4,164 | | | 0 | | | 0 | | | Total | $ | 45,284 | | | 26,033 | | | $ | 22,062 | | | 17,019 | |
As of December 31, 2020 and December 31, 2019 (net of write-downs discussed below), Ore on leach pads, current included $1.8 million and $1.8 million, respectively, of capitalized depreciation and amortization costs. Additionally, as of December 31, 2020 and December 31, 2019 Ore on leach pads, non-current included $0.4 million and $0 respectively, of capitalized depreciation and amortization costs.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
Write-down of production inventories
The estimated recoverable gold ounces placed on the leach pads are periodically reconciled by comparing the related ore contents to the actual gold ounces recovered (metallurgical balancing). During the year ended December 31, 2020, based on metallurgical balancing results, the Company determined that 10,492 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result, during the year ended December 31, 2020, the Company recognized a Write-down of production inventories on the consolidated statements of operations, which included production costs of $16.7 million, and capitalized depreciation and amortization costs of $1.3 million. The write-off of ounces during the year ended December 31, 2020 was primarily due to mismanagement of the oxidation process, improper adjustments to variables in the oxidation process for changes in the ore type based on domain, and improper solution management. As a result, the Company determined it would recover less gold ounces than planned for those sections of the leach pads.
During the 2019 fourth quarter, based on metallurgical balancing results, the Company determined that 11,680 ounces of gold that had been placed on the leach pads were no longer recoverable and wrote-off these ounces. As a result of the write-off the Company recognized a Write-down of production inventories on the consolidated statements of operations of $16.4 million. Cash production costs written-off were $15.1 million and capitalized depreciation and amortization costs written-off were $1.3 million. The write-off of these ounces was primarily a result of mismanagement of solution flows. The lost gold and silver ounces were leached and captured in solution. However, prior to the solution being processed through the Merrill-Crowe plant, it was inadvertently commingled with barren solution and pumped to leach pads no longer in use, which will prevent it from being recovered in the future.
Mine site period costs
During the year ended December 31, 2020, the Company incurred $46.7 million (which included $3.0 million of capitalized depreciation and amortization incurred in 2020) of Mine site period costs (inclusive of depreciation and amortization expenses) that did not qualify for allocation to the Company's production-related inventories and, therefore, were expensed as incurred. Such period costs are generally the result of significant downtime or delays, abnormally high levels of repairs, inefficient operations, overuse of processing reagents, or other unusual costs and activities.
In addition to the write-down related to metallurgical balancing during 2019, the Company incurred $2.2 million (which included $0.2 million of capitalized amortization incurred in 2019) of Mine site period costs (inclusive of depreciation and amortization expenses) that did not qualify for allocation to the Company's production-related inventories and, therefore, were expensed as incurred.
HYCROFT MINING HOLDING CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
5.3. Prepaids and OtherDeposits
The following table provides the components of Prepaids and other and Other assets, non-currentdeposits (in thousands): | | | | | | | | | | | | | December 31,
2020 | | December 31,
2019 | | Prepaids and other | | | | | Prepaids | $ | 3,198 | | | $ | 2,109 | | | Deposits | 1,105 | | | 539 | | | Total | $ | 4,303 | | | $ | 2,648 | | | | | | | Other assets, non-current | | | | | Equipment not in use | $ | 12,238 | | | $ | 19,683 | | | Prepaid supplies consignment inventory | 885 | | | 0 | | | Royalty - advance payment | 360 | | | 120 | | | Deferred future financing costs | 0 | | | 5,083 | | | Total | $ | 13,483 | | | $ | 24,886 | |
| | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Current prepaids and deposits: | | | | | Prepaids: | | | | | Insurance | $ | 1,631 | | | $ | 1,221 | | | Mining claims | 400 | | | 400 | | | Permitting fees | 95 | | | 95 | | | Surety bond fees | 643 | | | 446 | | | License fees | 280 | | | 287 | | | Other | 73 | | | 154 | | | Deposits | 204 | | | 238 | | | Total current prepaids and deposits | $ | 3,326 | | | $ | 2,840 | | | | | | | Non-current prepaids: | | | | | Insurance | $ | 947 | | | $ | — | | | Royalty – advance payment on Crofoot Royalty | 600 | | | 600 | | | Total non-current prepaids | $ | 1,547 | | | $ | 600 | |
Prepaids
As of December 31, 2020, prepaids primarily consisted of prepaid insurance ($1.8 million), mining claims and permitting fees ($0.4 million), prepaid equipment ($0.4 million), and subscription and license fees ($0.3 million). As of December 31, 2019, prepaids primarily consisted of prepaid insurance ($1.5 million), mining claims and permitting fees ($0.4 million), and subscription and license fees ($0.1 million).
Equipment not in useRoyalty – advance payment
As of December 31, 2020, equipment not in use classified as Other assets, non-current included ball mills, SAG mills, regrind mills,2023 and related motors and components that were previously purchased by a predecessor of the Company. During the year ended December 31, 2020, the Company engaged an international equipment broker to advertise equipment not in use for potential sale. There is a limited market for the Company's equipment not in use and any potential purchase would likely be subject to technical and commercial due diligence by the purchaser, as well as approval by the Company's Board of Directors. As such, equipment not in use is not classified as held-for-sale, as it is uncertain if the Company will sell any of the equipment within one year, or if the Company will elect to sell such equipment at all. As a result, equipment not in use is included in Other assets, non-current. During the year ended December 31, 2020, the Company determined that the carrying amount of certain equipment not in use was higher than its fair value and such assets were written down to estimated fair value less costs to sell, resulting in an impairment loss of $5.3 million, which is reported as Impairment on equipment not in use on the consolidated statements of operations. In the fourth quarter of 2020, the Company began reevaluating the best use of its equipment previously marketed for sale, while it continues to develop the sulfide oxidation technology process for its large-scale operation. Additionally, in the fourth quarter of 2020, the Company has paused the marketing of this equipment while it continues to develop the technology and process for a large-scale operation. Prepaid supplies consignment inventory
The Company has an inventory consignment agreement with a supplier of crusher parts that requires the supplier to maintain a specified inventory of replacement parts and components that are exclusively for purchase and use at the Hycroft Mine. As part of the agreement, the Company is required to make certain payments in advance of receiving such consignment inventory at the mine site. The Company records advance payments as prepaid supplies inventory within Other assets, non-current until such inventory is received, at which point, the amounts are reclassified to Inventories.
Royalty - advance payment
As of December 31, 2020,2022, royalty-advance payments includeincluded annual advance payments for a portion of the Hycroft Mine that is subject to a mining lease requiring a 4% net profit royalty be paid to the ownerprevious owners of certain patented and unpatented mining claims. Refer to SeeNote 22 -24 – Commitments and Contingencies for further detail.
Insurance – non-current During the year ended December 31, 2023, the Company purchased directors and officers insurance that extends coverage through September 2025. 4. Supplies Inventories, Net At December 31, 2023 and December 31, 2022, Supplies inventories, net was $1.8 million and $2.8 million, respectively. The Company maintains inventory reserves to account for potential losses due to inventory obsolescence, damage, or other factors that could affect the value of its inventory. As of December 31, 2023 and December 31, 2022, the Company recognized a Write-down of supplies inventories on the Consolidated Statement of Operations of $0.5 million and $1.1 million, respectively, for obsolete and slow moving supplies inventories.
HYCROFT MINING HOLDING CORPORATION Notes to Unaudited Condensed Consolidated Financial Statements 6. Restricted Cash5. Property, Plant, and Equipment, Net
The following table provides the components of restricted cashProperty, plant, and equipment, net (in thousands): | | | | | | | | | | | | | December 31,
2020 | | December 31,
2019 | | Reclamation surety bond cash collateral | $ | 39,677 | | | $ | 39,477 | | | First Lien Agreement restricted cash - Note 10 | 0 | | | 3,270 | | | Total | $ | 39,677 | | | $ | 42,747 | |
| | | | | | | | | | | | | | | | | | | Depreciation Life
or Method | | Year Ended December 31, | | | 2023 | | 2022 | | Production leach pads | Units-of-production | | $ | 11,190 | | | $ | 11,190 | | | Test leach pads | 18 months | | 6,241 | | | 6,241 | | | Process equipment | 5 - 15 years | | 17,556 | | | 17,302 | | | Buildings and leasehold improvements | 10 years | | 9,419 | | | 9,280 | | | Mine equipment | 5 - 7 years | | 4,732 | | | 4,872 | | | Vehicles | 3 - 5 years | | 1,700 | | | 1,578 | | | Furniture and office equipment | 7 years | | 713 | | | 370 | | | Mineral properties | Units-of-production | | 50 | | | — | | | Construction in progress and other | | | 35,504 | | | 35,721 | | | | | 87,105 | | | 86,554 | | | Less, accumulated depreciation and amortization | | | (34,014) | | | (31,722) | | | Total | | | $ | 53,091 | | | $ | 54,832 | |
As ofDepreciation expense related to Property, plant, and equipment, net was $2.8 million and $3.4 million for the years ended December 31, 2023 and December 31, 2022, respectively.
Leach pads The Company has historically recorded depreciation on its test leach pads over the test pads’ estimated remaining useful life. An estimated useful life of 18 months was based upon the expectation of when the tests would be completed. During the year ended December 31, 2022, the Company’s test leach pads were fully depreciated. Construction in progress and other The primary project included in construction in progress at December 31, 2023 and December 31, 2022, was construction of a new larger leach pad. Construction on this project commenced in 2020 and continued until February 2021 when it was temporarily suspended. The incurred construction costs for the Company's BLM reclamation obligation was secured with surety bonds totaling $59.9new, larger leach pad were $32.9 million which were partially collateralized by the restricted cash shown above. Restricted cash from Seller's First Lien Agreement was released on May 29, 2020 when such indebtedness was repaidsince commencing construction in conjunction with the Recapitalization Transaction (see Note 3 - Recapitalization Transaction).2020. 7. Plant, Equipment, and Mine Development, Net6. Restricted Cash
The following table provides the components of plant, equipment, and mine development, netRestricted cash (in thousands): | | | | | | | | | | | | | | | | | | | Depreciation Life
or Method | | December 31,
2020 | | December 31,
2019 | | Leach pads | Units-of-production | | $ | 17,432 | | | $ | 17,419 | | | Process equipment | 5 - 15 years | | 16,065 | | | 14,770 | | | Buildings and leasehold improvements | 10 years | | 10,507 | | | 10,507 | | | Mine equipment | 5 - 7 years | | 5,961 | | | 4,716 | | | Vehicles | 3 - 5 years | | 991 | | | 136 | | | Furniture and office equipment | 7 years | | 322 | | | 129 | | | Mine development | Units-of-production | | 756 | | | 119 | | | Mineral properties | Units-of-production | | 37 | | | 0 | | | Construction in progress and other | | | 33,185 | | | 936 | | | | | $ | 85,256 | | | $ | 48,732 | | | Less, accumulated depreciation and amortization | | | (25,033) | | | (17,208) | | | Total | | | $ | 60,223 | | | $ | 31,524 | |
| | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Reclamation and other surety bond cash collateral | $ | 26,287 | | | $ | 33,929 | | | Credit card collateral | 53 | | | 53 | | | Total | $ | 26,340 | | | $ | 33,982 | |
As of both December 31, 2023 and December 31, 2022, the Company’s surface management surety bonds totaled $58.7 million. In both periods, $58.3 million secured the financial assurance requirements for the Hycroft Mine. The remaining portion is related to the financial assurance requirements for the adjacent water supply well field and exploration. Events or circumstances that would necessitate the guarantor’s performance include a deteriorating financial condition or a breach of contract. Periodically, the Company may need to provide collateral to support these instruments. When the specified requirements are met, the party holding the related instrument cancels and/or returns it to the issuing entity. The Company is confident that it currently complies with all relevant bonding obligations and will be able to meet future bonding requirements through existing methods or alternative solutions as they arise. In the fourth quarter of 2023, the Company released $9.1 million from its surety bond cash collateral.
DuringHYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements The financial assurance requirement for the year ended December 31, 2020, new process equipmentadjacent water supply well field and exploration within the project boundary was placed into service ($1.2 million), new mobile equipmentreduced to $0.4 million during the second quarter of 2022. This reduction was placed into service ($1.2 million),achieved by canceling a $1.0 million surety bond and construction ofreplacing it with a new larger leach pad began ($30.9 million),$0.4 million increase to an existing surety bond. The $1.0 million surety bond was collateralized with $0.3 million cash which, upon cancellation, was returned to the primary project included in construction in progress as of December 31, 2020. Company. The $0.4 million increase to the existing surety bond was achieved without additional cash collateral. During the years ended December 31, 20202023 and 2019, certain leach pads ($11.2 million) were not actively used in the leaching process, and accordingly,December 31, 2022, the Company did not recordearned $1.6 million and $0.4 million of Interest income on its Restricted cash. Interest received on cash collateral balances is restricted as to its use and is included as an increase to Restricted cash with a corresponding recognition of Interest income when earned. 7. Assets Held For Sale As of December 31, 2023 and December 31, 2022, the Company’s Assets held for sale was comprised of equipment not-in-use of $7.1 million. In August 2022, the Company entered into an Equipment Purchase Agreement to sell one ball mill and one semi-autogenous (“SAG”) mill for consideration of $12.0 million. The Company amended the Equipment Purchase Agreement in December 2022 to include one sub-station transformer (collectively, “Equipment”) for an additional amount of $1.6 million for a total amended agreement amount of $13.6 million of which the Company has received payments totaling $1.1 million through year end 2022. Under the terms of the agreement, the final payment was due December 31, 2022, and the buyer was permitted to extend the payment for all or any depletionportion of the final payment of $12.5 million up to and including June 30, 2023 provided that the buyer paid the Company interest at a rate of 5% per annum on any outstanding balance for these leach pads. Additionally, duringthe ball mill and SAG mill from January 1, 2023, through March 31, 2023, and 7.5% per annum on any outstanding balance from April 1, 2023, until June 30, 2023. As such, the Company received required, monthly interest payments totaling $0.8 million and Nil for the years ended December 31, 20202023 and 2019,December 31, 2022, respectively. The buyer has never been delinquent in making principal or interest payments. In addition, the agreement requires the buyer to reimburse the Company did not acquire any plant, equipment,for certain holding costs related to the Equipment. These costs are recorded as an offset to the expense included in the Consolidated Statement of Operations. The Equipment Purchase Agreement was subsequently amended three additional times in 2023 (January 27, 2023, May 15, 2023, and December 29, 2023) and the final payment period was extended up to and including June 30, 2024. Together the original agreement and the four amendments make up the entire agreement and allows for the sale of some or mine development through non-cash capital leases. Mineral properties
all of the Equipment to third parties and for the buyer to terminate all or a portion of the Equipment Purchase Agreement and the Company received non-refundable deposit payments totaling $0.5 million in the year ended December 31, 2023, for a total of $1.6 million received to date. As of December 31, 2020, Mineral properties2023, the outstanding balance related to the Equipment Purchase Agreement was $12.1 million. Effective March 1, 2024, the buyer terminated a portion of the agreement. See Note 26 – Subsequent Events for additional information. As of December 31, 2023, the remaining Assets held for sale that are not included an ARC asset of $0.04 million thatin the Equipment Purchase Agreement discussed above are being marketed for sale. The Company has received interest from potential purchasers. It is being depreciated on a straight-line basis over the lifeCompany’s intention to sell these assets within the upcoming year. A summary of the Company’s only operating property,completed sales of equipment included in Assets held for sale during the Hycroft Mine.year ended December 31, 2022: •In February 2022, the Company completed the sale of a regrind mill for gross proceeds of $1.3 million. •In August 2022, the Company completed the sale of the mine equipment for gross proceeds of $0.1 million. •In December 2022, the Company completed the sale of the dual pinion ball mill and related assets for gross proceeds of $6.3 million, reduced by a commissions expense calculated as 17.5% of total gross proceeds less certain other selling expenses. As of December 31, 2023, the Company still held title to and risk of loss of the one ball mill, one SAG mill, and one sub-station transformer and, as such, all payments received toward the purchase of these assets have been included in Contract liabilities. See Note 11 – Contract Liabilities below for additional information. As of December 31, 2023 and 2022, the Company estimated the fair value of the Assets held for sale and determined that the fair value estimate exceeded the carrying value and as such no impairment loss was recorded.
