POS AM 1 tm2110640d1_posam.htm POS AM

 

As filed with the Securities and Exchange Commission on March 29, 2021

Registration No. 333-239840

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

POST-EFFECTIVE AMENDMENT NO. 1

to

FORM S-1

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

 

HYCROFT MINING HOLDING CORPORATION

 

(Exact name of registrant as specified in its charter)

 

Delaware

 

1040

 

82-2657796

(State or Other Jurisdiction of
Incorporation or Organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer Identification No.)

 

8181 E. Tufts Ave., Suite 510

Denver, Colorado 80237

(303) 253-3267

 

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Diane R. Garrett, Ph.D.
President and Chief Executive Officer
Hycroft Mining Holding Corporation
8181 E. Tufts Ave., Suite 510
Denver, Colorado 80237
(303) 524-1947

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:
Neal, Gerber & Eisenberg LLP
2 N. LaSalle Street, Suite 1700
Chicago, IL 60602
Attention: David S. Stone, Esq.
Tel: (312) 269-8000

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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 7(a)(2)(B) of the Securities Act. ☐

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 
 

 

 

EXPLANATORY NOTE

 

This Post-Effective Amendment No. 1 (this “Post-Effective Amendment No. 1”) to the Registration Statement on Form S-1 (File No. 333-239840) (the “Registration Statement”), as originally declared effective by the Securities and Exchange Commission (the “SEC”) on July 22, 2020, is being filed to include information contained in the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on March 24, 2021, and to update certain other information in the Registration Statement.

 

No additional securities are being registered under this Post-Effective Amendment No. 1. All applicable registration fees were paid at the time of the original filing of the Registration Statement on July 13, 2020.

2 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED MARCH      , 2021

 

HYCROFT MINING HOLDING CORPORATION

 

60,867,645 shares of Common Stock

13,489,999 Warrants

37,500,212 shares of Common Stock Issuable upon Exercise of the Warrants

 

This prospectus relates to: (1) the issuance by us of up to (i) 34,289,999 shares of Class A common stock, par value $0.0001 per share (“Common Stock”), of Hycroft Mining Holding Corporation, a Delaware corporation that may be issued upon exercise of warrants, including the public warrants, private placement warrants, forward purchase warrants and PIPE warrants (as such terms are defined under “Selected Definitions”) at an exercise price of $11.50 per share of Common Stock, and (ii) 3,210,213 shares of Common Stock that may be issued upon exercise of the Seller warrants (as such term is defined under “Selected Definitions”) at an exercise price, determined as of July 1, 2020 pursuant to the Seller Warrant Agreement (as such term is defined under “Selected Definitions”), of $40.31 per share upon the exercise of 12,721,623 Seller warrants, each currently exercisable into approximately 0.28055 shares of Common Stock, which exercise price and number of shares may fluctuate under the terms of the Seller Warrant Agreement; and (2) the offer and sale, from time to time, by the selling security holders identified in this prospectus (the “Selling Securityholders”), or their permitted transferees of up to (i) 60,867,645 shares of Common Stock, and (ii) up to 13,489,999 warrants to purchase shares of Common Stock, including the private placement warrants, forward purchase warrants and PIPE warrants.

 

This prospectus provides you with a general description of such securities and the general manner in which we and the Selling Securityholders may offer or sell the securities. More specific terms of any securities that we and the Selling Securityholders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus.

 

We will not receive any proceeds from the sale of the securities under this prospectus, although we could receive up to approximately $524 million for the issuance by us of the Common Stock registered under this prospectus assuming the exercise of all of the registered and outstanding public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants, to the extent such warrants are exercised for cash. However, we will pay the expenses associated with the sale of securities pursuant to this prospectus. Any amounts we receive from such exercises will be used for working capital and other general corporate purposes.

 

Information regarding the Selling Securityholders, the amounts of shares of Common Stock and warrants that may be sold by them and the times and manner in which they may offer and sell the shares of Common Stock and warrants under this prospectus is provided under the sections entitled “Selling Securityholders” and “Plan of Distribution,” respectively, in this prospectus. We have not been informed by any of the Selling Securityholders that they intend to sell their securities covered by this prospectus and do not know when or in what amount the Selling Securityholders may offer the securities for sale. The Selling Securityholders may sell any, all, or none of the securities offered by this prospectus.

 

The Selling Securityholders and intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended, with respect to the securities offered hereby, and any profits realized or commissions received may be deemed underwriting compensation. We have agreed to indemnify certain of the Selling Securityholders against certain liabilities, including liabilities under the Securities Act.

 

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.

 

Our Common Stock, our public warrants, and our Seller warrants (as defined in the Prospectus) are listed on The Nasdaq Capital Market, under the symbols “HYMC,” “HYMCW,” and “HYMCZ,” respectively. On March 26, 2021, the last reported sales price of our Common Stock was $4.04 per share, the last reported sales price of our public warrants was $0.63 per warrant, and the last reported sales price of our Seller warrants was $0.39 per warrant.

 

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We are an “emerging growth company” under federal securities laws and are subject to reduced public company reporting requirements. Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 13 of this prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

You should rely only on the information contained in this prospectus. We have not authorized any dealer, salesperson or other person to provide you with information about the Company, except for the information contained in this prospectus. The information contained in this prospectus is complete and accurate only as of the date on the front cover page of this prospectus, regardless of the time of delivery of this prospectus or the sale of any securities. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. The information contained in this prospectus may change after the date of this prospectus. Do not assume after the date of this prospectus that the information contained in this prospectus is still correct.

 

For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering and the distribution of this prospectus outside the United States.

 

The date of this prospectus is March 29, 2021

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TABLE OF CONTENTS

 

 

ABOUT THIS PROSPECTUS

1

 

 

SELECTED DEFINITIONS

1

 

 

CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS

6

 

 

PROSPECTUS SUMMARY

8

 

 

THE OFFERING

12

 

 

RISK FACTORS

13

 

 

USE OF PROCEEDS

30

 

 

SELLING SECURITYHOLDERS

30

 

 

DESCRIPTION OF BUSINESS

34

 

 

DESCRIPTION OF PROPERTY

39

 

 

LEGAL PROCEEDINGS

58

 

 

MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK AND RELATED STOCKHOLDER MATTERS

58

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

59

 

 

MANAGEMENT

76

 

 

EXECUTIVE COMPENSATION

82

 

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

94

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

98

 

 

PLAN OF DISTRIBUTION

100

 

 

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

102

 

 

DESCRIPTION OF SECURITIES TO BE REGISTERED

107

 

 

INTEREST OF NAMED EXPERTS AND COUNSEL

114

 

 

LEGAL MATTERS

115

 

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

115

 

 

INDEX TO FINANCIAL STATEMENTS

F-1

 

 

SIGNATURES

II-9

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ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities SEC using a “shelf” registration process. Under this shelf registration process, from time to time, the Selling Securityholders may offer and sell, and we may offer, issue and sell, as applicable, any combination of the securities described in this prospectus in one or more offerings. We may use the shelf registration statement to issue up to an aggregate of 37,500,212 shares of Common Stock upon exercise of the public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants. The Selling Securityholders may use the shelf registration statement to sell up to an aggregate of 60,867,645 shares of Common Stock, and 13,489,999 warrants, from time to time through any means described in the section entitled “Plan of Distribution.” Additional terms of any securities set forth herein that the Selling Securityholders offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the Common Stock and warrants being offered and the terms of the offering.

 

A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. See “Where You Can Find More Information.”

 

Neither we nor the Selling Securityholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any accompanying prospectus supplement or any free writing prospectus we have prepared. We and the Selling Securityholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

 

As discussed in Note 1 - Company Overview and Note 3 - Recapitalization Transaction to the Notes to the Financial Statements, on May 29, 2020, we, formerly known as Mudrick Capital Acquisition Corporation (“MUDS”), consummated a business combination transaction (the “Recapitalization Transaction”) that resulted in 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, 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 Subordinated Notes (as such are defined herein). Upon closing of the Recapitalization Transaction, our unrestricted cash available for use totaled $68.9 million.

 

SELECTED DEFINITIONS

 

Unless stated in this prospectus or the context otherwise requires, references to:

 

1.25 Lien Exchange” means the exchange by the 1.25 Lien Noteholders of the outstanding 1.25 Lien Notes for New Subordinated Notes.

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1.25 Lien Exchange Agreement” means that certain note exchange agreement, dated as of January 13, 2020, by and among the Seller and certain investment funds affiliated with or managed by Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine, as amended, pursuant to which the 1.25 Lien Exchange occurred immediately prior to the consummation of the Recapitalization Transaction.

 

1.25 Lien Notes” means the notes issued pursuant to the Note Purchase Agreements, dated as of February 22, 2019, May 21, 2019, June 27, 2019, August 6, 2019, August 29, 2019, September 25, 2019, October 16, 2019, November 21, 2019, December 17, 2019, January 17, 2020, February 7, 2020, March 12, 2020, April 16, 2020 and May 7, 2020 between the Seller, the guarantors and the purchasers named therein and WBox 2015-5 Ltd., as collateral agent.

 

1.25 Lien Noteholders” means the holders of the 1.25 Lien Notes and, subsequent to the 1.25 Lien Exchange, the holders of the New Subordinated Notes.

 

1.5 Lien Notes” means the notes issued pursuant to the Note Purchase Agreements, dated as of May 3, 2016, July 29, 2016, September 22, 2016, November 30, 2016, February 2, 2017, April 12, 2017, June 30, 2017, July 14, 2017, December 20, 2017, March 8, 2018, May 10, 2018, July 10, 2018, August 22, 2018, November 1, 2018, and December 19, 2018 between the Seller, the guarantors and the purchasers named therein and WBox 2015-5 Ltd., as collateral agent.

 

1.5 Lien Noteholders” means certain investment funds affiliated with Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine that hold the 1.5 Lien Notes.

 

Amended and Restated Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement entered into at the closing of the Recapitalization Transaction, by and among the Company and the restricted stockholders.

 

Acquisition Sub” means MUDS Acquisition Sub, Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of the Company.

 

Aristeia” means Aristeia Capital, LLC.

 

Assumed New Subordinated Notes” means $80,000,000 in aggregate principal amount of New Subordinated Notes assigned to, and assumed by, the Company in connection with the Recapitalization Transaction, on a pro rata basis across holders of New Subordinated Notes.

 

Board” means the board of directors of Hycroft Mining Holding Corporation.

 

business day” means a day, other than Saturday, Sunday or such other day on which commercial banks in New York, New York are authorized or required by applicable laws to close.

 

Cantor” means Cantor Fitzgerald & Co.

 

“Common Stock” means the Class A common stock, par value $0.0001 per share, of the Company.

 

DGCL” means the General Corporation Law of the State of Delaware.

 

debt and warrant assumption” means the assignment by Seller and the assumption by the Company of (x) $80,000,000 in aggregate principal amount of New Subordinated Notes, (y) the Sprott Credit Agreement and (z) Seller’s liabilities and obligations under the Seller Warrant Agreement.

 

effective time” means 9:00 a.m. New York time on May 29, 2020.

 

employee benefit plan” means any material “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended.

 

Excess Notes” means the $48,459,232 in aggregate principal amount of New Subordinated Notes exchanged pursuant to the Exchange Agreement.

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“Financial Statements” our consolidated financial statements for the year ended December 31, 2020 and the notes thereto (the “Notes”)

 

note exchange” means the exchange of the 1.5 Lien Notes and the Excess Notes, if any, for shares of Common Stock valued at $10.00 per share and/or cash payment pursuant to the terms of the Exchange Agreement.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

Exchange Agreement” means that certain Exchange Agreement, dated as of January 13, 2020, by and among the Seller, Acquisition Sub, the 1.5 Lien Noteholders and the 1.25 Lien Noteholders, as amended.

 

Feasibility Study” means the NI 43-101 Technical Report: Heap Leaching Feasibility Study prepared by M3 Engineering and Technology Corporation with an effective date of July 31, 2019, which formed the substantive basis for the Hycroft Technical Report that was prepared to comply with subpart 1300 of Regulation S-K.

 

First Lien Credit Agreement” means the first lien term loan credit agreement between the Seller and The Bank of Nova Scotia, as administrative agent, and other lenders.

 

First Lien Notes” means the notes under the First Lien Credit Agreement.

 

Forward Purchase Contract” means the Forward Purchase Contract, dated January 24, 2018, by and between the Company and sponsor, pursuant to which sponsor purchased 3,125,000 shares of Common Stock and 2,500,000 forward purchase warrants exercisable at $11.50 per share, for gross proceeds of $25,000,000, concurrently with the consummation of the Recapitalization Transaction.

 

forward purchase warrants” means the warrants to purchase one share of Common Stock at a price of $11.50 per share issued to the sponsor upon consummation of the Recapitalization Transaction pursuant to the Forward Purchase Contract.

 

founder shares” means shares of Class B common stock, par value $0.0001 per share, of the Company initially purchased by sponsor which were redeemed or converted into shares of Common Stock upon the consummation of the Recapitalization Transaction.

 

GAAP” means generally accepted accounting principles in the United States.

 

Highbridge” means Highbridge Capital Management, LLC.

 

HRD” means Hycroft Resources & Development, LLC, a Delaware limited liability company and an indirect, wholly-owned subsidiary of the Seller.

 

Hycroft,” “Company,” “HYMC,” “we,” “our,” or “us,” means Hycroft Mining Holding Corporation, a Delaware corporation and its subsidiaries.

 

Hycroft Mine” means the Hycroft Open Pit Mine, located in Winnemucca, Nevada that produces gold and silver using a heap leach mining process.