HYCROFT MINING HOLDING CORPORATION Notes to Unaudited Condensed Consolidated Financial Statements 8. Other LiabilitiesAsset Retirement Obligation The following table summarizes changes in the Company’s Asset Retirement Obligation (“ARO”) (in thousands): | | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Balance, beginning of period | $ | 10,302 | | | $ | 5,193 | | | Accretion | 1,087 | | | 408 | | | Liabilities reduced | (529) | | | — | | | 10,860 | | | 5,601 | | | Changes in estimates | (2,887) | | | 4,701 | | | Total, end of period | $ | 7,973 | | | $ | 10,302 | | | | | | | Current | $ | 3,172 | | | $ | — | | | Non-current | $ | 4,801 | | | $ | 10,302 | |
During the years ended December 31, 2023 and 2022, the Company recorded a change in estimate to the ARO of a $2.9 million reduction and $4.7 million increase, respectively. The change in estimate during the year ended December 31, 2023, reflected a net decrease in estimate attributable to the completion of part of the Crofoot leach pad re-sloping and the change in timing of water treatment Phases 2 and 3, and evaporation over a three-year period at the end of the mine life, partly offset by increased labor and equipment costs. In accordance with the change in estimate, the Company recorded a reduction in expense of $2.9 million as the Company does not have mineral reserves, and accordingly, all costs are expensed until such time that it declares mineral reserves. The change in estimate during the year ended December 31, 2022, was due to updated assumptions regarding cost estimate, regulatory changes requiring additional sloping, and timing of costs for reclamation activities associated with the Crofoot leach pad. In accordance with the change in estimate, the Company recorded an expense of $4.7 million as the Company does not have mineral reserves and accordingly all costs are expensed until such time that it declares mineral reserves. The Company estimates that reclamation expenditures will be made in 2024 and that reclamation work will be completed by the end of 2065. Any underestimate or unanticipated reclamation costs or any changes in governmental reclamation requirements could require us to record or incur additional reclamation costs. 9. Debt, Net The following table summarizes the components of Other liabilities, current and Other liabilities, non-currentDebt, net (in thousands): | | | | | | | | | | | | | December 31,
2020 | | December 31,
2019 | | (as restated) | | | | Other liabilities, current | | | | | Accrued compensation, benefits, continuation obligation, and bonus | 4,157 | | | 2,349 | | | Accrued compensation for phantom shares - Note 15 | 0 | | | 1,590 | | | Total | $ | 4,157 | | | $ | 3,939 | | | | | | | Other liabilities, non-current | | | | | Compensation and benefits continuation obligation | $ | 1,145 | | | $ | 0 | | | Payroll tax liability | 505 | | | 0 | | | Total | $ | 1,650 | | | $ | 0 | | | | | |
| | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Debt, net, current: | | | | | Sprott Credit Agreement, including $2.2 million additional interest | $ | 2,200 | | | $ | 2,200 | | | Note payable | 130 | | | 128 | | | | | | | Total | $ | 2,330 | | | $ | 2,328 | | | | | | | Debt, net, non-current: | | | | | Sprott Credit Agreement, including $1.1 million additional interest and net of original issue discount ($10.5 million, net) | $ | 42,530 | | | $ | 42,503 | | | Subordinated Notes | 101,639 | | | 92,080 | | | Note payable | 76 | | | 205 | | | Less, debt issuance costs | (1,628) | | | (2,098) | | | Total | $ | 142,617 | | | $ | 132,690 | |
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements The following table summarizes the Company’s contractual payments of Debt, net, including current maturities, for the five years subsequent to December 31, 2023 (in thousands): | | | | | | | | | | | 2024 | $ | 2,329 | | | 2025 | 1,154 | | | 2026 | 22 | | | 2027 | 151,329 | | | 2028 | — | | | Total | 154,834 | | | Less, original issue discount, net of accumulated amortization ($11.9 million) | (8,259) | | | Less, debt issuance costs, net of accumulated amortization ($3.3 million) | (1,628) | | | Total debt, net | $ | 144,947 | |
Interest expense The following table summarizes the components of recorded Interest expense (in thousands): | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2023 | | 2022 | Sprott Credit Agreement(1) | | $ | 6,206 | | $ | 5,310 | | Subordinated Notes(2) | | 9,565 | | 9,620 | | | Amortization of original issue discount | | 2,227 | | 2,840 | | Amortization of debt issuance costs(3) | | 463 | | 689 | | | Other interest expense | | 6 | | 22 | | | | | | | | Total | | $ | 18,467 | | | $ | 18,481 | |
(1)As of both December 31, 2023 and benefits continuation obligation2022, the Amended and Restated Credit Agreement (the “Sprott Credit Agreement”) bears interest monthly at a floating rate not less than 8.5% and the current effective interest rate was 14.4%. (2)The 10% Senior Secured Notes (“Subordinated Notes”) bear interest at 10.0% per annum (non-cash), payable in-kind on a quarterly basis. (3)As of both December 31, 2023 and 2022, the effective interest rate for the amortization of the discount and issuance costs was 1.6%. The Company has entered into separation agreementscapitalizes interest to Property, plant, and equipment, net for construction projects in accordance with former executives that provideASC Topic 835, Interest. Interest expense incurred under the Subordinated Notes is payable-in-kind. In May 2021, the Company began paying cash for among other things, continuation of such former executives' salaries and certain benefits for periods of 12-24 months frominterest expense incurred under the date of separation. 9. Debt, NetSprott Credit Agreement. Prior to May 2021, interest expense incurred under the Sprott Credit Agreement was payable-in-kind.
Debt covenants The Company’s debt agreements contain representations and warranties, events of default, restrictions and limitations, reporting requirements, and covenants that are customary for agreements of these types. TheOn February 28, 2022, the Company entered into the February 2022 Waiver and Amendment with Sprott Private Resource Lending II (Collector) and LP (the “Lender”). Pursuant to the February 2022 Waiver and Amendment, the Lender: (i) waived the Company’s obligation under the Sprott Credit Agreement (as defined herein) contains covenantsthen amended in 2020) to maintain at least $9.0 million of Unrestricted Cash on the last day of each calendar month during the period ending May 10, 2022 (the “Waiver Period”), provided that, among other things, restrict or limit the abilityCompany maintained at least $7.5 million of Unrestricted Cash on the last day of February 2022 and at least $9.0 million on the last day of each month thereafter during the Waiver Period; (ii) waived all obligations of the Company to enter into encumbrances (other than Permitted Encumbrances), incur indebtedness (other than Permitted Indebtedness), disposeprepay the facility with the net cash proceeds of its assets (other than Permitted Disposals), pay dividends, and purchase or redeem shares, as such terms areany Mill Asset Sales (as defined in the Sprott Credit Agreement. The Sprott Credit Agreement requiresFebruary 2022 Waiver and Amendment) until the earlier of: (a) the date on which the Company completes a private placement or other offering or issuance of its equity securities (the “Offering Date”); and (b) March 31, 2022; and (iii) extended the payment due date for the additional February interest payment and the February principal payment until the earlier of: (a) the Offering Date; and (b) March 31, 2022. Further, pursuant to the February 2022 Waiver and Amendment, any failure by the Company to ensure that, at all times, both its Working Capital and Unrestricted Cash are at least $10.0 million, as suchcomply with the terms are defined inof the Sprottpreceding sentence would constitute an immediate Event of Default under the Credit Agreement, and that at least every six months the Company demonstrate its ability to repay and meet all present and future obligations as they become due with a financial Model that uses consensus gold prices discounted by 5.0%, as such terms are defined in the Sprott Credit Agreement. The Subordinated Notes (as defined herein) include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents.
As of December 31, 2020, the Company was in compliance with all covenants.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Debt balances
The following table summarizes the components of debt (in thousands):
| | | | | | | | | | | | | December 31,
2020 | | December 31,
2019 | | Debt, net, current: | | | | Sprott Credit Agreement(1) | $ | 5,274 | | | $ | 0 | | | 2.0 Lien Notes | 0 | | | 208,411 | | | 1.5 Lien Notes | 0 | | | 137,050 | | | First Lien Agreement | 0 | | | 125,468 | | | 1.25 Lien Notes | 0 | | | 77,212 | | | Promissory Note | 0 | | | 6,773 | | | Less, debt issuance costs | (154) | | | (949) | | | Total | $ | 5,120 | | | $ | 553,965 | | | | | | | Debt, net, non-current: | | | | | Subordinated Notes | $ | 84,797 | | | $ | 0 | | | Sprott Credit Agreement | 61,894 | | | 0 | | | Less, debt issuance costs | (4,026) | | | 0 | | | Total | $ | 142,665 | | | $ | 0 | |
(1)Amount represents $1.6 million of Additional Interest (as defined in the Sprott Credit Agreement) plus 5.0% of the Company's outstanding debt balance asAs of December 31, 20202023, the Company was in compliance with all financial covenants under the Sprott Credit Agreement.
The following table summarizes the Company's contractual payments of long-termits debt including current maturities, for the five years subsequent to December 31, 2020 (in thousands):
| | | | | | | 2021 | $ | 5,274 | | | 2022 | 16,698 | | 2023 | 23,948 | | 2024 | 23,948 | | 2025 | 96,771 | | Total | 166,639 | | Less, original issue discount | (14,674) | | Less, debt issuance costs | (4,180) | | Total debt, net, current and non-current | $ | 147,785 | |
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
agreements.Sprott Credit Agreement On October 4, 2019, the Company, as borrower, certain subsidiaries of the Company, as guarantors, and Sprott Private Resource Lending II (Collector), LP. (“Lender”),the Lender, as arranger, executed a secured multi-advance term credit facility pursuant to which Lender committed to make, subject to certain conditions set forth therein, term loans in an aggregate principal amount up to $110.0 million. On May 29, 2020, the Company entered into the Amended and RestatedSprott Credit Agreement (the “Sprott Credit Agreement”) to update the conditions precedent and effect certain other changes to conform to the details of the business combination. On May 29, 2020, at the consummation of the Recapitalization Transaction,business combination transaction (the “Recapitalization Transaction”), the Company borrowed $70.0 million under the Sprott Credit Agreement, which was equal to the amount available under the first and second tranches, and issued to Lender 496,63449,663 shares of common stock, which was equal to 1.0% of the Company’s post-closing shares of common stock outstanding. The Company paid an original issuance discount equal to 2.0% ($1.4 million) of the amount borrowed. The Company does not believe it is currently able to borrow under the third and final $40.0 million tranche of the Sprott Credit Agreement due to its inability to satisfy applicable conditions and production milestones required by certain conditions precedent to borrowing. As it relates to the $62.3 million initially recorded for the Sprott Credit Agreement on the May 29, 2020 closing of the Recapitalization Transaction, the Company recorded $70.0 million for the stated amount of the borrowing itself, $9.3 million for the additional interest payment obligation, and a $17.0 million discount (inclusive of the $1.4 million original issuance discount), which will be amortized to Interest expense, net of capitalized interest using the effective interest method over the term of the Sprott Credit Agreement. As of December 31, 2020, the interest rate charged on the outstanding principal balance of the Sprott Credit Agreement was 8.5%. Using the closing price of $12.65 per share of common stock on the Recapitalization Transaction date, the Company also recorded $6.3 million to Additional paid-in capital for the 496,634 shares of common stock issued to the Lender.
Advances under the Sprott Credit Agreement bear interest monthly at a floating rate equal to 7.0% plus the greater of (i) U.S. Dollar three-month LIBOR and (ii) 1.5%, per annum, accruing daily and compounded monthly. For a period of twelve months following the May 29, 2020 initial advance date, 0 cash payments of interest or principal will be due, with 100% of interest accruing and being capitalized on a monthly basis to the outstanding principal balance of the Sprott Credit Agreement. Additionally, for each three-month period commencing on February 28, 2021, and ending on the maturity date, the Company shall pay Lender additional interest on the last business day of such three-month period, calculated according to a formula set forth in the Sprott Credit Agreement and currently equal to $0.5 million per quarter ($9.3 million in total over the life of the Sprott Credit Agreement). Upon a prepayment of the entire Sprott Credit Agreement, all remaining additional interest payments and all remaining and yet unpaid additional interest must be prepaid as well. The Company iswas required to make principal repayments beginning on August 31, 2021, and on the last business day every three months thereafter. The first four principal repayments are equal to two and one-half percent (2.5%)2.5% of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). All subsequent principal repayments are equal to seven and one-half (7.5%)7.5% of the outstanding principal amount of the Sprott Credit Agreement on May 31, 2021 (including all capitalized interest thereon, if any, but excluding the principal repayment then due). The entire outstanding balance of the Sprott Credit Agreement, together with all unpaid interest and fees (including all capitalized interest, if any), is due on the day that is five years from the last day of the month of the initial closing date, which shall be no later than May 31, 2025, the maturity date. The Company reviewed the features of the Sprott Credit Agreement for embedded derivatives, and determined no such instruments exist. The Sprott Credit Agreement may be repaid in whole or in part, at any time prior to the maturity date. Each prepayment or cancellation of the Sprott Credit Agreement (including capitalized interest, if any), whether in whole or in part, voluntarily or mandatory, subject to certain exceptions, that occurs on or prior to the fourth anniversary of the date of the initial advance is subject to a prepayment premium between 3.0% and 5.0%. The obligations of the Company under the Sprott Credit Agreement are guaranteed by Credit Parties and secured by a lien on all properties and assets now owned, leased or hereafter acquired or leased by any Credit Party, as such terms are defined and further detailed in the Sprott Credit Agreement.
The Company is required to make prepayments of its outstanding principal balance equal to 50% or 100% of the proceeds received as outlined in the Sprott Credit Agreement. On October 31, 2020,The Company reviewed the Company completed the salefeatures of a SAG mill that was not in use for net proceeds of $2.3 million, of which $1.2 million was repaid in accordance with the Sprott Credit Agreement.Agreement for embedded derivatives and determined no such instruments exist.
83Second Amendment to Sprott Credit Agreement
TableOn March 30, 2022, the Company and Lender under the Sprott Credit Agreement entered into the Second Amended and Restated Credit Agreement (“Second A&R Agreement”), which: (i) extended the maturity date for all of Contentsthe loans and other principal obligations under the Sprott Credit Facility by two years, to May 31, 2027; (ii) provided for the Company to prepay principal under the facility in the amount of $10.0 million promptly upon the Company’s receipt of cash proceeds from the Private Placement Offering with American Multi-Cinema, Inc. (“AMC”) and 2176423 Ontario Limited (the “Initial Equity Proceeds Prepayment”); (iii) provided for the Company to prepay principal under the Sprott Credit Facility in the amount of $13.9 million (representing 10% of the subsequent issuance of its equity interests consummated on or prior to March 31, 2022) (the “Subsequent Equity Proceeds Prepayments”); and (iv) eliminated the prepayment premiums otherwise payable with respect to the Initial Equity Proceeds Prepayment, the Subsequent Equity Proceeds Prepayments and all future prepayments of principal under the Sprott Credit Facility. In addition, the Company’s obligations: (i) to prepay principal with proceeds of asset sales will be credited/offset by the aggregate amount of Initial Equity Proceeds Prepayment and the Subsequent Equity Proceeds Prepayments ($23.9 million); and (ii) to maintain a minimum amount of Unrestricted Cash (as defined in the Second A&R Agreement) was increased to $15.0 million. The Company: (i) paid the previously deferred additional interest of $0.5 million; (ii) made the Initial Equity Proceeds Prepayment of $10.0 million and paid in-kind a $3.3 million fee in connection with the modification and capitalized it to principal on March 16, 2022; and (iii) made the Subsequent Equity Proceeds Prepayment of $13.9 million on March 30, 2022. The Company accounted for the Second A&R Agreement as a debt modification as the Second A&R Agreement did not result in debt that was substantially different.HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
In addition, the Company prepaid principal of $1.1 million for the Sprott Credit Agreement in November 2022.Subordinated Notes In connection with the business combination and pursuant to a 1.25 Lien Exchange Agreement, on May 29, 2020, the Company assumed $80.0 million in aggregate principal amount of Seller’s 1.25 Lien Notes that were exchanged as part of the Recapitalization Transaction (the "Subordinated Notes”).Transaction. The Subordinated Notes are secured and subordinate in priority to the obligations under the Sprott Credit Agreement. The Subordinated Notes bear interest at a rate of 10.0% per annum, payable in-kind on a quarterly basis. The principal on the new Subordinated Notes is due December 1, 2025. 2.0 Lien Notes
As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, $221.3 million of Seller's 2.0 Lien Notes were converted into shares of Seller common stock which, along with all of Seller's other stockholders, as part of Sellers's plan of dissolution, received a pro rata distribution of common stock from Seller that was received by Seller as consideration from the Company. The Company recorded $74.6 million directly to retained earnings upon Seller's distribution of 14,795,153 shares of common stock to Seller's former 2.0 Lien Note holders, which represented the difference between the carrying value of the 2.0 Lien Notes and the value of the common stock received as consideration by Seller's former 2.0 Lien Note holders. The 2.0 Lien Notes bore interest at a rate of 15.0% per annum, payable in-kind on a quarterly basis, through the issuance of additional 2.0 Lien Notes. The 2.0 Lien Notes were converted into Seller common stock at a conversion price of $1.67 per share in accordance with the 2.0 Lien Agreement. While outstanding, the obligations under the 2.0 Lien Notes and the guarantees by the guarantors in respect thereof were secured by liens on substantially all assets ofOn November 28, 2022, the Company entered into a Note Purchase and the guarantors, subject to the priority of the liens that secured the obligations under the First LienSale Agreement the 1.25 Lien Notes and the 1.5 Lien Notes.
1.5 Lien Notes
As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, after giving effect to the 1.5 Lien Notes’ 110.0% repurchase feature, $145.7 million of Seller’s 1.5 Lien Notes plus accrued and unpaid interest were exchanged, and subsequently cancelled, for 16,025,316 shares of common stock. The Company recorded a $14.6 million loss directly to retained earnings upon such exchange, which represented 10.0% of the $145.7 million aggregate principal amount of 1.5 Lien Notes balance at the time of exchange. While outstanding, the 1.5 Lien Notes bore interest at a rate of 15.0% per annum, which was payable in-kind on a quarterly basis, through the issuance of additional 1.5 Lien Notes. While outstanding, the obligations under the 1.5 Lien Notes and the guarantees by the guarantors in respect thereof were secured by liens on substantially all assets of Seller and the guarantors, subject to the priority of the liens that secured the obligations of the First Lien Agreement and the 1.25 Lien Notes, but superior in priority to the liens that secured the obligations of the 2.0 Lien Notes and the unsecured obligations of Seller.