 

Hycroft Technical Report” means that certain Technical Report Summary, Heap Leaching Feasibility Study prepared for the Seller with an effective date of July 31, 2019 by M3 Engineering and Technology Corporation and other qualified persons, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K.

 

Incentive Plan” means the HYMC 2020 Performance and Incentive Pay Plan.

 

initial stockholders” means holders of founder shares prior to the IPO.

 

Initial Subscribers” means investment funds affiliated with or managed by Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine (together with any permitted assigns under the Subscription/Backstop Agreements).

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IPO” means the Company’s initial public offering, consummated on February 12, 2018, through the sale of 20,800,000 public units (including 800,000 units sold pursuant to the underwriters’ partial exercise of their overallotment option) at $10.00 per unit.

 

Lender” means Sprott Private Resource Lending II (Collector), LP.

 

Mudrick Capital” means Mudrick Capital Management, L.P., a Delaware limited partnership, an affiliate of sponsor.

 

NASDAQ” means the National Association of Securities Dealers Automated Quotations Capital Market.

 

New Subordinated Notes” means the 10% payment-in-kind subordinated notes of the Seller issued pursuant to the 1.25 Lien Exchange Agreement.

 

Parent Sponsor Letter Agreement” means that certain letter agreement, dated as of January 13, 2020, by and between the Company and sponsor, as amended from time to time.

 

PIPE warrants” means the warrants to purchase one share of Common Stock at a price of $11.50 per share issued to the Initial Subscribers in the private investment.

 

private investment” means the equity financing through a private placement of equity securities in the Company pursuant to Section 4(a)(2) of the Securities Act, for gross proceeds to the Company in an aggregate amount of approximately $76.0 million funded in accordance with the terms of the Subscription/Backstop Agreements.

 

private placement warrants” means the warrants issued to sponsor and Cantor in a private placement simultaneously with the closing of the IPO.

 

public shares” means shares of Common Stock sold as part of the units in the IPO.

 

public units” means one share of Common Stock and one redeemable public warrant of the Company, whereby each public warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $11.50 per share of Common Stock, sold in the IPO.

 

public warrants” means the warrants included in the units issued in the IPO, where one warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $11.50 per share of Common Stock in accordance with the terms of the Warrant Agreement.

 

Purchase Agreement” means that certain Purchase Agreement, dated January 13, 2020, as amended on February 26, 2020, by and among the Company, Acquisition Sub and the Seller.

 

Recapitalization Transaction” means the transactions contemplated by the Purchase Agreement, the Exchange Agreement and the Second Lien Conversion Agreement consummated on May 29, 2020.

 

representatives” means a Person’s officers, directors, employees, accountants, consultants, agents, legal counsel, and other representatives.

 

restricted stockholders” means, collectively, sponsor, Cantor, certain directors and officers of the Company (as set forth in the Amended and Restated Registration Rights Agreement), the 1.5 Lien Noteholders, certain stockholders of the Seller that receive Common Stock in the Recapitalization Transaction, the Initial Subscribers pursuant to the private investment, and Lender.

 

SEC” means the United States Securities and Exchange Commission.

 

Second Amended and Restated Charter” means the Second Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on May 29, 2020.

 

Second Lien Conversion Agreement” means that certain note conversion and consent agreement by and among Seller and the Second Lien Noteholders, dated January 13, 2020.

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Second Lien Notes” means the notes issued pursuant to (a) that certain Note Purchase Agreement, dated as of October 22, 2015, by and among the Seller, certain of its affiliates and the purchasers named therein and (b) that certain Note Purchase Agreement, dated as of December 2, 2015, by and among Seller, certain of the Seller’s subsidiaries and the purchasers named therein, in each case, entered into pursuant to the 15% Senior Secured Convertible Notes Due 2020 Indenture, dated as of October 22, 2015, by and among Seller, the guarantors (as defined therein) and Wilmington Trust, National Association, as trustee and collateral agent as of January 6, 2016 and March 24, 2016.

 

Second Lien Noteholders” means certain funds affiliated with Mudrick Capital, Whitebox, Highbridge, Aristeia and Wolverine and two additional noteholders.

 

Securities Act” means the Securities Act of 1933, as amended.

 

Seller” means Hycroft Mining Corporation, a Delaware corporation.

 

Seller common stock” means Seller’s common stock, par value $0.001 per share.

 

Seller warrants” means a warrant to purchase shares of Common Stock issued pursuant to the Seller Warrant Agreement following the assumption of the Seller Warrant Agreement by the Company pursuant to the Purchase Agreement and effective as of the consummation of the Recapitalization Transaction.

 

Seller Warrant Agreement” means 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; such warrant agreement was assumed by the Company pursuant to the Purchase Agreement and Continental Stock Transfer & Trust Company, LLC is the successor warrant agent.

 

sponsor” means Mudrick Capital Acquisition Holdings LLC, a Delaware limited liability company, which is 100% owned by investment funds and separate accounts managed by Mudrick Capital.

 

Sprott Credit Agreement” means that certain amended and restated credit agreement, dated as of May 29, 2020, between Hycroft Mining Holding Corporation, as borrower, MUDS Acquisition Sub, Inc., MUDS Holdco, Inc., Hycroft Resources & Development, LLC, a Delaware limited liability company, and Allied VGH LLC, a Delaware limited liability company, as guarantors, Sprott Private Resource Lending II (Collector), LP, as lender, and Sprott Resource Lending Corp., as arranger.

 

Sprott Royalty Agreement” means that certain royalty agreement between the Company, Hycroft Resources & Development, LLC, a Delaware limited liability company and Sprott Private Resource Lending II (Co), Inc.

 

Subscription/Backstop Agreements” means those certain Subscription/Backstop Agreements, dated as of January 13, 2020, by and among the Company and the Initial Subscribers, as amended on May 28, 2020.

 

Treasury Regulation” means the regulations promulgated by the U.S. Department of the Treasury pursuant to and in respect of provisions of the U.S. Tax Code.

 

trust account” means the trust account of the Company that held the proceeds from the IPO.

 

U.S. Holder” means a beneficial owner of the Company’s securities who or that is, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof of the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust, if (a) a court within the United States is able to exercise primary supervision over the administration of the trust or one or more U.S. persons (as defined in the U.S. Tax Code) have authority to control all substantial decisions of the trust or (b) it has a valid election in effect under Treasury Regulations to be treated as a U.S. person.

 

U.S. Tax Code” means the Internal Revenue Code of 1986, as amended.

 

Warrant Agreement” means the Warrant Agreement, dated February 7, 2018, by and between Mudrick Capital Acquisition Corporation and Continental Stock Transfer & Trust Company, LLC.

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Warrants” means unless the context indicates otherwise the public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants.

 

Whitebox” means Whitebox Advisors, LLC.

 

Wolverine” means Wolverine Asset Management, LLC.

 

CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS

 

We make “forward-looking statements” in the “Summary,” “Risk Factors,” “Description of Business,” “Description of Property,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere throughout this prospectus.  All statements, other than statements of historical facts, included in this prospectus and in press releases 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 the future, are forward-looking statements, including but not limited to such things as future business strategy, plans and goals, competitive strengths and expansion and growth of our business.

 

The words “estimate”, “plan”, “anticipate”, “expect”, “intend”, “believe” “target”, “budget”, “may”, “schedule” and similar words or expressions identify forward-looking statements.  Forward-looking statements in this prospectus may include, for example, statements about:

 

 

Use of proceeds from this offering;

 

 

Industry-related risks including:

 

 

Fluctuations in the price of gold and silver;

 

 

Uncertainties concerning estimates of reserves and mineralized material;

 

 

Uncertainties relating to the novel coronavirus (“COVID-19”) pandemic;

 

 

The intense competition within the mining industry and state of Nevada;

 

 

The inherently hazardous nature of mining activities, including environmental risks;

 

 

Our insurance may not be adequate to cover all risks associated with our business, or cover the replacement costs of our assets;

 

 

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 proposed legislation in Nevada that could significantly increase the costs or taxation of our operations; and

 

 

Changes to the climate and regulations and pending legislation regarding climate change.

  

 

Business-related risks including:

 

 

Risks related to our liquidity and going concern considerations;

 

 

Risks related to our 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;

-6-

 

 

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 our failure to attract and retain personnel;

 

 

Risks related to technology systems 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 our Common Stock and warrants, including

 

 

Volatility in the price of our common stock and warrants;

 

 

Risks that warrants may expire worthless;

 

 

Anti–takeover provisions could make a third-party acquisition of us difficult; and

 

 

Risks related to limited access to our financial information, as we have elected to take advantage of the disclosure requirement exemptions granted to emerging growth companies and smaller reporting companies.

 

These statements involve 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.  Forward-looking statements are based on current expectations.  Although our management believes that its expectations are based on reasonable assumptions, we can give no assurance that these expectations will prove correct.  Please see “Risk Factors” below for more information about these and other risks.  Potential investors are cautioned against attributing undue certainty to forward-looking statements.  Although we have attempted to identify important factors that could cause actual results to 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.  There can be no assurance that our forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in the statements.  We assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus. It does not contain all the information that you may consider important in making your investment decision. Therefore, you should read the entire prospectus carefully, including, in particular, the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes.

 

As used in this prospectus, unless the context otherwise requires or indicates, references to “Hycroft,” “Company,” “HYMC,” “we,” “our,” and “us,” refer to Hycroft Mining Holding Corporation and its subsidiaries. “Seller” refers to Hycroft Mining Corporation prior to the Recapitalization Transaction.

 

Overview

 

We are a U.S.-based gold producer that has historically focused on mining, developing, and exploring properties in the state of Nevada in a safe, environmentally responsible and cost-effective manner. Gold and silver sales have historically represented 100% of the Seller’s operating revenues and are expected to represent 100% of our operating revenues in the future. Accordingly, the market prices of gold and silver significantly impact our financial position, operating results and cash flows.

 

The mailing address of our principal executive office is 8181 E. Tufts Ave., Suite 510, Denver, CO 80237. The telephone number of Hycroft is (303) 253-3267. For more information about Hycroft, please see the sections entitled “Description of Business,” “Description of Property,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operation,” “Management” and “Executive Compensation” in this prospectus.

 

Company History

 

Seller was incorporated as Allied Nevada Gold Corp. under the laws of the State of Delaware on September 14, 2006 and commenced operations on May 10, 2007. Seller suspended mining operations at the Hycroft Mine on July 8, 2015 to maximize cash flow and minimize spending through the remainder of the chapter 11 process and changed its name from Allied Nevada Gold Corp. to Hycroft Mining Corporation on October 9, 2015 in connection with its restructuring and emergence from federal bankruptcy proceedings. Seller continued to process and produce gold and silver through the operation of the heap leach pads and Merrill-Crowe processing plants located on the property, but in 2017, with revenue no longer covering the cost of the reagents necessary for production, the Hycroft Mine was placed into care and maintenance mode to minimize expenditures and conserve cash. While in care and maintenance, gold and silver production was a byproduct of maintenance activities.

 

Our Business

 

Our operating mine, the Hycroft Mine, is an open-pit heap leach operation located approximately 54 miles west of Winnemucca, Nevada. Mining operations at the Hycroft Mine were restarted in 2019. As part of the restart, Seller, along with M3 Engineering and Technology Corporation (“M3 Engineering”), in conjunction with SRK Consulting (U.S.), Inc. (“SRK”), completed the Hycroft Technical Report Summary, Heap Leaching Feasibility Study, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants, set forth in subpart 1300 of Regulation S-K, with an effective date of July 31, 2019 (the “Hycroft Technical Report”) for our proprietary two-stage heap oxidation and leach process for sulfide ore. 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.

 

Our Properties

 

All of our mining properties are located in Nevada. We currently have one Operating Property, namely the Hycroft Mine as discussed herein.

-8-

 

Recent Developments

 

On May 29, 2020, we completed the Recapitalization Transaction described below in the Section entitled “Description of Business.”

 

On July 1, 2020, Randy Buffington, our former Chairman, President, and CEO departed the Company. Mr. Buffington is assisting us during this transition period and has entered into a consulting agreement for 24 months, through July 1, 2022. See Note 22 — Subsequent Events to the Notes to Unaudited Consolidated Financial Statements and “Executive Compensation — Transition Agreements with Randy Buffington.

 

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. For more information about Dr. Garrett’s biography and compensation arrangements, see “Management” and “Executive Compensation — Compensation Arrangements with Diane R. Garrett,” respectively.

 

On September 8, 2020, the Company entered into a Transition and Succession Agreement and a Consulting Agreement with Stephen M. Jones, pursuant to which he resigned as the Company’s interim President and Chief Executive Officer and agreed to remain as a non-executive employee through November 30, 2020 and to provide consulting services for an additional six months thereafter. For more information, see “Executive Compensation — Transition Agreements with Stephen M. Jones.

 

Risk Factors

 

An investment in our securities common stock involves substantial risk. The occurrence of one or more of the events or circumstances described in the section entitled “Risk Factors,” alone or in combination with other events or circumstances, may have a material adverse effect on our business, cash flows, financial condition and results of operations. Important factors and risks that could cause actual results to differ materially from those in the forward-looking statements include, among others:

 

Industry-related risks including:

 

 

Fluctuations in the prices of gold and silver;

 

 

Uncertainties concerning estimates of mineral reserves and mineral resources;

 

 

Uncertainties relating to the COVID-19 pandemic;

 

 

The intense competition within the mining industry;

 

 

The inherently hazardous nature of mining activities, including environmental risks;

 

 

Our 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 proposed legislation in Nevada that could significantly increase the costs or taxation of our operations; and

 

 

Changes to the climate and regulations and pending legislation regarding climate change.