1.25 Lien Notes
As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, $48.5 million in aggregate principal amount of Seller’s 1.25 Lien Notes, which bore interest at 15.0% per annum, payable in-kind, were exchanged, and subsequently cancelled, for 4,845,920 shares of common stock and the remaining $80.0 million aggregate principal amount of Seller’s 1.25 Lien Notes were exchanged for $80.0 million in aggregate principal amount of new Subordinated Notes that were assumed in the Recapitalization Transaction by the Company, bearing interest at a rate of 10.0% per annum, payable-in-kind. The 1.25 Lien Notes bore interest at a rate of 15.0% per annum, which was payable in-kind on a quarterly basis, through the issuance of additional 1.25 Lien Notes. While outstanding, the obligations under the 1.25 Lien Notes and the guarantees by the guarantors in respect thereof were secured by liens on substantially all assets of Seller and the guarantors, subject to the priority of the liens that secured the obligations of the First Lien Agreement, but superior in priority to the liens that secured the obligations of the 1.5 Lien Notes, the 2.0 Lien Notes and the unsecured obligations of Seller.
First Lien Agreement
As discussed in Note 3 - Recapitalization Transaction, on May 29, 2020, $125.5 million of outstanding principal under the First Lien Agreement with the Bank of Nova Scotia as agent, plus accrued interest, was repaid. Most recently, from January 31, 2020 through the repayment date, the First Lien Agreement bore interest at either LIBOR plus 7.5% or an Alternate Base Rate Canada plus 7.5%, as such terms were defined in the First Lien Agreement. The repayment of the First Lien Agreement and other obligations under the First Lien Agreement were guaranteed by all of the direct and indirect domestic subsidiaries of Seller. While outstanding, the obligations under the First Lien Agreement, the guarantees by the guarantors in respect thereof were secured by liens on substantially all of the assets of the Company and its subsidiaries. Upon repayment of the First Lien Agreement, $3.3 million of restricted cash was released to the Company (see Note 6 - Restricted Cash(the “Highbridge Agreement”).
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Promissorywith Highbridge MSF International Ltd. (“Highbridge”) whereby the Company agreed to purchase and Highbridge agreed to sell, $11.1 million (including $0.2 million in accrued unpaid interest) of Subordinated Notes. The purchase of the Subordinated Notes was completed in two transactions: (i) cash consideration of $5.6 million; and (ii) the issuance of 50,000 shares of common stock with a grant date fair value of $0.4 million. In addition, the Company paid $0.1 million in legal fees related to the Highbridge Agreement. As a result of the Highbridge Agreement, the Company recorded a Gain on extinguishment of debt of $5.0 million which represented the difference between the carrying value of the Subordinated Notes of $11.1 millionand the total consideration paid, including legal fees, of $6.1 million. The purchase of the Subordinated Notes represented a discount of approximately 42% to the face value of the debt.
Amendment to the 10% Senior Secured Notes and Note Exchange Agreement On March 14, 2022, the Company entered into an amendment to the 10% Senior Secured Notes and Note Exchange Agreement (the “Note Amendment”), with: (i) certain direct and indirect subsidiaries of the Company as Guarantors; (ii) holders of the Subordinated Notes, including certain funds affiliated with, or managed by, Mudrick Capital Management, L.P. (“Mudrick”), Whitebox Advisors, LLC, Highbridge Capital Management, LLC, and Aristeia Capital, LLC (collectively, the “Amending Holders”); and (iii) Wilmington Trust, National Association, in its capacity as collateral agent. The Note Amendment amends the Note Exchange Agreement dated as of January 13, 2020 (the “Note Exchange Agreement”), and the Subordinated Notes issued thereunder in order to extend the maturity date of the Subordinated Notes from December 1, 2025 to December 1, 2027. The Note Amendment also removed the requirements that a holder receive the consent of the Company and the other holders in order to transfer any Subordinated Note. The Amending Holders constituted all of the holders of the Subordinated Notes. The Note Amendment became effective upon the closing of a private placement upon receipt of $55.9 million gross cash proceeds (before deduction of fees and expenses). The Company accounted for the Note Amendment as a debt modification as the Note Amendment did not result in debt that was substantially different. The Company incurred a $1.8 million liability management fee attributable to the completion of the Note Amendment. As the Note Amendment was accounted for as a debt modification, the $1.8 million paid to a third-party was charged to General and administrative. 2023 Waiver and Amendment On March 9, 2023, the Company entered into a letter agreement (the “2023 Waiver and Amendment”), by and between the Company, the Lender, and Sprott Private Resource Lending II (Co) Inc. (“SPRL II” and together with the Lender, the “Sprott Parties”). Pursuant to the terms of the Sprott Credit Agreement, the Company agreed that while any indebtedness is outstanding under the Sprott Credit Agreement or while the credit facility under the Sprott Credit Agreement remains available to the Company, the Company and guarantors under the Sprott Credit Agreement would not undertake certain corporate actions without the Lender’s prior written consent. As discussedof January 5, 2024, the Company voluntarily pre-paid $34.7 million of the first lien loan, along with $3.3 million for the additional interest balance, totaling $38.0 million. See Note 26 – Subsequent Events for additional information. 10. Accounts Payable and Accrued Expenses As of December 31, 2023 and December 31, 2022, Accounts payable and accrued expenses was $1.6 million and $5.6 million, respectively. During the year ended December 31, 2021, the Company recorded a loss of $2.1 million in Note 3 - Recapitalization Transaction, on May 29, 2020, a $6.9 million promissory note was repaid, the obligationStatement of whichOperations related to a 2014firm purchase commitment for crusher liners under consignment over a period of three years, commencing in August 2020. This loss represented the unfulfilled commitment obligation outstanding as of the date the Company terminated the agreement and that loss was initially recognized in Accounts payable and accrued expenses. During the year ended December 31, 2023, the Company reached a settlement agreement with the vendor, whereby the Company agreed to pay $1.0 million to the vendor and in return, the vendor agreed to release the Company from any future obligations. As a vendorresult, the Company recorded a Gain on settlement of a predecessor accrued liability of Seller.$1.2 million during the year ended December 31, 2023. Interest expense, net
11. Contract Liabilities As of December 31, 2023 and December 31, 2022, the Company’s Contract liabilities was comprised of deposits for equipment not-in-use of $1.6 million and $1.1 million, respectively. These deposits were received in accordance with the amended sales agreement for one SAG mill, one ball mill, and one sub-station transformer. In accordance with Topic 606, Revenue from Contracts with Customers, if the sale does not materialize by the deadline provided in the Agreement (June 30, 2024) and no further extensions are provided, then the contract is over and the nonrefundable deposit payments received will be recognized as Other income. See Note 7 – Assets Held for Sale for additional details.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements 12. Other Liabilities The following table summarizes the components of recorded interest expensecurrent and non-current portions of Other liabilities (in thousands): | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2020 | | 2019 | | 2.0 Lien Notes | | $ | 12,902 | | | $ | 28,537 | | | 1.5 Lien Notes | | 8,635 | | | 18,763 | | | 1.25 Lien Notes | | 6,218 | | | 5,241 | | | First Lien Agreement | | 4,575 | | | 10,022 | | | Sprott Credit Agreement | | 6,009 | | | 0 | | | Subordinated Notes | | 4,797 | | | 0 | | | Amortization of debt issuance costs | | 1,972 | | | 2,048 | | | Promissory Note | | 141 | | | 786 | | | Other interest expense | | 40 | | | 0 | | | Capitalized interest | | (1,831) | | | (551) | | | Total | | $ | 43,458 | | | $ | 64,846 | |
| | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Other liabilities, current | | | | | Accrued compensation | $ | 3,000 | | | $ | 2,868 | | | | | | | | | | | | | | | Accrued directors’ fees | 38 | | | 36 | | | Excise tax liability | — | | | 96 | | | Operating lease liability | 25 | | | 11 | | | Total | $ | 3,063 | | | $ | 3,011 | | | | | | | Other liabilities, non-current | | | | | | | | | Operating lease liability | $ | 8 | | | $ | — | |
Accrued compensation Accrued compensation reflects amounts for pay earned but not yet due, amounts for accrued and unused vacation pay, and accrued incentive compensation. Excise tax liability A gold and silver excise tax applied to gross sales proceeds became effective for the Company on July 1, 2021, following the passage of Assembly Bill 495 at the Nevada Legislative Session ended on May 31, 2021. This gold and silver excise tax is a tiered tax, with a highest rate of 1.1% and the first payment was made on April 1, 2022. The Company capitalizes interestbill does not take into consideration expenses or costs incurred to generate gross proceeds. Therefore, this tax is treated as a gross receipts tax and not as a tax based on income. As a result, the gold and silver excise tax was reported as a component of Plant, equipment, and mine development, netCost of sales onand not as income tax expense. As of December 31, 2023 and 2022, the consolidated balance sheets for construction projects in accordance with ASC Topic 835, Interest. Except forCompany accrued Nil and $0.1 million, respectively, related to the First Lien Agreement and other interest expense, amounts shown in the table above represent non-cash interest expense charges.annual excise tax. 10.13. Deferred Gain on Sale of Royalty Obligation
On May 29, 2020, the closing date of the Recapitalization Transaction, the Company and Sprott Private Resource Lending II (Co) Inc. (the “Payee”) entered into a royalty agreement with respect to the Hycroft Mine (the “Sprott Royalty Agreement”) in which Payee paid to the Company cash consideration in the amount of $30.0 million, for which the Company granted to Payee a perpetual royalty equal to 1.5% of the Net Smelter Returns from itsthe Hycroft Mine, payable monthly. Net Smelter Returns for any given month are calculated as Monthly Production multiplied by the Monthly Average Gold Price and the Monthly Average Silver Price, minus Allowable Deductions, as such terms are defined in the Sprott Royalty Agreement. The Company is required to remit royalty payments to the Payee free and clear and without any present or future deduction, withholding, charge or levy on account of taxes, except Excluded Taxes as such term is defined in the Sprott Royalty Agreement. The Company hashad the right to repurchase up to 33.3% (0.5% of the 1.5% royalty) of the royalty on each of the first and second anniversaries from May 29, 2020. The Company did not exercise its right to repurchase 0.5% on the first anniversary and waived its right to repurchase on the second anniversary. The Sprott Royalty Agreement is secured by a first priority lien on certain property of the Hycroft Mine, including: (1)(i) all land and mineral claims, leases, interests, and rights; (2)(ii) water rights, wells, and related infrastructure; and (3)(iii) stockpiles, buildings, structures, and facilities affixed to, or situated on, the Hycroft Mine, which ranks senior to security interests and liens granted pursuant to the Sprott Credit Agreement. In addition to the terms generally described above, the Sprott Royalty Agreement contains other terms and conditions commonly contained in royalty agreements of this nature. During the year ended December 31, 2020, the Company recorded amortization of the royalty obligation of approximately $0.04 million and made payments of $0.5 million. As of December 31, 2020,2023, the Company classified the entire deferred gain from the sale of its royalty as a non-current liability as a result of the cessation of mining operations in November 2021.
During the years ended December 31, 2023 and 2022, the Company made payments under the Sprott Royalty Agreement of $0.1 million and $0.4 million, respectively, which are included in Operating expenses and Cost of sales, respectively, on the royalty obligation was recorded as a current liability based upon the estimated gold and silver expected to be produced over the next 12 months, using the current mine plan, and current proven and probable mineral reserves.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements 11.Consolidated Statements of Operations.
14. Warrant Liabilities The following table summarizes the Company'sCompany’s outstanding warrant liabilities (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Transfers to 5-Year Public Warrants(2) | | | | | Balance at
December 31, 2022 | | Fair Value Adjustments(1) | | | Balance at
December 31, 2023 | | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | 5-Year Private Warrants | | 9,126,515 | | $ | 786 | | | — | | $ | (175) | | | (8,261,093) | | $ | (585) | | | 865,422 | | $ | 26 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at
December 31, 2021 | | Fair Value Adjustments(1) | | Transfers to 5-Year Public Warrants(2) | | Expiration | | Balance at
December 31, 2022 | | | | | | | | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | 5-Year Private Warrants | | 9,478,830 | | $ | 664 | | | — | | $ | 164 | | | (352,315) | | $ | (42) | | | — | | $ | — | | | 9,126,515 | | $ | 786 | | | Seller Warrants | | 12,721,901 | | 5 | | | — | | (5) | | | — | | — | | | (12,721,901) | | — | | | — | | — | | | Total | | 22,200,731 | | $ | 669 | | | — | | $ | 159 | | | (352,315) | | $ | (42) | | | (12,721,901) | | $ | — | | | 9,126,515 | | $ | 786 | |
(1)Liability classified warrants are subject to fair value remeasurement at each balance sheet date in accordance with ASC 815-40, Contracts on Entity’s Own Equity. As a result, fair value adjustments related exclusively to the Company’s liability classified warrants. See Note 21 – Fair Value Measurements for further detail on the fair value of the Company’s liability classified warrants. (2)See Note 15 – Stockholders’ Equity. The following table summarizes additional information on the Company’s outstanding warrants (U.S. dollars in thousands):as of December 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5-Year Private Warrants | | Seller Warrants | | Total | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Balance at January 1, 2020 | 0 | | | $ | 0 | | | 12,621,623 | | | $ | 18 | | | 12,621,623 | | | $ | 18 | | | Additions | 10,240,000 | | | 12,185 | | | 0 | | | 0 | | | 10,240,000 | | | 12,185 | | | Transfers | (351,585) | | | (581) | | | 0 | | | 0 | | | (351,585) | | | (581) | | | Fair value adjustments | — | | | 3,722 | | | — | | | 45 | | | — | | | 3,767 | | | Balance at December 31, 2020 | 9,888,415 | | | $ | 15,326 | | | 12,621,623 | | | $ | 63 | | | 22,510,038 | | | $ | 15,389 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercise Price | | Exercise Period | | Expiration Date | | Warrants Outstanding | | 5-Year Private Warrants | | $ | 11.50 | | | 5 years | | May 29, 2025 | | 865,422 |
Warrant Liabilities 5-Year Private Warrants Prior to the Recapitalization Transaction, MUDS issued 7,740,000 warrants to purchase 7,740,000 shares of common stock at an exercise price of $11.50 per share for a period of five years from the May 29, 2020 Recapitalization Transaction, and concurrently with the Recapitalization Transaction, the Company issued 2,500,000 private placement warrants as part of a forward purchase unit offering at an exercise price of $11.50 per share for a period of five years from the issuance date (collectively, the "5-Year Private Warrants"). The 5-Year Private Warrants cannot be redeemed and can be exercised on a cashless basis if the 5-Year Private Warrants are held by the initial purchasers or their permitted transferees. If the 5-year5-Year Private Warrants are transferred to someone other than the initial purchasers or their permitted transferees ("Unrelated(an “Unrelated Third Party"Party”), such warrants become redeemable by the Company under substantially the same terms as the 5-Year Public Warrants. AsSince the original issue of December 31, 2020, the Company had 9,888,415private warrants, transfers to 5-Year PrivatePublic Warrants outstanding, as 351,585 of such warrants were transferred to an Unrelated Third Partytotaled 9,374,578, including 8,261,093, 352,315, and 409,585 during the yearyears ended December 31, 20202023, 2022, and are therefore considered 5-Year Public Warrants. See Note 3 - Recapitalization Transaction for additional details on transactions to which these warrants were issued.2021, respectively.
Seller Warrants
As part of the Recapitalization Transaction,On August 3, 2022, the Company assumed the obligations and liabilitiesissued a notice under that certain warrant agreement, dated as of October 22, 2015, by and between Seller and Computershare Inc., a Delaware corporation, and its wholly owned subsidiary Computershare Trust Company, N.A., a federally chartered trust company, collectively as initial warrant agent; and Continental Stock Transfer & Trust Company, LLC was named as the successor warrant agent (the “Seller Warrant Agreement”). Pursuant to the assumption of the Seller Warrant Agreement notifying the warrants issued thereunder (the “Seller Warrants”) became exercisable into sharesholders of common stock. Upon assumption by the Company, theits Seller Warrants were exercisable into 3,210,213 shares of common stock at an exercise price determined as of October 1, 2020 pursuant to the Seller Warrant Agreement of $44.82 per share upon exercise of the 12,721,623 outstanding Seller Warrants, with each warrant exercisable into 0.2523 shares of common stock, which exercise price and number of shares were subject to adjustment from time to time under the terms of the Seller Warrant Agreement. Seller Warrants have a seven-year term that expires in October 2022.