 

Business-related risks including:

 

 

Risks related to our liquidity and going concern considerations;

 

 

Risks related to our 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;

-9-

 

 

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 our failure to attract and retain personnel;

 

 

Risks related to technology systems 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 our Common Stock and warrants, including:

 

 

Volatility in the price of our common stock and warrants;

 

 

Risks that warrants may expire worthless;

 

 

Anti–takeover provisions could make a third-party acquisition of us difficult; and

 

 

Risks related to limited access to our financial information, as we have elected to take advantage of the disclosure requirement exemptions granted to emerging growth companies and smaller reporting companies.

 

You should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 13 of this prospectus.

 

Implications of Being an Emerging Growth Company

 

We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the “JOBS Act.” An emerging growth company may take advantage of specified reduced requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

 

 

we may present only two years of audited financial statements and only two years of related Management’s Discussion & Analysis of Financial Condition and Results of Operations;

 

 

we are exempt from the requirement to obtain an attestation report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

 

 

we are permitted to provide less extensive disclosure about our executive compensation arrangements; and

 

 

we are not required to give our stockholders non-binding votes on executive compensation or “golden parachute” arrangements.

-10-

 

We may take advantage of these provisions for up to five full fiscal years or such earlier time that we are no longer an emerging growth company. We may choose to take advantage of some but not all of these reduced burdens. We would cease to be an emerging growth company if we have more than $1 billion in annual revenues, have more than $700 million in market value of our shares of common stock held by non-affiliates, or issue more than $1 billion of non-convertible debt over a three-year period. The Company has elected not to opt out of the extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, 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 the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

 

Corporate Information

 

We were incorporated on August 28, 2017 as a Delaware corporation under the name “Mudrick Capital Acquisition Corporation” and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On May 29, 2020, in connection with the consummation of the Recapitalization Transaction, we changed our name to “Hycroft Mining Holding Corporation”.

 

Our principal executive offices are located at 8181 E. Tufts Ave., Suite 510, Denver, Colorado, and our telephone number is (303) 253-3267. Our website is www.hycroftmining.com. The information found on, or that can be accessed from or that is hyperlinked to, our website is not part of this prospectus.

-11-

 

THE OFFERING

 

We are registering the issuance by us of up to 37,500,212 shares of our Common Stock that may be issued by us upon exercise of warrants to purchase Common Stock, including the public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants. We are also registering the resale by the Selling Securityholders or their permitted transferees of (i) up to 60,867,645 shares of Common Stock, and (ii) up to 13,489,99 warrants to purchase Common Stock, including the private placement warrants, forward purchase warrants and PIPE warrants. Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” on page 13 of this prospectus.

 

As of March 22, 2021, we had 59,901,306 shares of Common Stock outstanding.

 

Issuance of Securities - Common Stock and Warrants

 

Shares of Common Stock to be issued upon exercise of all public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants

 

37,500,212 shares

 

 

 

Use of proceeds

 

We could receive up to an aggregate of approximately $524 million from the exercise of all public warrants, private placement warrants, forward purchase warrants, PIPE warrants and Seller warrants assuming the exercise in full of all such warrants for cash. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of such warrants for general corporate purposes which may include acquisitions or other strategic investments or repayment of outstanding indebtedness.

 

 

 

Resale of Common Stock and Warrants

 

 

 

 

 

Shares of Common Stock offered by the Selling Securityholders

 

60,687,645

 

 

 

Warrants offered by the Selling Securityholders

 

 

 

 

 

Private placement warrants, forward purchase warrants and PIPE warrants

 

13,489,999

 

 

 

Exercise Price for private placement warrants, forward purchase warrants and PIPE warrants

 

$11.50 per share of Common Stock

 

 

Use of proceeds

 

We will not receive any proceeds from the sale of the Common Stock and warrants to be offered by the Selling Securityholders. With respect to shares of Common Stock underlying the warrants, we will not receive any proceeds from the sale of such shares except with respect to amounts received by us upon exercise of such warrants to the extent such warrants are exercised for cash.

 

 

 

Restrictions to Sell

 

Pursuant to the Amended and Restated Registration Rights Agreement the restricted stockholders agreed not to sell, transfer, pledge or otherwise dispose of certain securities they hold or receive, for certain time periods specified therein. For more information, please see the section entitled “Plan of Distribution – Restrictions to Sell.”

 

NASDAQ Ticker Symbols

 

Common Stock: HYMC

Public Warrants: HYMCW

Seller warrants: HYMCZ

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RISK FACTORS

 

Investing in our securities involves a high degree of risk. Investors should carefully consider the risks described below and all of the other information set forth in the registration statement of which this prospectus forms a part, including our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our Common Stock or warrants. If any of the events or developments described below occur, our business, financial condition, or results of operations could be materially or adversely affected. As a result, the market price of our Common Stock and warrants could decline, and investors could lose all or part of their investment. The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. 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 “Cautionary Notes Regarding Forward-Looking Statements” above.

 

Industry-Related Risks

 

The market prices of gold and silver are volatile. A decline in gold and silver prices could result in decreased revenues, decreased net income, increased losses and decreased cash inflows which may negatively affect our business.

 

Gold and silver are commodities. Their prices fluctuate and are affected by many factors beyond our 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 March 26, 2021, December 31, 2020 and December 31, 2019, were $1,732, $1,888 and $1,515 per ounce for gold, respectively, and $25.06, $26.49 and $18.04 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 our 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. In addition, sustained lower gold or silver prices may:

 

 

reduce revenue potential due to cessation of the mining of deposits, 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 cancel plans for the mining of oxide, transitional, and sulfide ores or the development of new and existing projects;

 

 

make it more difficult for us to satisfy and/or service our debt obligations;

 

 

reduce existing mineral reserves by removing ores from mineral reserves that can no longer be economically processed at prevailing prices; and

 

 

cause us to recognize an impairment to the carrying values of 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.

-13-

 

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 face intense competition in the mining industry.

 

The mining industry is intensely competitive, some of which is with large established mining companies with substantial mining capabilities and with greater financial and technical resources than ours. We compete with other mining companies in the recruitment and retention of qualified managerial and technical employees and in acquiring attractive mining claims. If we are unable to successfully attract and retain qualified employees, our development programs and/or our operations may be slowed down or suspended, which may adversely impact our development, financial condition and results of operations.

 

Mining development and processing operations pose inherent risks and costs that may negatively impact our business.

 

Mining 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;

 

 

pandemics adversely affecting the availability of workforces and supplies;

 

 

mechanical equipment failure and facility performance problems; and

 

 

the availability of critical materials, equipment and skilled labor.

 

These occurrences could result in damage to, or destruction of, our properties or production facilities, personal injury or death, environmental damage, delays in mining or processing, increased production costs, asset write downs, monetary losses and legal liability, any of which could have a material adverse effect on our 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.

-14-

 

Environmental regulations could require us to make significant expenditures or expose us to potential liability.

 

To the extent we become subject to environmental liabilities, the payment of such liabilities or the costs that we may incur, including costs to remedy environmental pollution, would reduce funds otherwise available to us and could have a material adverse effect on our financial condition, results of operations, and liquidity. If we are unable to fully remedy an environmental violation or release of hazardous substances, we 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. Actual remedial 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 an adverse effect on our 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 our 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 our operations. We cannot provide any assurance that any such law, regulation, enforcement or private claim will not have a negative effect on our business, financial condition or results of operations.

 

Our operations are subject to extensive environmental regulations, which could result in operational delays, penalties and costs.

 

All phases of our operations are subject to extensive federal and state environmental regulation, including those enacted under the following laws:

 

 

Comprehensive Environmental Response, Compensation, and Liability Act;

 

 

Resource Conservation and Recovery Act;

 

 

Clean Air Act;

 

 

National Environmental Policy Act;

 

 

Clean Water Act;

 

 

Safe Drinking Water Act;

 

 

Federal Land Policy and Land Management Act; and

 

 

Bald and Golden Eagle Protection Act;

 

Additional regulatory authorities also have jurisdiction over some of our operations and mining projects including the Environmental Protection Agency, the Nevada Division of Environmental Protection, the U.S. Fish and Wildlife Service, BLM, and the Nevada Department of Wildlife.

 

These environmental regulations require us to obtain various operating permits, approvals and licenses and also impose standards and controls relating to development and production activities. For instance, we are 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 our financial position, results of operations, cash flows and liquidity following consummation of the Recapitalization Transaction. Also, the U.S. Fish and Wildlife Service may designate critical habitat and suitable habitat areas it believes are necessary for survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in further material restrictions to land use and may materially delay or prohibit land access for our development. For example, we 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 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 our financial performance, results of operations and liquidity.

-15-

 

Compliance with current and future government regulations may cause us to incur significant costs.

 

Our 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. Compliance with this and other legislation could require us to make significant financial outlays. The enactment of new legislation or more stringent enforcement of current legislation may increase costs, which could have a negative effect on our 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 cannot provide any assurances that we 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.

 

There are uncertainties as to title matters in the mining industry. Any defects in such title could cause us to lose our rights in mineral properties and jeopardize our business operations.

 

Our mineral properties consist 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 have 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 believe 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.

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The present status of our unpatented mining claims located on public lands allows us 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 are 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 remain at risk that the mining claims may be forfeited either to the United States or to rival private claimants due to failure to comply with statutory requirements. Prior to 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. 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 do not obtain fee title to our unpatented mining claims, we can provide no assurance that we 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 hold a material interest. If there are title defects with respect to any properties, we might be required to compensate other persons or perhaps reduce our 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 production and development programs.

 

Legislation has been proposed periodically that could, if enacted, significantly affect the cost of our operations on our unpatented mining claims or the amount of Net Proceeds of Mineral Tax we pay to the State of Nevada.

 

Members of the U.S. Congress have periodically introduced bills which 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 our ability to develop mineralized material on unpatented mining claims. A majority of our mining claims are unpatented claims. Although we cannot predict what legislated royalties might be, the enactment of these proposed bills could adversely affect the potential for development of our unpatented mining claims and the economics of our existing operating mines on federal unpatented mining claims. Passage of such legislation could adversely affect our 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 our 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 significant costs on us and our suppliers, 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 our 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, we cannot predict how legislation and regulation will affect our 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 us or other companies in our industry could harm our reputation.

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Climate change could have an adverse impact on our cost of operations.

 

The potential physical impacts of climate change on our operations are highly uncertain and would be particular to the area in which we operate. These climate changes may include changes in rainfall and storm patterns and intensities, water shortages and changing temperatures. These changes in climate could adversely affect our mining operations, including by affecting the moisture levels and pH of ore on our leach pads, increase the cost of production at the Hycroft Mine and materially and adversely affect the financial performance of our operations.

 

Business-Related Risks

 

Due to uncertainty surrounding 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 statements of the Company have been prepared on a “going concern” basis, which contemplates the presumed continuation of the Company even though 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 it is probable that, without additional capital injections, we may be unable to meet our obligations as they become due within one year after the date of the financial statements in this registration statement of which this prospectus is a part.

 

We restarted operations 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 filing date of this registration statement of which this prospectus is a part 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 over the next 12 months including interest payments.

 

Our ability to continue as a going concern is contingent upon increasing sales, by achieving higher cost-effective operating tonnages and recovery rates as planned as well securing additional funding for working capital, capital expenditures and other corporate expenses. 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, timing of oxidation, 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.

 

We may need to raise additional capital, but such capital may not be available on favorable terms or at all.

 

The continuing operation of our Hycroft Mine and future 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 postponement of development or production at the Hycroft Mine. The covenants 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.

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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.

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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 this Registration Statement of which this prospectus forms a part.

 

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 we will need to acquire an expanded mining fleet capable of mining targeted production rates, and recruit and train operators and maintenance staff. Additional resources must also be spent on enhancing our processing plant capabilities. No assurances can be given that we will be able to successfully eliminate these mining 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. 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.

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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.

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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, is unable to produce and supply enough soda ash or ceases operations because of 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 materially 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 reserves 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.

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The Sprott Credit Agreement imposes significant operating and financial restrictions that may limit our ability to operate our business.

 

The Sprott Credit Agreement imposes significant operating and financial restrictions on us and our restricted subsidiaries. These restrictions will limit our 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 our assets or the assets of our restricted subsidiaries.

 

These restrictions could limit our ability to finance our future operations or capital needs, make acquisitions or pursue available business opportunities.

 

In addition, the Sprott Credit Agreement will require us to comply with a number of customary covenants, including:

 

 

covenants related to the delivery of monthly, quarterly and annual financial statements, budgets and annual projections;

 

 

maintaining required insurance;

 

 

compliance with laws (including environmental);

 

 

compliance with ERISA;

 

 

maintenance of ownership of 100% of 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 you that we will satisfy these covenants or that our lenders will 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, Net to 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 subsidiary Hycroft Resources and Development, LLC and Sprott Private Resource Lending II (CO) Inc., 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 our assets.

 

Our substantial indebtedness could adversely affect our financial condition.

 

As of March 26, 2021, we 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 able 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 our high level of debt could intensify. Our high level of debt and royalty payment obligations could:

 

 

make it more difficult for us to satisfy our obligations with respect to our outstanding debt;

 

 

require a substantial portion of our 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;

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limit our 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 purchase and decreases in prices of gold and silver that we sell, 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;

 

 

place us at a disadvantage compared to other, less leveraged competitors; and

 

 

increase our cost of borrowing.

 

Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under our debt, and the price of our common stock. The Sprott Credit Agreement contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our 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 our debt.