As discussed below in the Public Offering warrants section, in connection with the Public Offering, the Company determined that certain adjustments were required to be made to the terms of the Seller Warrants were adjusted effective as of August 3, 2022 as a result of the issuance byor deemed issuance of additional equity awards under the CompanyHYMC 2020 Performance and Incentive Pay Plan to “Restricted Persons” (as defined in the Public OfferingSeller Warrant Agreement) through August 3, 2022, in the aggregate amount of 4,951,3882,570,602 restricted stock units convertible into shares of common stock and for the prospective issuance of up to “Restricted Persons”50,000 shares of common stock to participants who may be deemed to be Restricted Persons. These shares of common stock were not prospectively adjusted under the Seller Warrant Agreement. As a resultprovisions.
In accordance with the adjustment provisions of the adjustments required under the Seller Warrant Agreement, (1)Agreement: (i) the exercise price of each Seller Warrant was decreased from $44.82$40.31 per share of common stock to $41.26$39.90 per share of common stock; and (2)(ii) the number of shares of common stock issuable upon exercise of each Seller Warrant was increased from 0.252340.028055 to 0.27411. Accordingly,0.028347; and (iii) as adjusted, the aggregate number of shares of common stock issuable upon full exercise of the 12,721,623 outstanding Seller Warrants increased from 3,210,213 shares to 3,487,168 shares of common stock. As a result of the Company authorizing the issuance of up to 2,508,002 shares under the Hycroft Mining Holding Corporation Incentive and Performance Plan (“Incentive Plan”), as of January 19, 2021, the Company elected to treat all shares issuable under the Incentive Plan as deemed issued to Restricted Persons and elected to prospectively reduce the exercise price of each Seller Warrant to $40.31 per share of common stock and increase the number of shares of common stock issuable upon exercise of each Seller Warrant to 0.28055. As a result, an aggregate of 3,569,051 shares of common stock are issuable upon exercise of the 12,721,623 outstanding Seller Warrants. See Note 19 - Fair Value Measurements for further detail on the Seller Warrants.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements 12. Asset Retirement Obligation
The following table summarizes changes in the Company’s ARO (in thousands):
| | | | | | | | | | | | | 2020 | | 2019 | | Balance at January 1, | $ | 4,374 | | | $ | 5,832 | | | Accretion expense | 374 | | | 422 | | | Changes in estimates | 37 | | | (1,880) | | | Balance at December 31, | $ | 4,785 | | | $ | 4,374 | |
The Company did not incur any reclamation expenditures during the years ended December 31, 2020 and 2019. For the year ended December 31, 2020, the changes in estimates were due to constructionaggregate number of shares of common stock issuable upon full exercise of the new leach pad along with increases in equipment12,721,901 outstanding Seller Warrants was increased from 356,912 to 360,628 shares of common stock.
Pursuant to the terms of the Seller Warrant Agreement, the Seller Warrants expired on October 22, 2022, seven years following the original issuance date. As of their expiration, the Seller Warrants were no longer exercisable or outstanding. See Note 24 – Commitments and labor costs. Changes in estimates duringContingencies for further details regarding legal proceedings related to the year ended December 31, 2019 were driven by increased equipment and diesel costs but were more than offset by an increase in our credit adjusted risk-free rate, which is used to discount the future reclamation costs. Seller Warrants. 15. Stockholders’ Equity Common stock As of December 31, 2020, the Company estimates that no significant reclamation expenditures associated with the ARO will be made until 2047 and that reclamation work will be completed by the end of 2065. 13. Stockholders' Equity
Following the May 29, 2020 Recapitalization Transaction, as of December 31, 2020, the total number of shares of all classes of capital stock that the Company has authority to issue is 410,000,000, of which 400,000,000 are common stock, par value $0.0001 per share, and 10,000,000 are preferred stock par value $0.0001 per share. The designations, powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect to each of our class of capital stock are discussed below.
Common stock
As of December 31, 2020,2023, there were 59,901,30620,736,612 shares of common stock issued and outstanding. Each holder of common stock is entitled to one vote for each share of common stock held by such holder. The holders of common stock are entitled to the payment of dividends and other distributions as may be declared from time to time by the Board of Directors in accordance with applicable law and to receive other distributions from the Company. Subject
On November 14, 2023, the Company effectuated a reverse stock split with a ratio of 1-for-10. The reverse stock split was intended to increase the termsprice per share of the Recapitalization Transaction and as of May 29, 2020, certain new and existing holders ofCompany’s common stock ofto allow the Company are subject to lock-up periods, which ranged from six to twelve months or were dependentdemonstrate compliance with the $1.00 minimum bid price requirement for continued listing on the Company's filing of a registration statement, deemed effective by the SEC.Nasdaq. All share and per share data have been retroactively adjusted for this reverse split. Preferred stock As of December 31, 2020,2023, there were 0no shares of preferred stock issued and outstanding. Dividend policy The Company’s credit facility under the Sprott Credit Agreement contains provisions that restrict itsthe Company’s ability to pay dividends. For additional information see Note 9 -– Debt, Net. Amendment to the Company’s Second Amended and Restated Certificate of Incorporation On March 11, 2022, the Board approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation increasing the number of authorized shares of the Company’s common stock by 1,000,000,000 to a total of 1,400,000,000 (the “Certificate of Incorporation Amendment”) and directed that the Certificate of Incorporation Amendment be submitted for consideration by the stockholders of the Corporation. On March 15, 2022, AMC, 2176423 Ontario Limited, and entities affiliated with Mudrick, who together constituted the holders of a majority of the issued and outstanding common stock, approved the Certificate of Incorporation Amendment by written consent. The Certificate of Incorporation Amendment became effective upon filing of the Certificate of Incorporation Amendment with the Delaware Secretary of State on April 22, 2022, 20 days after the Company commenced distribution of an Information Statement on Schedule 14C to the stockholders of the Company. Common Stock Private placement offering On March 14, 2022, the Company entered into subscription agreements with AMC and 2176423 Ontario Limited pursuant to which the Company agreed to sell the entities an aggregate of 46,816,480 units at a purchase price per unit of $1.193 with each unit consisting of one-tenth share of the Company’s common stock (on a post 1-for-10 reverse stock split basis) and one warrant to purchase one-tenth share of Common Stock (“Warrants”) and the shares issuable upon exercise of the Warrants (the “Warrant Shares”), providing for a total purchase price of approximately $55.9 million. The Warrants have an exercise price of $1.068 per Warrant Share and will expire five years after issuance. On March 15, 2022, the Private Placement Offering closed and the Company received gross proceeds of $55.9 million before deducting expenses incurred in connection therewith. Net proceeds were $53.6 million, after deducting legal and other fees of $2.3 million (including a non-cash $1.8 million financial advisor fee related to the Private Placement Offering discussed under Settlement fee below). At-the-market offering On March 15, 2022, the Company implemented an ATM Program by entering into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. (“Sales Agreement”). Under the terms of the Sales Agreement, the Company may from time to time to or through the Agent, acting as sales agent or principal, offer and sell shares of its Class A common stock, par value $0.0001 per share, having a gross sales price of up to $500.0 million. Shares of common stock sold under the Sales Agreement were issued pursuant to the Company’s shelf registration statement on Form S-3 (No. 333-257567) that the SEC declared effective on July 13, 2021, including the prospectus, dated July 13, 2021, and the prospectus supplement, dated March 15,
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Warrants2022. The Company suspended the ATM Program on March 25, 2022 (while keeping the Sale Agreement in place), and received total gross proceeds, before deducting fees and expenses of the ATM Program, of $138.6 million from the sale of 8,955,358 shares of the Company’s common stock (on a post 1-for-10 reverse stock split basis). Net proceeds, after deducting commissions and fees of $5.0 million were $133.5 million.
In addition to the 5-Year Private Warrants and the Seller Warrants discussed above,Beginning on November 17, 2023, the Company has Public Offering Warrantsagain began accessing the ATM Program under the terms of the Sales Agreement, and 5-Year Public Warrants. The Company had a total of 56,494,855 warrants outstanding as of December 31, 2020.
Public Offering Warrants
On October 6, 2020, the Company issued 9,583,334 units in2023, sold an underwritten public offering at an offering price to of $9.00 per unit (the "Public Offering"), with each unit consisting of 1 share of common stock and 1 warrant to purchase one share of common stock at an exercise price of $10.50 per share (“Public Offering Warrants”). Of the 9.6 million units issued, 5.0 million units were issued to Restricted Persons, as defined under the Seller Warrant Agreement. After deducting underwriting discounts and commission and offering expenses, the proceeds net of discount and equity issuance costs to the Company were $83.1 million. The Public Offering Warrants are immediately exercisable and entitle the holder thereof to purchase 1 share of common stock at an exercise price of $10.50 for a period of five years from the closing date of the Public Offering. Theadditional 523,328 shares of common stock for aggregate gross proceeds of $1.1 million, less commissions and offering expenses of $0.3 million. As of December 31, 2023, there were $360.3 million of common stock available for issuance under the ATM Program.
Stock issuance – other Settlement fee In February 2022, the Company engaged the financial advisor to assist with its financing efforts. During March 2022, the Company completed the Private Placement Offering, the ATM Program and entered into the Second A&R Agreement and Note Amendment without assistance from the financial advisor. As the Company completed the aforementioned equity and debt transactions during the engagement period, the Company and the Public Offering Warrants were separated upon issuancefinancial advisor agreed to a fee of $3.5 million of which 50% is related to liability management for the Note Amendment and 50% is attributable to the Private Placement Offering. On July 26, 2022, the Company executed a settlement agreement and the engagement was terminated with no future obligations. The Company agreed to pay $1.75 million in cash and issue shares of common stock under a private placement for the Public Offering.remaining $1.75 million. The Public Offering Warrants are listed for tradingCompany issued 171,467 shares of common stock (on a post 1-for-10 reverse stock split basis) on July 28, 2022, and remitted the cash payment on August 1, 2022. The number of shares of common stock issued was determined using the volume weighted average price on the Nasdaq Capital Market underfor the symbol "HYCML".ten trading days preceding the effective date of the settlement agreement. Salary continuation payments The Company entered into separation agreements with former executives that provide for, among other things, continuation of such former executives’ salaries and certain benefits for periods of 12-24 months from the dates of separation. On October 6, 2021, the Company entered into a Waiver and Amendment to the Transition and Succession Agreement and Consulting Agreement with a former employee. The Waiver and Amendment amends the Transition and Succession Agreement and the Consulting Agreement between the Company and the employee, dated July 1, 2020. The Waiver and Amendment terminated the remaining unpaid cash payments to the employee pursuant to the Transition and Succession Agreement and Consulting Agreement in the aggregate amount of $0.7 million, in exchange for the issuance of an aggregate of up to 27,500 shares of the Company’s common stock (on a post 1-for-10 reverse stock split basis), of which 13,750 shares of common stock were issued on October 8, 2021, and 13,750 shares of common stock were issued on June 30, 2022.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Principal payments on debt and finance leases
| | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Principal payments on debt | $ | (2,200) | | | $ | (32,885) | | | Principal payments on finance leases | (128) | | | (125) | | | Total | $ | (2,328) | | | $ | (33,010) | |
Equity Classified Warrants The following table summarizes the Company’s outstanding equity classified warrants included in Additional paid-in capital on the Consolidated Balance Sheets (dollars in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at
December 31, 2022 | | Transfers from 5-Year Private Warrants(1) | | Balance at
December 31, 2023 | | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | 5-Year Public Warrants | | 25,163,383 | | $ | 28,954 | | | 8,261,093 | | $ | 585 | | | 33,424,476 | | $ | 29,539 | | | Public Offering Warrants | | 9,583,334 | | 12,938 | | | — | | — | | | 9,583,334 | | 12,938 | | | Private Placement Offering Warrants | | 46,816,480 | | 25,604 | | | — | | — | | | 46,816,480 | | 25,604 | | | Total | | 81,563,197 | | $ | 67,496 | | | 8,261,093 | | $ | 585 | | | 89,824,290 | | $ | 68,081 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at
December 31, 2021 | | Warrant Issuances | | Transfers from 5-Year Private Warrants(1) | | Balance at
December 31, 2022 | | | | | | | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | Warrants | Amount | | 5-Year Public Warrants | | 24,811,068 | | $ | 28,912 | | | — | | $ | — | | | 352,315 | | $ | 42 | | | 25,163,383 | | $ | 28,954 | | | Public Offering Warrants | | 9,583,334 | | 12,938 | | | — | | — | | | — | | — | | | 9,583,334 | | 12,938 | | | Private Placement Offering Warrants | | — | | — | | | 46,816,480 | | 25,604 | | | — | | — | | | 46,816,480 | | 25,604 | | | Total | | 34,394,402 | | $ | 41,850 | | | 46,816,480 | | $ | 25,604 | | | 352,315 | | $ | 42 | | | 81,563,197 | | $ | 67,496 | |
(1)See Note 14 – Warrant Liabilities. 5-Year Public Warrants Prior to the Recapitalization Transaction, MUDS issued 20,800,000 units, with each unit consisting of 1one-tenth share of common stock (on a post 1-for-10 reverse stock split basis) and 1one warrant to purchase oneone-tenth share of common stock (on a post 1-for-10 reverse stock split basis) at an exercise price of $11.50 per share for a period of five years from the May 29, 2020, Recapitalization Transaction (the "IPO Warrants"“IPO Warrants”), and concurrently with the Recapitalization Transaction, the Company issued 3,249,999 warrants upon substantially the same terms as part of a backstop unit offering at an exercise price of $11.50 per share for a period of five years from the issuance date (the "Backstop Warrants"“Backstop Warrants” and collectively with the IPO Warrants, the "5-Year“5-Year Public Warrants"Warrants”). During 2020, 351,585the years ended December 31, 2023 and 2022, 8,261,093 and 352,315, respectively, 5-Year Private Warrants were transferred from a 5-Year Private Warrant holder to an Unrelated Third Party, and accordingly, those warrants are now included with the 5-Year Public Warrants. The Company has certain abilities to call the 5-Year Public Warrants if the last reported sale price of common stock equals or exceeds $18.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period. As of December 31, 2020,2022, the Company had 24,401,48325,163,383 5-Year Public Warrants outstanding. The 5-Year Public Warrants (other than the Backstop Warrants) are listed for trading on the Nasdaq Capital Market under the symbol "HYMCW". See Note 3 - Recapitalization Transaction for additional details on transactions to which the 5-Year “HYMCW.” Public Offering Warrants were issued. 14. Revenues
The table below is a summary of the Company’s gold and silver sales (in thousands, except ounces sold):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2020 | | 2019 | | | Amount | | Ounces
Sold | | Amount | | Ounces
Sold | | Gold sales | | $ | 44,279 | | | 24,892 | | | $ | 12,803 | | | 8,593 | | | Silver sales | | 2,765 | | | 136,238 | | | 906 | | | 52,036 | | | Total | | $ | 47,044 | | | 0 | | $ | 13,709 | | | 0 |
Following the 2019 restart of the Hycroft Mine,On October 6, 2020, the Company began recording revenue from goldissued 9,583,334 units in an underwritten public offering at an offering price to of $9.00 per unit, with each unit consisting of one-tenth share of common stock (on a post 1-for-10 reverse stock split basis) and silver sales during the third quarterone warrant to purchase one-tenth share of 2019. While the Company is not obligated to sell anycommon stock at an exercise price of its gold and silver to one customer, the majority of gold and silver sales during both 2019 and 2020 were to the same customer. For the years ended December 31, 2020 and 2019, approximately 79.1% and 100.0%, respectively, of revenue was attributable to sales to one customer.
15. Stock-Based Compensation
Performance and Incentive Pay Plan
The Company's Performance and Incentive Pay Plan (the “PIPP”$10.50 per share (“Public Offering Warrants”), which was approved on February 20, 2019 and amended on May 29, 2020 in connection with the Recapitalization Transaction, is a stock-based compensation plan to attract, retain and. Of
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements the 9.6 million units issued, 5.0 million units were issued to Restricted Persons, as defined under the Seller Warrant Agreement. After deducting underwriting discounts and commission and offering expenses, the proceeds net of discount and equity issuance costs to the Company were $83.1 million. The Public Offering Warrants are immediately exercisable and entitle the holder thereof to purchase one-tenth share of common stock (on a post 1-for-10 reverse stock split basis) at an exercise price of $10.50 for a period of five years from the closing date. The shares of common stock and the Public Offering Warrants were separated upon issuance. The Public Offering Warrants are listed for trading on the Nasdaq under the symbol “HYCML.” Private Placement Warrants Pursuant to the Private Placement Offering, the Company issued 46,816,480 Warrants with an exercise price of $1.068 per Warrant Share that expire five years from the date of issuance. The Warrants are deemed freestanding, equity-linked financial instructions that do not require liability classification under ASC Topic 480-10 Overall Debt because: (i) they are not mandatorily redeemable shares; (ii) they do not obligate the Company to buy back shares; and (iii) they are not settled in a variable number of shares. As a result, the Company allocated the gross proceeds of $55.9 million from the Private Placement Offering between the Warrants and common stock as of the closing date of March 15, 2022. The Company used the Black-Scholes option pricing model to determine the fair value of the Warrants upon the issuance date using the following assumptions: | | | | | | | As of March 15, 2022 | | Expected term (years) | 5 | | Risk-free interest rate | 2.1 | % | | Expected volatility | 118.4 | % | | Expected dividend yield | — | |
The following table summarizes additional information on the Company’s outstanding equity-classified warrants as of December 31, 2023: | | | | | | | | | | | | | | | | Exercise price | Exercise period | Expiration date | Warrants outstanding | | 5-Year Public Warrants | $ | 11.50 | | 5 years | May 29, 2025 | 33,424,476 | | | Public Offering Warrants | $ | 10.50 | | 5 years | October 6, 2025 | 9,583,334 | | | Private Placement Offering Warrants | $ | 1.068 | | 5 years | March 15, 2027 | 46,816,480 | |
16. Revenues The table below is a summary of the Company’s gold and silver sales (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2023 | | 2022 | | | Amount | | Ounces Sold | | Amount | | Ounces Sold | | Gold sales | | $ | — | | | — | | | $ | 32,249 | | | 17,728 | | | Silver sales | | — | | | — | | | 980 | | | 44,084 | | | Total | | $ | — | | | | | $ | 33,229 | | | |
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements The Company’s gold and silver sales during the year ended December 31, 2023 and 2022, were attributable to the following customers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2023 | | 2022 | | | Amount | | Percentage | | Amount | | Percentage | | Customer A | | $ | — | | | N/A | | $ | 12,159 | | | 36.6 | % | | Customer B | | — | | | N/A | | 10,997 | | | 33.1 | % | | Customer C | | — | | | N/A | | 10,073 | | | 30.3 | % | | Total | | $ | — | | | N/A | | $ | 33,229 | | | 100.0 | % |
17. Stock-Based Compensation Performance and Incentive Pay Plan The HYMC Performance and Incentive Pay Plan (the “PIPP”) was approved on February 20, 2019 and amended on May 29, 2020 and June 2, 2022. The PIPP is a stock-based and cash-based compensation plan to attract, retain and motivate employees and directors while directly linking incentives to increases in stockholder value. Terms and conditions (including performance-based vesting criteria) of awards granted under the PIPP are establishedapproved by the Board of Directors or the Compensation Committee of the Board of Directors, who administer the PIPP. Awards may be granted in a variety of forms, including restricted stock, restricted stock units, stock options, stock appreciation rights, performance awards, and other stock-based awards. The On June 2, 2022, the Company’s stockholders approved an amendment to the PIPP which increased the number of authorized shares of common stock made available for award under the PIPP is equal to 5.0% of the issued and outstandingissuance by 1.2 million shares of the Company'scommon stock. As a result, 1,450,800 shares of common stock immediately after the close of the Recapitalization Transaction, or 2,508,002 shares. There are currently 1,819,814 shares registered and available to grantauthorized for issuance under the PIPP. There are no equity compensation plans not approved by stockholders.As of December 31, 2023, there were 482,070 shares of common stock available for issuance under the PIPP. As of December 31, 2020,2023, all awards granted under the PIPP were in the form of restricted stock units to employees or consultants of the Company. Restricted stock units granted to employees under the PIPP without performance-based vesting criteria typically vest in either equal annual installments over two to threefour years, or in entirety on the fourth anniversary after the grant date. Awards granted to employees with performance-based vesting criteria typically vest in annual installments overtwo or three years subject to the achievement of certain financial and operating results of the Company. RestrictedCertain restricted stock units granted to non-employee directors vestedvest immediately while others vest in substantially equal installments over a two to three yearyears period. For restricted stock units granted in the first quarter of 2019 that had not vested as of December 31,prior to August 2020, a price per share was not determined as ofupon the grant date. The number of shares of common stock of the Company to be issued upon vesting is to bewas calculated on the vesting date, which iswas either the second or third anniversary of the date of the grant, or the annual date the compensation committee determinesdetermined the achievement of the corporate performance targets. Such unvested restricted stock unit awards arewere included in Other liabilities non-current. Referuntil each vesting date when the amount was transferred to Note 8 - Other LiabilitiesAdditional paid-in capital for further detail. The following table summarizes the Company’s stock-based compensation cost and unrecognized stock-based compensation cost by plan (in thousands):
| | | | | | | | | | | | | | | | | Restricted Stock Units | | Performance and Incentive Pay | | Number of Units | | Weighted Average Grant Date Fair Value | Non-vested at beginning of year(1) | | 339,271 | | $ | 10.96 | | | Granted | | 517,234 | | 8.11 | | | Canceled/forfeited | | (131,724) | | 11.32 | | | Vested | | (179,085) | | 11.05 | | | Non-vested at end of year | | 545,696 | | $ | 8.12 | |
(1)The weighted average grant date fair value for non-vested. As of December 31, 2022, there were no remaining restricted stock units atunit grants outstanding required to be accounted for as Other liabilities. Prior to each vesting date, the beginning ofCompany estimated the year was not determined because a price per share was not determined as of the grant date. The number of shares of common stock of the Company to be issued upon vesting is to be calculated on the vesting date.
In connection withusing the closing of the Recapitalization Transaction on May 29, 2020, approximately 0.1 million restricted stock units, which were granted in 2019, vested at an averageshare price of $12.65 per share, the closing price ofits common stock on the datelast day of each reporting period as quoted on the Recapitalization Transaction. Nasdaq.
On June 1, 2020, approximately 0.1 million restrictedNovember 14, 2023, the Company effectuated a reverse stock units vested at an average pricesplit with a ratio of $11.501-for-10. All share and per share the closing price of common stock on such vesting date. Additionally, in connection with the 2020 annual grantinformation has been retroactively adjusted to give effect to the Company’s directors, approximately 0.03 million restrictedreverse stock units were granted on December 4, 2020, which immediately vested at $7.43 per share, the closing price on the Nasdaq Capital Market of the Company's common stock on December 4, 2020.split for all periods presented. During the year ended December 31, 2020, the Company reclassified $1.8 million from Other liabilities, current to Additional paid-in capital for the restricted stock units that vested. Shares ofThe following tables summarize the Company’s common stock were issued for the vested restricted stock units held by former employeesunvested share awards outstanding as of December 31, 2020; however, shares of common stock for such awards will not be issued to current employees until2023 and 2022, under the Conversion Date, as defined in the equity award agreements.PIPP:
The total intrinsic value of restricted stock units (calculated as the product of price per share on the vesting date times the number of restricted stock units vested) vested during the year ended December 31, 2020 was $2.0 million. NaN restricted stock units vested during the year ended December 31, 2019. | | | | | | | | | | | | | | | | | | | | Number of Restricted Stock Units | | | | | Weighted Average Grant Date
Fair Value Per Unit | | Unvested at December 31, 2022 | | 354,715 | | | | | | $ | 19.94 | | | Granted | | 501,691 | | | | | | 4.61 | | | | | | | | | | | Canceled/forfeited | | (62,934) | | | | | | 12.17 | | Vested(1) | | (186,374) | | | | | | 14.12 | | | Unvested at December 31, 2023 | | 607,099 | | | | | $ | 10.04 | |
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Total compensation expense relating to restricted stock awards was $2.4 million and $1.2 million for | | | | | | | | | | | | | | | | | | | | Number of Restricted Stock Units | | | | | Weighted Average Grant Date
Fair Value Per Unit | Unvested at December 31, 2021(2) | | 221,091 | | | | | | $ | 28.21 | | | Granted | | 330,707 | | | | | | 13.03 | | Impact of fluctuations in share price(3) | | (51,520) | | | | | | 6.04 | | Canceled/forfeited(1) | | (28,250) | | | | | | 30.96 | | | Vested | | (117,313) | | | | | | 29.64 | | Unvested at December 31, 2022(1) | | 354,715 | | | | | $ | 19.94 | |
(1)For the years ended December 31, 20202023 and 2019, respectively. Our recognized tax benefit from2022, 2,595 and 3,115 respectively of restricted stock units vested and the corresponding issuance of shares of common stock was deferred as the Company was under a trading black-out as of the date of vesting. The shares of common stock will be issued upon expiration of the trading blackout. (2)Amount includes liability-based awards for which the number of units awarded was not determined until the vesting date. The number of liability-based award units included in this expense foramount were estimated using the yearsmarket value of the Company’s shares of common stock as of the end of each reporting period. (3)Amount represents difference between liability-based awards estimated as of the end of the previous reporting period and the number of shares of common stock issued upon vesting. During the year ended December 31, 2020 and 2019 was $0.42022, the Company reclassified $0.8 million and $0.3 million, respectively. As of December 31, 2020, $2.9 million of total unrecognized compensation cost relatedfrom Other liabilities, current toAdditional paid-in capital for performance-based restricted stock units was expected to be recognized as an expense by the Company in the future over a weighted-average period of approximately 2.2 years.that vested.
Non-Employee Director Phantom Stock Plan
Non-executive members of Seller's Board of Directors received phantom shares pursuant to the Hycroft Mining Corporation Non-Employee Director Phantom Stock Plan (the “Phantom Plan”) as part of their annual compensation pursuant to phantom stock award agreements. For grants issued during the years ended 2015 and 2016, the cash payment was equal to the fair market value of 1 share of common stock of Seller at the date of payment. Under the grant agreements, each phantom share vested on the date of grant and entitled the participant to a cash payment. For grants issued during 2018, 2019, and 2020, the cash payment was equal to the greater of the (1) grant date value, or (2) the fair market value of 1 share of common stock of Seller at the date of payment. The cash payments were to be made to participants upon certain Payment Events, as such term is defined in the Phantom Plan, which was triggered by the closing of the Recapitalization Transaction. In connection with the closing of the Recapitalization Transaction, a $1.8 million cash payment was made to the participants to satisfy the 1,237,500 phantom shares that were vested and outstanding.
During the years ended December 31, 20202023 and 2019, non-employee members of Seller’s Board of Directors were granted a total of 157,500 and 315,000 phantom shares of stock, respectively, that vested upon grant. During the years ended December 31, 2020 and 2019,2022, the Company recorded $0.2compensation expense of $2.9 million and $0.7$2.5 million, respectively, in compensation expense related to the vesting and valuation adjustmentsrestricted stock awards. As of the Seller's phantom shares, which is included in General and administrative on the consolidated statementsDecember 31, 2023, there was $3.3 million of operations. Historically, the Company included amounts for Seller's outstanding phantom awards at fair value within Other liabilities, current (see Note 19 - Fair Value Measurements for additional information).unrecognized compensation cost related to unvested restricted stock units. 16.18. Income Taxes
For the years ended December 31, 20202023 and 2019,2022, the Company recorded 0 incomeno Income tax benefit or expense based upon the annual effective tax rate of 0.0% for each period.(benefit). The annual effective tax rate was Nil for both 2023 and 2022, which was driven primarily by net operating losses for each period was driven by losses for each period. The gain related to the Recapitalization Transaction was excluded from the estimated annual effective tax rate calculation for the 2020 period as it is consideredand a discrete item. The Company reversed a portion of thefull valuation allowance based on the net operating loss expected to be used, in order to offset Seller's taxable gain related to the Recapitalization Transaction.was provided for deferred tax assets. The Company is subject to state income tax in Colorado, which is the location of its corporate office, but did not incur any income tax expense related to Colorado due to continued net operating losses. The Company iswill be subject to mining taxes in Nevada, which arewill be classified as income taxes as such taxes are based on a percentage of mining profits, butprofits. The Company did not incur any mining tax expense in 2023 or 2022 due to continued mining losses. The Company is not subject to foreign income taxes as all of the Company’s operations and properties are located within the United States. The Company’s loss before income taxes was attributable solely to domestic operations in the United States. The components of the Company’s incomeIncome tax expense (benefit) were as follows (in thousands): | | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Current | | | | | Federal | $ | — | | | $ | — | | | Deferred | | | | | Federal | (11,428) | | | (17,719) | | | Change in Valuation Allowance | 11,428 | | | 17,719 | | | Income tax expense (benefit) | $ | — | | | $ | — | |
For the years ended December 31, 2023 and 2022, the Company incurred no net Income tax expense (benefit).
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements | | | | | | | | | | | | | | | | | Year Ended | | | 2020 | | 2019 | | | (as restated) | | | | Current | | | | | | Federal | | $ | 0 | | | $ | 0 | | | Deferred | | | | | | Federal | | 146,794 | | | (24,609) | | | Change in Valuation Allowance | | (146,794) | | | 24,609 | | | Income Tax Benefit | | $ | 0 | | | $ | 0 | |
The following table provides a reconciliation of income taxes computed at the United States federal statutory tax rate of 21% in 20202023 and 20192022, to the income tax provision (in(dollars in thousands): | | Year Ended | | 2020 | | 2019 | | (as restated) | | | | Year Ended December 31, | | | Year Ended December 31, | | 2023 | | | 2023 | | 2022 | | Loss before income taxes | Loss before income taxes | | $ | (136,392) | | $ | (98,895) | | United States statutory income tax rate | United States statutory income tax rate | | 21% | | 21% | United States statutory income tax rate | 21% | | 21% | | Income tax (benefit) at United States statutory income tax rate | Income tax (benefit) at United States statutory income tax rate | | $ | (28,642) | | $ | (20,768) | | Change in valuation allowance | Change in valuation allowance | | (146,794) | | 24,609 | | Recapitalization transaction | | 157,855 | | 0 | | Cancellation of debt income | | 15,360 | | 0 | | State tax provision, net of federal benefit | | 1,263 | | (3,847) | | Warrant fair value adjustment | Warrant fair value adjustment | | 790 | | 0 | | Other | | 168 | | 6 | | Income Tax Benefit | | $ | 0 | | | $ | 0 | | | Adjustment of prior year income taxes | | | | Income tax expense (benefit) | | | Income tax expense (benefit) | | | Income tax expense (benefit) | |
For the year ended December 31, 2020,2023, the effective tax rate was a result of a decreasean increase in the valuation allowance of $146.8 million which offset a $157.9 million net write-off and usage of certain deferred tax assets as a result of the Recapitalization Transaction and $15.4 million of cancellation of debt income related to the Recapitalization Transaction.$11.4 million. For the year ended December 31, 2019,2022, the effective tax rate was driven bya result of an increase in the valuation allowance of $24.6$17.7 million that was partially offset by adjustments relatedand adjustment to the apportionment of taxable loss to the state of Colorado. The apportionment of taxable loss caused state return to provision adjustments of $3.8 million.prior year income taxes. The components of the Company’s deferred tax assets are as follows (in thousands): 91 | | | | | | | | | | | | | Year Ended December 31, | | 2023(1) | | 2022 | | Net operating loss | $ | 74,821 | | | $ | 49,765 | | | Mineral properties | 48,677 | | | 39,322 | | | Plant, equipment, and mine development | 1,373 | | | 23,219 | | | Intangible assets | 17,192 | | | 18,698 | | | Deferred gain on sale of royalty | 6,266 | | | 6,266 | | | Asset retirement obligation | 1,674 | | | 2,163 | | | Accrued compensation | 593 | | | 1,258 | | | Stock-based compensation | 1,835 | | | 536 | | | Inventories | 835 | | | 221 | | | Assets available for sale | (398) | | | — | | | Other | 31 | | | 23 | | | Valuation allowance | (152,899) | | | (141,471) | | | Total | $ | — | | | $ | — | |
Table(1)During 2023, the Company determined that it did not timely elect out of ContentsHYCROFT MINING HOLDING CORPORATION
NotesInternal Revenue Code (“IRC”) § 168(k) bonus depreciation for 2020 and 2021, and therefore its reported 2023 deferred tax assets related primarily to Consolidated Financial Statements
| | | | | | | | | | | | | | | | | December 31, | | | 2020 | | 2019 | | | (as restated) | | | | Net operating loss | | $ | 7,675 | | | $ | 146,382 | | | Mineral properties | | 39,555 | | | 0 | | | Plant, equipment, and mine development | | 30,767 | | | 60,840 | | | Intangible assets | | 21,710 | | | 0 | | | Royalty | | 6,292 | | | 0 | | | Interest expense carryforward | | 1,935 | | | 24,369 | | | Asset retirement obligation | | 997 | | | 927 | | | Stock-based compensation | | 405 | | | 257 | | | Accrued compensation | | 197 | | | 0 | | | Inventories | | 191 | | | 15,438 | | | Reorganization costs | | 0 | | | 7,701 | | | Other liabilities | | 0 | | | 609 | | | Credits and other | | 0 | | | (6) | | Valuation allowance | | (109,724) | | (256,517) | | Total net deferred tax assets | | $ | 0 | | | $ | 0 | |
Based on the weight of evidence available as of both December 31, 2020,2023 and 2019,2022, which included recent operating results, future projections, and historical inability to generate positive operating cash flow, the Company concluded that it was more likely than not that the benefit of its net deferred tax assets would not be realized and, as such, recorded full valuation allowances of $109.7$152.9 million and $256.5$141.5 million, respectively, against its net deferred tax assets. The Company had net operating loss carryovers as of December 31, 20202023 and 20192022, of $36.6$356.3 million and $683.8$237.5 million, respectively, for federal income tax purposes. The accumulated net operating loss carryovers as of December 31, 2019 were not transferred from the Seller to the Company upon consummation of the Recapitalization Transaction, which caused the decrease in the balance. The carryforward amount as of December 31, 20202023, can be carried forward indefinitely and can be used to offset taxable income and reduce income taxes payable in future periods, pending any potential limitation pursuantsubject to Internal Revenue Code (“IRC”) sectionlimitations under IRC § 382. Additional analysis IRC § 382 imposes limitations on the use of the IRC section 382 limitations will be performed in the future and could result in an annual limitation applied to the $36.6 million of net operating losses. Immediately prior to the Recapitalization Transaction, Seller had estimated net deferred tax assets of approximately $193.0 million, which were primarily comprised ofU.S. federal net operating losses and offset byupon a full valuation allowance.more than 50% change in ownership in the Company within a three-year period. In connection with its at-the-market equity offering, the Company underwent an IRC § 382 ownership change on March 25, 2022. As a result, utilization of $286.5 million of the Recapitalization Transaction, Seller, which sold allCompany’s net operating