 

If we default on our obligations to pay any of our indebtedness or otherwise default under the agreements governing our indebtedness, lenders could accelerate such debt and we may be subject to restrictions on the payment of our other debt obligations or cause a cross-acceleration.

 

Any default under the agreements governing our 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 us 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 our indebtedness, we 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 our secured debt, institute foreclosure proceedings against our assets; and

 

 

even if these lenders or holders do not declare a default, they may be able to cause all of our 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, we could be forced into bankruptcy or liquidation.

 

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

 

Our ability to make scheduled payments on our debt and royalty obligations or refinance our debt obligations (if necessary) depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control, including the market prices of gold and silver. We may be unable to maintain a level of cash flow from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness and our royalty obligations.

 

If our cash flows and capital resources are insufficient to fund our debt service obligations and our royalty obligations, we 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. We may not be able 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 us to meet our scheduled debt service obligations. The Sprott Credit Agreement restricts our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service and royalty payment obligations then due.

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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.

 

Our inability to generate sufficient cash flows to satisfy our debt and royalty obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations.

 

If we cannot make scheduled payments on our debt, we will be in default and the lenders under the Sprott Credit Agreement and the Sprott Royalty Agreement could foreclose against the assets securing their borrowings and we 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 are generally imposed on companies with mining operations in order to minimize 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 to carry out reclamation obligations imposed on us in connection with our activities, we must allocate financial resources that might otherwise be spent on further development programs. We have established a provision for our reclamation obligations on the Hycroft Mine property, as appropriate, but this provision may not be adequate. If we are required to carry out unanticipated reclamation work, our financial position could be adversely affected.

 

We are 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 are unable to do so. Third party financial assurances may not be available to us or we 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 adversely affect our financial position.

 

If we lose key personnel or are unable to attract and retain additional personnel, we may be unable to develop our business.

 

Our development 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, and other key employees that we may hire in the future. We will need to recruit 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 growth could be significantly curtailed.

-25-

 

We are dependent upon information technology systems that are subject to disruption, damage, failure and risks associated with implementation and integration.

 

We are dependent upon information technology systems in the conduct of our operations. Our information technology systems are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyber-attacks, 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, we could potentially be subject to production 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 our cash flows, financial condition or results of operations.

 

We 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 our operations. System modification failures could have a material adverse effect on our business, financial position and results of operations and could, if not successfully implemented, adversely impact the effectiveness of our internal controls over financial reporting.

 

The three largest stockholders of the Company are able to 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 our other stockholders.

 

As of December 31, 2020 Mudrick Capital, Whitebox, and Highbridge beneficially owned approximately 42%, 20% and 13% of the outstanding shares of our common stock, respectively. Because of their significant stockholdings, each of Mudrick Capital, Whitebox and Highbridge could exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise influence our 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 our common stock.

 

Risks related to our Common Stock and Warrants

 

The market price of our shares of common stock and publicly traded warrants may fluctuate widely.

 

The trading price of our common stock and warrants listed for trading may fluctuate substantially and may be lower than current price. This may be especially true for companies like ours with a small public float. If an active market for our securities continues, the trading price of our securities could be volatile and subject to wide fluctuations. The trading price of our common stock and warrants depends on many factors, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part 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:

 

 

actual or anticipated fluctuations in our financial results or the financial results of companies perceived to be similar to the Company;

 

 

changes in the market’s expectations about our operating results;

 

 

the public’s reaction to our press releases, other public announcements and filings with the SEC;

 

 

speculation in the press or investment community;

 

 

actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

 

 

the operating results failing to meet the expectation of securities analysts or investors in a particular period;

-26-

 

 

changes in financial estimates and recommendations by securities analysts concerning the Company or the market in general;

 

 

operating and stock price performance of other companies that investors deem comparable to 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 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, 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 Recapitalization Transaction. 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, 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 we make significant payments.

 

There is no guarantee that our outstanding public warrants will ever be in the money, and they may expire worthless and the terms of warrants may be amended.

 

We have 34,289,898 publicly traded warrants outstanding that entitle holders to purchase one share of our common stock at an exercise price of $11.50 per share for a period of five years from the May 29, 2020 Recapitalization Transaction. On October 6, 2020, we issued 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 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.

 

Additionally, as part of the Recapitalization Transaction, we assumed the obligations and liabilities 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, the warrants issued thereunder (the “Seller warrants”) became exercisable into shares of our common stock. As of March 22, 2021, 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 warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

-27-

 

Anti-takeover provisions contained in our charter and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

 

Our charter contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are 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 our 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 our 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 our 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 our 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 our 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 our 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” and a “smaller reporting company,” and the reduced disclosure requirements applicable to us as such may make our 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 out 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.

-28-

 

We are also a “smaller reporting company”, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are $100 million or more during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter. Similar to emerging growth companies, smaller 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 financial statements. Our stockholders may find our common stock less attractive as a result of our status as an “emerging growth company” and “smaller reporting company” and our reliance on the reduced disclosure requirements afforded to these companies.

-29-

 

USE OF PROCEEDS

 

We are not selling any securities under this prospectus and we will not receive any proceeds from the sale of securities by the Selling Securityholders, although we could receive up to approximately $524 million assuming the exercise of all of the outstanding warrants, including the Seller warrants, for cash. Any amounts we receive from such exercises will be used for working capital and other general corporate purposes. The holders of the warrants are not obligated to exercise the warrants and we cannot assure you that the holders of the warrants will choose to exercise any or all of the warrants.

 

SELLING SECURITYHOLDERS

 

The Selling Securityholders may from time to time offer and sell any or all of our securities set forth below pursuant to this prospectus. When we refer to “Selling Securityholders” in this prospectus, we mean the persons listed in the table below, and the pledgees, donees, permitted transferees, assignees, successors and others who later come to hold any of the Selling Securityholders’ interests in our securities other than through a public sale.

 

The following table sets forth:

 

 

the name of the Selling Securityholders for whom we are registering shares of Common Stock and warrants for resale to the public,

 

 

the number of shares of Common Stock and warrants that the Selling Securityholders beneficially owned prior to the offering for resale of the securities under this prospectus,

 

 

the number of shares of Common Stock and warrants that may be offered for resale for the account of the Selling Securityholders pursuant to this prospectus, and

 

 

the number and percentage of shares to be beneficially owned by the Selling Securityholders after the offering of the resale securities (assuming all of the offered shares of Common Stock and warrants are sold by the Selling Securityholders).