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements losses and outstanding equity interests of its direct subsidiaries and substantially all of its other assets, to Acquisition Sub, which also assumed substantially all ofcertain unrealized losses are limited on an annual basis. The Company’s annual limitation under IRC § 382 is approximately $1.3 million. If the liabilities of Seller, hadIRC § 382 annual limitation amount is not fully utilized in a taxable gain and cancellation of indebtedness of approximately $128.5 million before considering Seller's net operating loss carryforwards. In connection withparticular tax year, then the Recapitalization Transaction, Seller used approximately $27.2 million of its deferredunused portion from that tax assets to offset the taxable gain in full, resulting in remaining net deferred tax assets of approximately $94.1 million immediately after the Recapitalization Transaction. The remaining net deferred tax assets balance of Seller did not transferyear is added to the Company as a result of the Recapitalization Transaction. For U.S. tax purposes, the sale of Seller's disregarded subsidiaries interests and other assets was considered a sale of assets. The acquired assets have a carryover basis for U.S. GAAP purposes and the Company has stepped up the fair market value basisIRC § 382 annual limitation in the assets acquired for tax purposes.subsequent years. As necessary, the Company provides a reserve against the benefits of uncertain tax positions taken in its tax filings that are more likely than not to not be sustained upon examination. Based on the weight of available evidence, the Company does not believe it has taken any uncertain tax positions that require the establishment of a reserve. The Company has not recorded any income tax reserves or related interest, or penalties related to income tax liabilities as of December 31, 2020.2023. The Company'sCompany’s policy, if it were to have uncertain tax positions, is to recognize interest and/or penalties related to unrecognized tax benefits as part of its incomeIncome tax expense.expense (benefit). With limited exception, the Company is no longer subject to U.S. federal income tax audits by
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
taxing authorities for tax years 2017 and prior; however, net operating loss and credit carryforwards from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used. 17.19. Loss Per Share
The table below summarizes the Company's basic and dilutedNet loss per share calculations (in thousands, except share and per share amounts):
| | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2020 | | 2019 | | | (as restated) | | | | Net loss | | $ | (136,392) | | | $ | (98,895) | | | | | | | | Weighted average shares outstanding | | | | | | Basic | | 34,833,211 | | | 301,559 | | | Diluted | | 34,833,211 | | | 301,559 | | | | | | | | Basic loss per common share | | $ | (3.92) | | | $ | (327.95) | | | Diluted loss per common share | | $ | (3.92) | | | $ | (327.95) | |
The weighted-average shares of common stock outstanding for the year ended December 31, 2019all periods have been retroactively restated as shares reflectingadjusted to reflect the exchange ratio established in the Recapitalization Transaction to effect theCompany’s 1-for-10 reverse recapitalization (1 Seller share for 0.112 HYMC share).stock split effectuated November 14, 2023. Basic and diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common sharesstock outstanding during the period. Loss
The table below summarizes the Company’s basic and diluted loss per share amounts in the 2019 period exclude the commoncalculations (in thousands, except share effects from certain of Seller's debt instruments, which are reflected in the 2020 period. and per share amounts): | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | | | | 2023 | | 2022 | | Net loss | | | | | $ | (55,024) | | | $ | (60,828) | | | | | | | | | | | Weighted average shares outstanding | | | | | | | | | Basic | | | | | 21,113,516 | | | 16,977,306 | | | Diluted | | | | | 21,113,516 | | | 16,977,306 | | | | | | | | | | | Basic loss per common share | | | | | $ | (2.61) | | | $ | (3.58) | | | Diluted loss per common share | | | | | $ | (2.61) | | | $ | (3.58) | |
Due to the Company'sCompany’s net loss during the years ended December 31, 20202023 and 2019,2022, respectively, there was no dilutive effect of common stock equivalents because the effects of such would have been anti-dilutive. UsingThe following table summarizes the treasury stock method, the weighted-average common stock equivalentsshares excluded from diluted loss per share calculations were 47.7 million shares (47.4 million shares related to warrants, and 0.3 million shares related to restricted stock units), for the year ended December 31, 2020. For the year ended December 31, 2019, the weighted-average common stock equivalents excluded from diluted loss per share calculations using the treasury stock method were 3.2 million shares related to warrants. Unvested restricted stock units granted in 2019 were excluded from common stock equivalent calculations because theweighted average number of shares required to settle such stock-based compensation awards is not known untilof common stock outstanding, as the future vesting date.impact would be anti-dilutive (in thousands): | | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Shares after conversion of warrants | 9,069 | | | 9,069 | | | Restricted stock units | 607 | | | 355 | | | Total | 9,676 | | | 9,424 | |
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements 18.20. Segment Information
The Company'sCompany’s reportable segments are comprised of operating units that have revenues,Revenues, earnings or losses, or assets exceeding 10% of the respective consolidated totals, and are consistent with the Company’s management reporting structure. Each segment is reviewed by the executive decision-making group to make decisions about allocating the Company'sCompany’s resources and to assess their performance. The tables below summarize the Company'sCompany’s segment information:information (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | Hycroft Mine | | Corporate and Other | | Total | | | | | (as restated) | | (as restated) | | 2020 | | | | | | | | Revenue - Note 14 | | $ | 47,044 | | | $ | 0 | | | $ | 47,044 | | | Cost of sales | | 109,621 | | | 0 | | | 109,621 | | | Other operating costs | | 5,705 | | | 21,084 | | | 26,789 | | | Loss from operations | | (68,282) | | | (21,084) | | | (89,366) | | | Interest expense - Note 10 | | (141) | | | (43,317) | | | (43,458) | | | Fair value adjustment to Warrants - Note 19 | | 0 | | | (3,767) | | | (3,767) | | | Interest income | | 199 | | | 0 | | | 199 | | | Loss before reorganization items and income taxes | | (68,224) | | | (68,168) | | | (136,392) | | | Reorganization items | | 0 | | | 0 | | | 0 | | | Loss before income taxes | | $ | (68,224) | | | $ | (68,168) | | | $ | (136,392) | | | | | | | | | | Total Assets | | $ | 177,298 | | | $ | 55,328 | | | $ | 232,626 | | | | | | | | | | 2019 | | | | | | | | Revenue - Note 14 | | $ | 13,709 | | | $ | 0 | | | $ | 13,709 | | | Cost of sales | | 30,669 | | | 0 | | | 30,669 | | | Other operating costs | | 10,909 | | | 6,072 | | | 16,981 | | | Loss from operations | | (27,869) | | | (6,072) | | | (33,941) | | | Interest expense - Note 10 | | (786) | | | (64,060) | | | (64,846) | | | Fair value adjustment to Warrants - Note 19 | | 0 | | | 0 | | | 0 | | | Interest income | | 797 | | | 0 | | | 797 | | | Loss before reorganization items and income taxes | | (27,858) | | | (70,132) | | | (97,990) | | | Reorganization items | | 0 | | | (905) | | | (905) | | | Loss before income taxes | | $ | (27,858) | | | $ | (71,037) | | | $ | (98,895) | | | | | | | | | | Total Assets | | $ | 119,789 | | | $ | 14,848 | | | $ | 134,637 | |
| | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, 2023 | | | Hycroft Mine | | Corporate and Other | | Total | | | | | | | | | | | | | | | | Operating costs | | $ | 32,881 | | | $ | 12,673 | | | $ | 45,554 | | | Loss from operations | | (32,881) | | | (12,673) | | | (45,554) | | | Interest expense – Note 9 | | (1) | | | (18,466) | | | (18,467) | | | Interest income | | 2,422 | | | 5,856 | | | 8,278 | | | | | | | | | | Gain on sale of assets, net of commissions | | 544 | | | — | | | 544 | | | Fair value adjustment to warrants – Notes 14 and 21 | | — | | | 175 | | | 175 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | $ | (29,916) | | | $ | (25,108) | | | $ | (55,024) | | | | | | | | | | Total Assets | | $ | 66,129 | | | $ | 135,564 | | | $ | 201,693 | | | | | | | | | | | | | | | | | | Year Ended December 31, 2022 | | | Hycroft Mine | | Corporate and Other | | Total | | Revenues – Note 16 | | $ | 33,229 | | | $ | — | | | $ | 33,229 | | | Cost of sales | | 53,589 | | | — | | | 53,589 | | | Other operating costs | | 18,763 | | | 14,367 | | | 33,130 | | | Loss from operations | | (39,123) | | | (14,367) | | | (53,490) | | | Interest expense – Note 9 | | (10) | | | (18,471) | | | (18,481) | | | Interest income | | 439 | | | 1,874 | | | 2,313 | | | Gain on extinguishment of debt | | — | | | 5,041 | | | 5,041 | | | Fair value adjustment to warrants – Notes 14 and 21 | | — | | | (159) | | | (159) | | | Gain on sale of assets, net of commissions | | 3,948 | | | — | | | 3,948 | | | | | | | | | | | | | | | | | Net loss | | $ | (34,746) | | | $ | (26,082) | | | $ | (60,828) | | | | | | | | | | Total Assets | | $ | 102,057 | | | $ | 146,897 | | | $ | 248,954 | |
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
19.21. Fair Value Measurements
Recurring fair value measurements The following table sets forth by level within the fair value hierarchy, the Company’s liabilities measured at fair value on a recurring basis (in thousands). | | | | | | | | | | | | | | | | | | | Hierarchy
Level | | December 31,
2020 | | December 31,
2019 | | | | (as restated) | | | | Liabilities: | | | | | | | Other liabilities, current | | | | | | | Accrued compensation for phantom shares | 3 | | $ | 0 | | | $ | 1,590 | | | Other liabilities, non-current | | | | | | | 5-Year Private Warrant liability - Note 11 | 2 | | $ | 15,327 | | | 0 | | Seller Warrant liability - Note 11 | 2 | | 62 | | | $ | 18 | | | Total | | | $ | 15,389 | | | $ | 1,608 | |
Accrued compensation for phantom shares
Certain of Seller's phantom shares, which were satisfied in full upon closing of the Recapitalization Transaction, were carried at fair value due to holders of such awards being entitled to variable cash payments based upon valuations of Seller's common stock. The historical fair value of such obligation was computed using inputs and assumptions that were significant and unobservable as Seller was a privately held entity and, as such, were classified within Level 3 of the fair value hierarchy. The inputs and assumptions included estimates of consideration to be received by holders of phantom shares based on the estimated fair value of the consideration that may be allocated to such holders from the various financing transactions Seller was considering at such time based on the implied equity value.
5-Year Private Warrants | | | | | | | | | | | | | | | | | | | Hierarchy
Level | | Year Ended December 31, | | | 2023 | | 2022 | | 5-Year Private Warrants | 2 | | $ | 26 | | | $ | 786 | |
The 5-Year Private Warrants are valued using a Black-Scholes model that requires a variety ofvarious inputs including the Company'sCompany’s stock price, the strike price of the 5-Year Private Warrants, the risk-free rate, and the implied volatility. As the terms of the 5-Year5-
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Year Private Warrants are identical to the terms of the 5-Year Public Warrants except that the 5-Year Private Warrants, havewhile held by certain restrictions against redemptionsholders or their permitted transferees, are precluded from mandatory redemption and rightsare entitled to be exercise on a cashless basis when such warrants are held by“cashless basis” at the initial purchasers or their permitted transferees,holder’s election, the implied volatility used in the Black-Scholes model is calculated using a Monte-CarloGeneralized AutoRegressive Conditional Heteroskedasticity model of the 5-Year Public Warrants that factors in the restrictive redemption and cashless exercise features of the 5-Year Private Warrants. The Company updates the fair value calculation on at least a quarterly basis, or more frequently if changes in circumstances and assumptions indicate a change from the existing carrying value. Seller Warrant liability
As part of the Recapitalization Transaction, the Company assumed Seller's obligations under the Seller Warrant Agreement and the 12.7 million Seller Warrants outstanding became exercisable into shares of the Company's common stock. The Seller Warrant Agreement also contains certain terms and features to reduce the exercise price and increase the number of shares of common stock each warrant is exercisable into. As a result, Seller Warrants are considered derivative financial instruments and carried at fair value. The fair value of Seller Warrants was computed by an independent third-party consultant (and validated by the Company) using a Monte Carlo simulation-based model that requires a variety of inputs, including contractual terms, market prices, exercise prices, equity volatility and discount rates. The Company updates the fair value calculation on at least an annual basis, or more frequently if changes in circumstances and assumptions indicate a change from the existing carrying value. See Note 13 - Stockholders' Equity for additional information on the Seller Warrants.
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
Items disclosed at fair value Debt, net The Sprott Credit Agreement and the Subordinated Notes are privately held and, as such, there is no public market or trading information available for such debt instruments. As of December 31, 2020,2023 and December 31, 2022, the fair value of the Company’s debt instruments was $154.9 million.$149.2 million and $130.7 million, compared to the carrying value of $144.9 million and $135.0 million as of December 31, 2023 and December 31, 2022, respectively. The fair value of the principal of the Company’s debt instruments, including capitalized interest, was estimated using a market approach in which pricing information for publicly traded, non-convertible debt instruments with speculative ratings were analyzed to derive a mean trading multiple to apply to the December 31, 2020 balances. As of2023 and December 31, 2019, Seller determined that certain of its debt instruments' carrying value exceeded the estimated fair value, which was based on the estimated fair value of the consideration that may be allocated to such debt instruments from the various financing transactions Seller was considering at such time. Accordingly, as of December 31, 2019, Seller estimated that the fair value of the 2.0 Lien Notes and 1.5 Lien Notes was approximately $262.4 million, compared to the carrying value of $345.5 million. Royalty obligation
As of December 31, 2020, the estimated net present value of the Company’s royalty obligation was $148.4 million, compared to the carrying value of $30.0 million. The net present value of the Company's royalty obligation was modeled using the following level 3 inputs: (1) market consensus inputs for future gold and silver prices; (2) a precious metals industry consensus discount rate of 5.0%; and (3) estimates of the Hycroft Mine’s life-of-mine gold and silver production volumes and timing.2022, balances.
20.22. Supplemental Cash Flow Information
The following table provides supplemental cash flow information (in thousands): | | | | | | | | | | | | | Year Ended December 31, | | 2020 | | 2019 | | Cash paid for interest | $ | 5,366 | | | $ | 10,239 | | | | | | | Significant non-cash financing and investing activities: | | | | | Exchange of Seller's 1.5 Lien Notes for HYMC common stock | 160,254 | | | 0 | | | Exchange of Seller's 1.25 Lien Notes for Subordinated Notes | 80,000 | | | 0 | | | Exchange of Seller's 1.25 Lien Notes for HYMC common stock | 48,459 | | | 0 | | | Write-off of Seller's debt issuance costs | 8,202 | | | 0 | | | Plant, equipment, and mine development additions included in accounts payable | 1,229 | | | 2,458 | | | Private Warrants transferred to Public Warrants | 581 | | | 0 | | | Accrual of deferred financing and equity issuance costs | 94 | | | 1,025 | |
In addition to the supplemental cash flow information shown above, Note 3 - Recapitalization Transaction and Note 9 - Debt, Net provide additional details on non-cash transactions that were part of the Recapitalization Transaction, as well as information on non-cash interest charges.
| | | | | | | | | | | | | Year Ended December 31, | | 2023 | | 2022 | | Cash interest paid | $ | 6,212 | | | $ | 5,318 | | | | | | | Significant non-cash financing and investing activities: | | | | | Increase in debt from in-kind interest – Note 9 | 9,559 | | | 9,619 | | | Debt issuance costs paid in-kind – Note 9 | — | | | 3,300 | | | Shares of common stock issued as payment of Settlement Fee – Note 15 | — | | | 1,749 | | | Liability based restricted stock units transferred to equity – Note 17 | — | | | 727 | | | Shares of common stock issued for purchase of Subordinated Notes – Note 9 | — | | | 385 | | | Shares of common stock issued for salary continuation payments – Note 15 | — | | | 158 | |
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
21.23. Employee Benefit Plans
401(k) Plan The Hycroft Mining Corporation 401(k) Plan (the “401(k) Plan”) is a defined contribution plan that is available to all employees of the Company upon their date of hire. The 401(k) Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, and Section 401(k) of the Internal Revenue Code. AdministrativeIRC. Administration fees of the 401(k) Plan are paid by the Company. The assets of the 401(k) Plan are held and the related investments are executed by the 401(k) Plan’s trustee. Participants in the 401(k) Plan exercise control and direct the investment of their contributions and account balances among various investment alternatives. The Company matches a percentage of employee deferrals to the 401(k) Plan up to certain limits. For the years ended December 31, 20202023 and 2019,2022, the Company’s matching contributions totaled $0.9$0.6 million and $0.5$0.4 million, respectively. 22. Commitments and Contingencies
From time to time,During the quarter ended December 31, 2022, the Company is involved in various legal actions relatedswitched the 401(k) plan provider from Fidelity Investments to its business, someAon. Aon’s pooled employer plan will reduce risks and costs for the Company by (i) eliminating future 401(k) audits, (ii) reduced fees and administrative costs, and (iii) reduced time performing plan maintenance. As of which are class action lawsuits. Management does not believe, based on currently available information, that contingencies related to any pending or threatened legal matter will have a material adverse effect on the Company’s financial statements, although a contingency could be materialDecember 15, 2022, all plan assets were transferred to the Company’s resultsnew provider. These changes will not affect the benefits or rights of operations or cash flows for a particular period depending on the results of operations and cash flows for such period. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
On February 7, 2020, a purported class action complaint was filed by a purported holder of the Seller Warrants, in the Court of Chancery of the State of Delaware against Seller and the Company. The complaint sought a declaratory judgment that the Recapitalization Transaction constitutes a “Fundamental Change” under the terms of the Seller Warrant Agreement and thereby requiring that Seller Warrants be assumed by the Company as part of the Recapitalization Transaction, in addition to asserting claims for: (1) breach or anticipatory breach of contract against Seller; (2) breach or anticipatory breach of the implied covenant of good faith and fair dealing against Seller; and (3) tortious interference with contractual relations against the Company. The complaint sought unspecified money damages and also sought an injunction enjoining Sellerplan participants and the Company from consummating the Recapitalization Transaction. On February 26, 2020, the Company and Seller entered into an amendmentwill continue to make contributions to the Purchase Agreement whereby Seller’s liabilities and obligations under the Seller Warrant Agreement were includedplan as an assumed liability under the Purchase Agreement. On March 27, 2020, the Company and Seller filed motions to dismiss the complaint. On May 15, 2020, a hearing was held and the complaint was dismissed. On May 21, 2020, Plaintiff filed a motion to alter or amend the Court’s order in order to retain jurisdiction in order to file application for a mootness fee, to which the Company and Seller, while disputing factual assertions and characterizations, did not oppose. On June 30, 2020, the motion was granted and the Court retained jurisdiction over the action to hear any mootness fee application. The matter was settled and a $0.1 million mootness fee was paid on September 8, 2020.
Financial commitments not recorded in the financial statements
As of December 31, 2020 and December 31, 2019, the Company's off-balance sheet arrangements consisted of operating lease agreements, a net profit royalty arrangement, and a future purchase obligation for consignment inventory.
Operating leases
During the year ended December 31, 2020, the Company signed 2 leases for the rental of mining equipment. The operating leases for mobile mining equipment were used to supplement the Company’s own fleet. Each lease had less than a year remaining as of December 31, 2020. The total remaining minimum lease payments for the 2 leases was approximately $4.8 million as of December 31, 2020.
The Company also holds operating leases. Rent expense is $0.2 million annually and the leases expire between March 2021 and January 2022.
As the Company has elected to take advantage of the extended transition period for complying with new or revised accounting standards, the Company will not adopt ASU 2016-02 until January 2022, or it no longer qualifies as an emerging growth company, and no right of use asset or liability will be recorded on the balance sheet for existing operating leases.before.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements Net24. Commitments and Contingencies
Legal Proceedings The Company has been named as a defendant in four pro se actions that assert claims for breach of contract and declaratory judgment arising from or directly relating to Warrants purportedly held by the Pro Se Plaintiffs in the Delaware Chancery Court. In various forms, they allege that the Company or its predecessor entities breached the Warrant Agreement, dated October 22, 2015, and/or related Amendment Agreement, dated February 26, 2020. In sum, in all four actions, Plaintiffs allege, by or on behalf of “Warrant holders,” that the Company or its predecessor(s) breached these agreements by failing to make proper “Mechanical Adjustments” to the Warrants in accordance with terms of the Warrant Agreement upon the occurrence of certain business transactions and events, including the May 29, 2020, Business Combination. On January 10, 2024, in response to the Company’s motion to consolidate the four pro se actions, the Delaware Chancery Court ordered the parties to submit a proposed briefing schedule for the defendant’s preliminary motions to dismiss. The Company expenses legal fees and other costs associated with legal proceedings as incurred. The Company assessed, in conjunction with its legal counsel, the need to record a liability related to the Complaint and determined that a loss was not probable nor reasonably estimable. Litigation accruals are recorded when, and if, it is determined that a loss related matter is both probable and reasonably estimable. Material loss contingencies that are reasonably possible of occurrence, if any, are subject to disclosure. No losses have been recorded during the year ended December 31, 2022 or 2021, respectively, with respect to litigation or loss contingencies. Insurance The Company has deductible-based insurance policies for certain losses related to general liability, workers’ compensation, and automobile coverage. The Company records accruals for contingencies related to its insurance policies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Insurance losses for claims filed and claims incurred but not reported are accrued based upon estimates of the aggregate liability for uninsured claims using historical loss development factors and actuarial assumptions followed in the insurance industry. Royalties As of December 31, 2023 and December 31, 2022, the Company’s off-balance sheet arrangements consisted of a net profit royalty arrangement and a net smelter royalty arrangement. Crofoot Royalty A portion of the Hycroft Mine ispurchased patented claims and unpatented claims that are subject to a mining lease that requires a 4% net profit royalty be paid to the owner of certain patented and unpatentedsellers (“Crofoot Royalty”). Every year that mining claims. The mining lease alsooccurs on those claims, the agreement requires an annual advance payment of $120,000 every year mining occurs on the leased claims.$120,000. All advance annual payments are credited against the future payments due under the 4% net profit royalty. An additional payment of $120,000 is required for each year total tons mined on the leased claims exceeds 5.0 million tons. As of December 31, 2020, total tons mined from the leased claims exceeded 5.0 million tons, requiring an incremental amountCompany ceased mining operations in November 2021, the Company was not required to pay the annual advance payment of $120,000 due to the owner of the mining claims.in 2023 or 2022. The total payments due under the mining lease are capped at $7.6 million, of which the Company has paid or accrued $2.7$3.3 million and included $0.4$0.6 million of advanced annual payments in Other assets non-current in the consolidated balance sheetsConsolidated Balance Sheets as of December 31, 2020.2023 and December 31, 2022.
Consignment inventoryNet smelter royalty
During the first quarter of 2020, Hycroft entered into an agreement with a spare parts supplier that requires the supplier to maintain a specified inventory of replacement parts and components that are exclusively for purchase by Hycroft. Pursuant to the agreement,Sprott Royalty Agreement in which the Company received cash consideration in the amount of $30.0 million, the Company granted a perpetual royalty equal to 1.5% of the Net Smelter Returns from the Hycroft Mine, payable monthly. Net Smelter Returns for any given month are calculated as Monthly Production multiplied by the Monthly Average Gold Price and the Monthly Average Silver Price, minus Allowable Deductions, as such terms are defined in the Sprott Royalty Agreement. The Company is required to purchase allremit royalty payments to the payee free and clear and without any present or future deduction, withholding, charge or levy on account of taxes, except Excluded Taxes as such term is defined in the Sprott Royalty Agreement.
At both December 31, 2023 and December 31, 2022, the estimated net present value of the un-replenished consignment stock inventory, totaling $2.5 million, over the two-year lifeCompany’s net smelter royalty was $146.7 million. The net present value of the Inventory Consignment agreement. AsCompany’s net smelter royalty was modeled using the following inputs: (i) market consensus inputs for future gold and silver prices; (ii) a precious metals industry consensus discount rate of December 31, 2020, the Company had prepaid $0.8 million towards the un-replenished consignment stock inventory, which is included in Prepaids5.0%; and other in the consolidated balance sheets. See Note 2 - Summary of Significant Accounting Policies and Note 5 - Prepaids and Other for additional detail. 23. Related Party Transactions
Certain amounts(iii) estimates of the Company's indebtedness disclosed in Note 9 - Debt, Net have historically,Hycroft Mine’s life-of-mine gold and with regard to the $80.0 million of Subordinated Notes, are currently, held by 5 financial institutions. As of December 31, 2020, 3 of the financial institutions, Highbridge Capital Management, LLC (“Highbridge”), Mudrick Capital Management, L.P (“Mudrick”)silver production volumes and Whitebox Advisors, LLC (“Whitebox”), held more than 10% of the common stock of the Company and, as a result, each are considered a related party (the "Related Parties") in accordance with ASC 850, Related Party Disclosures. For the years ended December 31, 2020 and 2019, Interest expense, net of capitalized interest included $31.3 million and $57.6 million, respectively, for the debt held by Related Parties. As of December 31, 2020 and 2019, the Related Parties held a total $71.2 million and $497.2 million, respectively, of debt. Additionally, the Company's Compensation Committee and Board of Directors approved annual Director compensation arrangements for non-employee directors, of which $0.2 million is payable to Mudrick. During the year ended December 31, 2020, the Company paid $0.1 million to Mudrick and Mudrick vested in 5,047 restricted stock units that will convert into the same number of shares of the Company's common stock upon the Mudrick representative no longer serving on the Company's Board of Directors.
In connection with the closing of the Public Offering on October 6, 2020, Highbridge and Mudrick acquired 833,333, and 3,222,222 of the units, consisting of shares of common stock and warrants to purchase common stock, issued in the Public Offering, respectively. Refer to Note 13 - Stockholders' Equity for further information.
24. Subsequent Events
Appointment of Chief Operating Officer
John William Henris was appointed as the Company's Executive Vice President and Chief Operating Officer, effective as of January 11, 2021. The Company entered into an employment agreement dated as of January 11, 2021 with Mr. Henris, and issued him 33,423 restricted stock units vesting on the fourth anniversary of the grant date, subject to his continued employment.
HYCROFT MINING HOLDING CORPORATION Notes to Consolidated Financial Statements 25. Restatement of Previously Issued Audited Financial StatementsRelated Party Transactions As previously mentioned in Note 1 - Company Overview,During the years ended December 31, 2023 and 2022, the Company has restated previously issued financial statements after considering newly released guidance bypaid $0.3 million and $0.9 million, respectively, to Ausenco Engineering South USA, Inc. (“Ausenco”) for the SEC staff regarding the accounting and reporting for warrants.
On April 12, 2021, the Acting Directorpreparation of the Division2023 Hycroft TRS, due diligence assistance, and a new 2024 technical report. The Company’s President and Chief Executive Officer is currently a non-executive director for Ausenco’s parent company Board of Corporation FinanceDirectors.
As of December 31, 2023 and Acting Chief Accountant2022, AMC was considered a related party because an AMC representative serves on the Company’s Board of Directors, and as of December 31, 2022, AMC held more than 10% of the Securities and Exchange Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies (“SPACs”) entitled "Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” (the “SEC Statement”). Specifically, the SEC Statement clarified guidance for all SPAC-related companies regarding the accounting and reporting for “certain featurescommon stock of warrants issued in SPAC transactions” that “may be common across many entities” and are related to warrants of a kind similar to those issued by the Company. The SEC Statement focused in part on provisions in warrant agreements that provide for potential changes to the settlement amounts dependent upon the characteristicsAMC representative disclaims any beneficial ownership of the warrant holder,shares of our common stock and because the holder of such warrants would not be an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude such warrants from being classified in equity and thus such warrants should be classified as a liability. Based on ASC 815-40, Contracts in an Entity’s Own Equity, warrant instruments that do not meet the criteriaall cash payments for directorship are paid directly to be considered indexed to an entity’s own stock shall be initially classified as liabilities at their estimated fair values. The misstatements that causedAMC. In total, the Company to conclude that its financial statements should be restated arepaid the result ofAMC representative $0.2 million, including $0.1 million in cash compensation, and granted restricted stock units with a misapplication of the guidance on accounting for certain of its issued warrants, which came to light following issuance of the SEC Statement. In periods subsequent to issuance, changes in the estimatedgrant date fair value of $0.1 million. As of December 31, 2023 and 2022, AMC was entitled to receive 18,007 and 6,119, respectively, shares of common stock upon the derivative instruments should be reported in the statementfuture vesting of operations and comprehensive income (loss).restricted stock units.
The following presentsCertain amounts of the restated consolidated condensedCompany’s indebtednesshave historically, and with regard to the Subordinated Notes, were held by five financial statementsinstitutions. As of December 31, 2023, none of the financial institutions held more than 10% of the common stock of the Company. As of December 31, 2022, one of the financial institutions, Mudrick, held more than 10% of the common stock of the Company and, as of and fora result, was considered a related party in accordance with ASC 850, Related Party Disclosures. For the year ended December 31, 2020. The consolidated Statement2022, Interest expense included $4.0 million for the debt held by Mudrick and as of Stockholders' Equity reflectsDecember 31, 2022, Mudrick held $42.9 million of Debt, net.
26. Subsequent Events As of January 5, 2024, the restatement adjustments presented Company voluntarily pre-paid $34.7 million of the first lien loan, along with $3.3 million for the additional interest balance, totaling $38.0 million with a remaining outstanding balance of $15.0 million. As a result of this payment, the applicable margin will be reduced by 100 basis points through the final payment. Effective March 1, 2024, the buyer terminated a portion of the Equipment Purchase Agreement related to one ball mill and one SAG mill, but not the one sub-station transformer. At the time of termination of a portion of the agreement, the outstanding balance related to the Equipment Purchase Agreement was $12.1 million. In accordance with Topic 606, Revenue from Contracts with Customers, because the sale did not materialize for a portion of the agreement, the nonrefundable deposit payments received of $1.5 million will be recognized as Other income in the consolidated Balance Sheets presented below.
| | | | | | | | | | | | | | | | | | | | | HYCROFT MINING HOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(U.S. dollars in thousands, except share amounts) | | | December 31, 2020 | | | As Previously Reported | | Restatement Adjustment | | As Restated | | Total Assets | | $ | 232,626 | | | $ | 0 | | | $ | 232,626 | | | Liabilities: | | | | | | | | Current Liabilities | | $ | 21,681 | | | $ | 0 | | | $ | 21,681 | | | Other liabilities, non-current | | 1,712 | | | (62) | | | 1,650 | | | Debt, net, non-current | | 142,665 | | | 0 | | | 142,665 | | | Royalty obligation, non-current | | 29,839 | | | 0 | | | 29,839 | | | Asset retirement obligation, non-current | | 4,785 | | | 0 | | | 4,785 | | | Warrant Liability, non-current | | 0 | | | 15,389 | | | 15,389 | | | Total Liabilities | | $ | 200,682 | | | $ | 15,327 | | | $ | 216,009 | | | Stockholders' (deficit) equity: | | | | | | | | Common stock | | $ | 6 | | | $ | 0 | | | $ | 6 | | | Additional paid-in capital | | 548,975 | | | (11,605) | | | 537,370 | | | Accumulated deficit | | (517,037) | | | (3,722) | | | (520,759) | | | Total stockholders' equity (deficit) | | $ | 31,944 | | | $ | (15,327) | | | $ | 16,617 | | | Total liabilities and stockholders' equity (deficit) | | $ | 232,626 | | | $ | 0 | | | $ | 232,626 | |
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | HYCROFT MINING HOLDING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share amounts) | | | December 31, 2020 | | | As Previously Reported | | Restatement Adjustment | | As Restated | | Revenue | | $ | 47,044 | | | $ | 0 | | | $ | 47,044 | | | Total cost of sales | | (109,621) | | | 0 | | | (109,621) | | | Operating Expenses | | (26,789) | | | 0 | | | (26,789) | | | Loss from Operations | | (89,366) | | | 0 | | | (89,366) | | | Other Income and Expense: | | | | | | | | Interest expense, net of capitalized interest | | (43,458) | | | 0 | | | (43,458) | | | Fair value adjustment to Warrants | | (45) | | | (3,722) | | | (3,767) | | | Interest Income | | 199 | | | 0 | | | 199 | | | Loss before reorganization items and income taxes | | (132,670) | | | (3,722) | | | (136,392) | | | Reorganization items | | 0 | | | 0 | | | 0 | | | Net loss | | $ | (132,670) | | | $ | (3,722) | | | $ | (136,392) | |
HYCROFT MINING HOLDING CORPORATION
Notes to Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | HYCROFT MINING HOLDING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands, except share amounts) | | | December 31, 2020 | | | As Previously Reported | | Restatement Adjustment | | As Restated | | Net loss | | $ | (132,670) | | | $ | (3,722) | | | $ | (136,392) | | | Adjustments to reconcile net loss for the period to net cash used in operating activities: | | | | | | | | Non-cash portion of interest expense - Note 10 | | 38,843 | | | 0 | | | 38,843 | | | Write-down of production inventories - Note 4 | | 17,924 | | | 0 | | | 17,924 | | | Impairment on equipment not in use - Note 5 | | 5,331 | | | 0 | | | 5,331 | | | Depreciation and amortization | | 5,886 | | | 0 | | | 5,886 | | | Stock-based compensation - Note 15 | | 2,380 | | | 0 | | | 2,380 | | | Salary continuation and compensation costs | | 2,116 | | | 0 | | | 2,116 | | | Fair value adjustment to Warrants | | 45 | | | 3,722 | | | 3,767 | | | Accretion - Note 12 | | 374 | | | 0 | | | 374 | | | Phantom share compensation | | 225 | | | 0 | | | 225 | | | Amortization reduction of Sprott Royalty Obligation - Note 10 | | (37) | | | 0 | | | (37) | | | Reduction in asset retirement obligation | | 0 | | | 0 | | | 0 | | | Change in value of phantom shares | | 0 | | | 0 | | | 0 | | | Changes in operating assets and liabilities | | (50,925) | | | 0 | | | (50,925) | | | Net cash used in operating activities | | (110,508) | | | 0 | | | (110,508) | | | Net cash used in investing activities | | (31,124) | | | 0 | | | (31,124) | | | Cash flows from financing activities: | | 188,705 | | | 0 | | | 188,705 | | | Net increase (decrease) in cash and restricted cash | | 47,073 | | | 0 | | | 47,073 | | | Cash and restricted cash, beginning of period | | 48,967 | | | 0 | | | 48,967 | | | Cash and restricted cash, end of period | | $ | 96,040 | | | $ | 0 | | | $ | 96,040 | | | Total cash and restricted cash | | $ | 96,040 | | | $ | 0 | | | $ | 96,040 | |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
Changes in the Registrant’s certifying accountant was previously provided on Form 8-K as filed with the SEC on July 3, 2020.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Annual Report on Form 10-K/A,10-K, the Company conducted an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation of these disclosure controls and procedures, at the time that the Original Form 10-K was filed, the Chief Executive Officer and Chief Financial Officer concluded that,determined whether, as of December 31, 2020,2023, the disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published consolidated financial statements. Internal control over financial reporting is promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effectedeffectuated by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation. Our management, haswith the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the Company'sour internal control over financial reporting as of December 31, 2020. Management’s assessment2023. Our management’s evaluation of our internal control over financial reporting was based on assessment criteria established in the 2013 framework in Internal Control—IntegratedControl-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).Commission. Based on suchthis evaluation, our management concluded that as of December 31, 2023, our internal control over financial reporting was effective as of December 31, 2020.effective.
Subsequent to that evaluation, solely as a result of the material weakness related to mistakes in our accounting for warrants issued prior to and in conjunction with the May 29, 2020, business combination and recapitalization transaction,Our management, including our Chief Executive Officer and Chief Financial Officer, concludedbelieves that as of December 31, 2020, ourany disclosure controls and procedures were not effective.
In addition, our Chief Executive Officer and our Chief Financial Officer previously concluded that our disclosureor internal controls and procedures, were effective forno matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the interim periods ended June 30, 2020objectives of the control system are met. Further, the design of a control system must consider the benefits of controls relative to their costs. Inherent limitations within a control system include the realities that judgments in decision-making can be faulty, and September 30, 2020. However,that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the Chief Executive Officer and Chief Financial Officer have subsequently concluded that ourindividual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. While the design of any system of controls is to provide reasonable assurance of the effectiveness of disclosure controls, such design is also based in part upon certain assumptions about the likelihood of future events, and procedures weresuch assumptions, while reasonable, may not effective fortake into account all potential future conditions. Accordingly, because of the interim periods ended June 30, 2020 and September 30, 2020, solelyinherent limitations in a cost-effective control system, misstatements due to the material weakness in our internal control over financial reporting as described below.
A material weakness is a deficiency,error or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements couldfraud may occur and may not be prevented or detected on a timely basis. We identified a material weakness in our controls over the accounting for complex financial instruments. Our controls to evaluate the accounting for complex financial instruments, such as warrants, did not operate effectively to appropriately apply the provisions of ASC 815-40. This material weakness resulted in the failure to prevent a material error in our accounting for certain warrants and the resulting restatement of our previously issued financial statements.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-K/A. That
evaluation included consideration of the views expressed in the SEC Statement of April 12, 2021 in which the SEC Staff clarified its interpretations of certain generally accepted accounting principles related to warrants issued by SPACs. Prior to the SEC Statement, we believed that our warrant accounting was consistent with generally accepted accounting principles. Our belief was supported by the fact that most other SPACs and parties that have entered into business combinations with SPACs similarly interpreted the warrant accounting principles at issue. However, based on the clarifications expressed in the SEC Statement which resulted in the restatement discussed further in Note 25 - Restatement of Previously Issued Financial Statements, to the Consolidated Financial Statements, our management and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2020 in providing them with material information relating to the Company and its consolidated subsidiaries required to be disclosed in the reports we file under the Exchange Act. In response to this material weakness, the Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for significant or unusual transactions, we are improving these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards. Our plans at this time include acquiring enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding the application of complex accounting transactions. Our remediation plan can only be accomplished over time and will be continually reviewed to determine that it is achieving its objectives. We can offer no assurance that these initiatives will ultimately have the intended effects.
Notwithstanding this material weakness, management has concluded that our audited financial statements included in this Form 10-K/A present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with U.S. generally accepted accounting principles.
Changes in Internal Control Over Financial Reporting There were no significant changes in our internal control over financial reporting during the most recent fiscal quarteryear that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION (a) None.
(b) During the fiscal quarter ended December 31, 2023, none of our officers or directors informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE Information regarding our directors will be included in our Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2020)2023) for our 20212024 Annual Meeting of Stockholders (the “Proxy Statement”) under the headingProposal No. 1 – Election of Directors and the information to be included therein is incorporated herein by reference. Information regarding our directors’ and executive officers’ compliance with Section 16(a) of the Exchange Act will be included in the Proxy Statement, if required, under the heading Delinquent Section 16(a) Reports and if included in the Proxy statement, the information to be included therein is incorporated herein by reference. Information regarding the Nominating and Governance Committee of our Board of Directors and the procedures by which our stockholders may recommend nominees to our Board of Directors, and information regarding the Audit Committee of our Board of Directors and its “audit committee financial experts,” will be included in the Proxy Statement under the headings Board and Corporate Governance Matters and Other Matters – Submission of Stockholder Proposals for the 20222025 Annual Meeting and the information to be included therein is incorporated herein by reference. We have adopted a Code of Ethics as required by the Nasdaq Capital Market listing standards and the rules of the SEC. The Code of Ethics applies to all of our directors, officers, including our Chief Executive Officer and Chief Financial Officer, and Controller and employees. The Code of Ethics is publicly available on our website at http:https://hycroftmining.com/company/board-and-committees/corporate-responsibility/overview/. If we make substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, that applies to any of our directors or executive officers, we will disclose the date and nature of such amendment or waiver on our website or in a current report on Form 8-K in accordance with applicable Nasdaq Capital Market and SEC rules.
ITEM 11. EXECUTIVE COMPENSATION Information regarding compensationrequired by Item 11 of our executive officers and directors will bePart III is included in theour Proxy Statement under the headings Executive Compensation and Board and Board and Corporate Governance Matters - Matters—Director Compensation. The information to be included thereinand is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information regarding security ownershiprequired by Item 12 of certain beneficial owners and management will bePart III is included in theour Proxy Statement under the headingheadings Proposal No. 2—Equity Compensation Plan Information Table and Security Ownership of Certain Beneficial Owners and Managementand the information to be included therein is incorporated herein by reference.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information, as of December 31, 2020, relating to our equity compensation plans pursuant to which equity awards are authorized for issuance. Refer to Note 15 - Stock-Based Compensation to the Notes to Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data of this Form 10-K for additional information regarding our equity compensation plans.
| | | | | | | | | | | | | | | | | | | | | | | Number of securities to be issued upon exercise of outstanding options, warrants, and rights (a) | | Weighted-average exercise price of outstanding options, warrants, and rights (b) (1) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | Approved by security holders (2) | | 545,696 | | $ | 8.12 | | | 1,819,814 | Not approved by security holders (2) | | — | | — | | — | | Total | | 545,696 | | $ | 8.12 | | | 1,819,814 |
(1)Weighted-average exercise price is based solely on securities with an exercise price.
(2)All shares were approved by security holders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information regarding certain relationships and related party transactions and policies and procedures for the review and approval or ratificationrequired by Item 13 of such transactions will bePart III is included in our Proxy Statement under the headingheadings Certain Relationships and Related Party Transactionsand the information to be included therein is incorporated herein by reference. Information regarding our directors and their independence will be included in the Proxy Statement under the heading Board and Corporate Governance MattersMatters—Director Independence and the information to be included therein is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information regarding the fees we paid our independent accountants, Plante & Moran PLLC during 2020 and the Audit Committee’s policies and procedures regarding the pre-approvalrequired by Item 14 of audit and permissible non-audit services will bePart III is included in theour Proxy Statement under the headings Proposal No. 2 – 5—Ratification of Appointment of Independent Registered Public Accounting Firm - Principal AccountingFirm—Independent Registered Public Accountant Fees and Services of Plante & Moran, andPre-Approval Policy and the information to be included therein is incorporated herein by reference.
PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)Exhibits
| | | | | | | | | | 2.1 | |
| | 2.2 | |
| | 3.1 | |
| | 3.2 | | | 3.3 |
| 4.13.4 |
| | 4.1 |
| | 4.2 | |
| | 4.3 | |
| | 4.4 | |
| | 4.5 |
| | 4.6 |
|
| | | | | | | 4.7 |
| 4.64.8 | |
| | 4.9 |
| | 4.10 |
| | 10.1 | Second Amended and Restated Credit Agreement, dated as of March 30, 2022, by and between Hycroft Mining Holding Corporation, as borrower, Autar Gold Corporation (f/k/a Muds Holdco Inc.), Hycroft Resources & Development, LLC and Allied VGH LLC, as guarantors, Sprott Private Lending II (Collector), LP, as lender, and Sprott Resource Lending Corp. as arranger (incorporated by reference to Exhibit 10.1 to the registrant’s Annual Report on Form 10-K filed with the SEC on March 31, 2022).
| | 10.2 | Amended and Restated Credit Agreement, dated as of May 29, 2020, by and between Hycroft Mining Holding Corporation, as borrower, MUDS Acquisition Sub, Inc., MUDS Holdco, Inc., Hycroft Resources & Development, LLC and Allied VGH LLC, as guarantors, Sprott Private Resource Lending II (Collector), LP, as lender, and Sprott Resource Lending Corp., as arranger (Incorporated(incorporated by reference to Exhibit 10.1 to the Registrant’sregistrant’s Current Report on Form 8-K, filed with the SEC on June 4, 2020).
| 10.210.3 |
| | 10.4 |
| | 10.5 |
| | 10.6 |
| | 10.7 |
| 10.310.8 | | Form of Subscription/Backstop Agreement, dated January 13, 2020, entered into by Mudrick Capital Acquisition Corporation, and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC (Incorporated by reference to Exhibit 10.1 to the joint proxy statement/prospectus on Form S-4 of the Registrant, filed with the SEC on February 14, 2020).
|
| | | | | | | | | 10.4 | | Form of Amendment to Subscription Agreement, dated May 28,2020 entered into by Mudrick Capital Acquisition Corporation, and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC. (Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).
| 10.5 | |
| 10.6 | |
| 10.7 | |
| 10.8 | |
| | 10.9 | |
| | 10.10 | |
|
| | | | | | | 10.11 | | Seller SupportSubscription Agreement dated as of January 13, 2020, by and among Mudrick Capital AcquisitionMarch 14, 2022 between Hycroft Mining Holding Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC (Incorporated2176423 Ontario Limited (incorporated by reference to Exhibit 10.210.4 to the joint proxy statement/prospectusregistrant’s Current Report on Form S-4 of the Registrant,8-K, filed with the SEC on February 14, 2020)March 15, 2022).
| | 10.12 | | Exchange Agreement, dated as of January 13, 2020, by and among MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated(incorporated by reference to Exhibit 10.3 to the joint proxy statement/prospectusregistrant’s Current Report on Form S-4 of the Registrant8-K filed with the SEC on FebruaryJanuary 14, 2020).
| | 10.13 | | Omnibus Amendment to Note Purchase Agreements and Exchange Agreement, dated May 28, 2020 by and between MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain of its direct and indirect subsidiaries and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated by reference to Exhibit 10.12 to the Registrant’s Form 8-K, filed with the SEC on June 4, 2020).
| 10.14 | | Note Exchange Agreement, dated as of January 13, 2020, by and among Hycroft Mining Corporation and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC or Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated(incorporated by reference to Exhibit 10.7 to the joint proxy statement/prospectus on Form S-4S-4/A (File No. 333-236460) of the Registrant,registrant, filed with the SEC on February 14,April 7, 2020).
|
| | | | | | | | | 10.1510.14 | | Omnibus Amendment to Note Purchase Agreements and Note Exchange Agreement, dated May 28, 2020 by and between MUDS Acquisition Sub, Inc., Hycroft Mining Corporation and certain of its direct and indirect subsidiaries and certain investment funds affiliated with or managed by Mudrick Capital Management, L.P., Whitebox Advisors LLC, Highbridge Capital Management, LLC, Aristeia Capital, LLC and Wolverine Asset Management, LLC, in each case, signatory thereto (Incorporated(incorporated by reference to Exhibit 10.14 to the Registrant’sregistrant’s Current Report on Form 8-K, filed with the SEC on June 4, 2020).
| 10.1610.15 | | Parent Sponsor LetterAmendment to the 10% Senior Secured Notes and Note Exchange Agreement dated as of January 13, 2020,March 14, 2022 among Hycroft Mining Holding Corporation, certain subsidiaries of Hycroft Mining Holding Corporation and holders of the Notes, including certain funds affiliated with, or managed by, and among Mudrick Capital Acquisition HoldingsManagement, L.P, Whitebox Advisors, LLC, Highbridge Capital Management, LLC, Aristeia Highbridge Capital Management, LLC and Mudrick Capital Acquisition Corporation (IncorporatedWolverine Asset Management, LLC and Wilmington Trust, National Association, in its capacity as collateral agent (incorporated by reference to Exhibit 10.410.2 to the joint proxy statement/prospectusregistrant’s Current Report on Form S-4 of the Registrant8-K, filed with the SEC on February 14, 2020)March 15, 2022).
| 10.1710.16† | |
| 10.18 | |
| 10.19 | |
| 10.20 | |
| 10.2110.17† | |
| 10.22 | |
| 10.23 | |
| 10.24 | |
| 10.25 | |
| 10.26 | |
| 10.27 | |
|
| | | | | | | | | 10.28 | |
| 10.29 | |
| 10.3010.18† | |
| 10.3110.19† | |
| | 10.20† |
| 10.3210.21† | |
| 10.3310.22† | |
|
| | | | | | 10.3410.23† | |
| 10.3510.24† | |
| 10.3610.25† | |
| 10.37 | |
| 10.3810.26† | |
| 10.3910.27† | |
| 10.4010.28† | |
| 10.4110.29† | |
| 10.4210.30† | |
| | 10.31 |
| | 10.32 |
| | 10.33 |
| | 10.34 |
| | 10.35 |
| | 10.36 |
|
| | | | | | | | | 21.110.37 | |
| 23.110.38 |
| | 21.1* |
| | 23.1* |
| | | | 23.2* |
| 23.223.3* | |
| 23.323.4* | |
| 23.431.1* | |
| 23.5 | |
| 96.1 | |
|
| | | | | | | | | Rule 13a-14(a)/15d-14(a) Certifications. | 31.1 | |
| 31.231.2* | |
| | | | Section 1350 Certifications.32.1** | 32.1 | |
| 32.232.2** | |
| | | | Mine Safety Disclosure Exhibits.95.1* | 95.1 | |
| | 96.1 | |
| Interactive Data File.97.1* |
| 101.INS101.INS* | | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)*
| 101.SCH101.SCH* | | Inline XBRL Taxonomy Extension Schema Document*Document
| 101.CAL101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document*Document
| 101.DEF101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document*Document
| 101.LAB101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document*Document
| 101.PRE101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document*Document
|
| | | | | | 104104* | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
| *Filed herewith. ** Furnished herewith. † Management contract or compensatory plan or arrangement. |
*Filed herewith.
**Previously filed with the Original Form 10-K.
ITEM 16. FORM 10-K SUMMARY None.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | | | | | | HYCROFT MINING HOLDING CORPORATION (Registrant) | | | | | | Date: MayMarch 14, 20212024 | By: | /s/ Diane R. Garrett | | | | Diane R. Garrett
President and Chief Executive Officer and Director
(Principal Executive Officer)
| |
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Diane R. Garrett and Stanton Rideout, and each of them individually, his or her true and lawful attorney-in-fact, with full power of substitution and re-substitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments to the Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities andindicated on the dates indicated.March 14, 2024. | | | | | | | | | | Name | | Title | | | | | /s/ Diane R. Garrett | | President and Chief Executive Officer (Principal Executive Officer) and Director (Principal Executive Officer)
| | Diane R. Garrett | | | | | /s/Stanton Rideout | | Executive Vice President and Chief Financial Officer
(Principal FinanceFinancial Officer and Principal Accounting Officer)
| | Stanton Rideout | | | | | /s/ Stephen LangDavid Kirsch | | Chairman of the Board of Directors | David KirschStephen Lang | | | | | | /s/ Sean GoodmanEugene Davis | | Director | Eugene I. DavisSean Goodman | | | | | | /s/John Ellis
| | Director | John J. Ellis | | | | | | /s/Michael J. Harrison | | Director | | Michael James Harrison | | | | | | | /s/ David C. Naccarati | | Director | | David C. Naccarati | | | | | |
| /s/Thomas S. Weng | | Director | | Thomas S. Weng | | | | | | /s/Marni Wieshofer | | Director | | Marni Wieshofer | | |
|