 

Shares of Common Stock

 

    Beneficial
Ownership Before
the Offering
    Shares to be Sold in
the Offering
    Beneficial
Ownership After  
the Offering
 
Name of Selling Securityholder   Number of Shares   %(1)     Number of Shares   %(1)     Number of Shares   %(1)  
Mudrick Capital Management, L.P.(2)   38,921,571   52.9 %   32,477,130   46.1 %   6,444,444   10.2 %
Whitebox Advisors LLC(3)   12,856,334   21.1 %   12,856,334   21.1 %   0   *  
Highbridge Capital Management, LLC(4)   9,094,078   14.8 %   7,427,412   12.3 %   1,666,666   2.7 %
Aristeia Capital, L.L.C.(5)   5,911,463   9.8 %   4,989,085   8.3 %   922,378   1.5 %
Wolverine Asset Management, LLC(6)   1,505,669   2.5 %   1,505,669   2.5 %   0   *  
Sprott Private Resource Lending II (Collector), LP(7)   437,940   *     437,940   *     0   *  
Cantor Fitzgerald & Co(8)   732,810   1.2 %   732,810   1.2 %   0   *  
Prisma Pelican Fund(9)   31,604   *     31,604   *     0   *  
Ninepoint Credit Opportunities Fund(10)   4,515   *     4,515   *     0   *  
Natural Resource Income Investing Limited Partnership(11)   9,030   *     9,030   *     0   *  
Sprott Private Resource Streaming and Royalty (Collector), LP.(12)   13,545   *     13,545   *     0   *  

 

 

 

*

Less than 1%

 

 

(1)

Based on 59,901,306 shares of Common Stock issued and outstanding on March 22, 2021

-30-

 

 

  (2) Includes: (i) 14,691,779 shares of Common Stock (including 4,604,204 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Fund Global L.P.; (ii) 4,128,186 shares of Common Stock (including 1,530,893 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Drawdown Fund, L.P.; (iii) 3,873,868 shares of Common Stock (including 1,717,473 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Drawdown Fund II, L.P.; (iv) 1,172,798 shares of Common Stock (including 394,863 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Specialty Fund, LP; (v) 49,132 shares of Common Stock (including 14,722 shares of Common Stock underlying warrants) held by Mudrick Distressed Senior Secured Fund Global, L.P.; (v) 1,244,498 shares of Common Stock (including 622,249 shares of Common Stock underlying warrants) held by Mudrick Distressed Opportunity Drawdown Fund II SC, L.P., and (vii) 13,761,310 shares of Common Stock (including 4,833,710 shares of Common Stock underlying warrants) held by certain accounts managed by Mudrick Capital Management, L.P. (collectively the “Mudrick Funds”). Mudrick Capital Management, L.P. is the investment manager of the Mudrick Funds other than the Sponsor and is the managing member of the Sponsor. Mudrick Capital Management, L.P. holds voting and dispositive power over the shares of Common Stock held by the Mudrick Funds and the Sponsor. Mudrick Capital Management, LLC is the general partner of Mudrick Capital Management, L.P., and Jason Mudrick is the sole member of Mudrick Capital Management, LLC. As such, Mudrick Capital Management, L.P., Mudrick Capital Management, LLC and Jason Mudrick may be deemed to have beneficial ownership of the shares of Common Stock held by the Mudrick Funds. Each such entity or person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of such holders is 527 Madison Avenue, 6th Floor, New York, New York 10022.
     
  (3)

Includes (i) 1,999,914 shares of Common Stock held by Whitebox Asymmetric Partners, LP (including 139,691 shares of Common Stock underlying warrants); (ii) 5,136,986 shares of Common Stock held by Whitebox Credit Partners, LP (including 371,598 shares of Common Stock underlying warrants); (iii) 1,276,623 shares of Common Stock held by Whitebox Institutional Partners, LP (including 89,476 shares of Common Stock underlying warrants); and (iv) 4,442,811 shares of Common Stock held by Whitebox Multi-Strategy Partners, LP (including 312,252 shares of Common Stock underlying warrants). Whitebox Advisors LLC is the investment manager of Whitebox Asymmetric Partners, LP, Whitebox Credit Partners, LP, Whitebox Institutional Partners, LP, Whitebox Multi-Strategy Partners, LP (collectively, the “Whitebox Funds”) and holds voting and disposable power over the shares of the Company held by the Whitebox Funds. Whitebox Advisors LLC is owned by Robert Vogel, Paul Twitchell, Jacob Mercer, and Paul Roos and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in Whitebox Advisors LLC or such Whitebox Funds. The address of these persons is 3033 Excelsior Blvd., Suite 500, Minneapolis, Minnesota 55416.

     
  (4) Includes (i) 2,809,600 shares of Common Stock (including 423,996 shares of Common Stock underlying the warrants) held by Highbridge Tactical Credit Master Fund, L.P. (“TCF”); and (ii) 6,284,478 shares of Common Stock (including 929,869 shares of Common Stock underlying warrants) held by Highbridge MSF International Ltd. (“MSF” and, together with TCF, the “Highbridge Funds”). Highbridge Capital Management, LLC (“HCM”), the trading manager of the Highbridge Funds, may be deemed to be the beneficial owner of the shares held by the Highbridge Funds. Jonathan Segal and Jason Hempel are responsible for the investment and voting decisions made by HCM with respect to the shares held by MSF and TCF. The Highbridge Funds and the foregoing individuals disclaim any beneficial ownership of these shares. The business address of HCM is 277 Park Avenue, 23rd Floor, New York, NY 10172 and the business address of the Highbridge Funds is c/o HedgeServ (Cayman) Ltd., Cricket Square, Floor 6, George Town, Grand Cayman KY1-1104, Cayman Islands.

 

 

(5)

Includes (i) 2,300,455 shares of Common Stock (including 123,626 shares of Common Stock underlying warrants) held by ALSV Limited; (ii) 152,752 shares of Common Stock (including 28,703 shares of Common Stock underlying warrants) held by Windermere Ireland Fund PLC; (iii) 3,016,446 shares of Common Stock (including 184,714 shares of Common Stock underlying warrants) held by APSV, LLC; and (iv) 441,810 shares of Common Stock (including 82,709 shares of Common Stock underlying warrants) held by ASIG International Limited (collectively, the “Aristeia Funds”). Each of the foregoing figures excludes shares of Common Stock underlying warrants that are not presently exercisable due to the effect of a beneficial ownership limitation blocker. Aristeia Capital, L.L.C. (“Aristeia”) may be deemed the beneficial owner of the securities described herein in its capacity as the investment manager of the Aristeia Funds, which are the holders of such securities. As investment manager of each Aristeia Fund, Aristeia has voting and investment control with respect to the securities held by each Aristeia Fund. Anthony M. Frascella and William R. Techar are the Co-Chief Investment Officers of Aristeia. Each of Aristeia and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in the Aristeia Funds. The business address of such holders is One Greenwich Plaza, Third Floor, Greenwich, Connecticut 06830.


 

(6)

Includes 1,505,669 shares of Common Stock (including 169,985 shares of Common Stock underlying warrants) held by Wolverine Flagship Fund Trading Limited (the “WF Fund”). Wolverine Asset Management, LLC (“WAM”) is the investment manager to WF Fund and has voting and investment power over these securities. The sole member and manager of WAM is Wolverine Holdings, L.P. (“Wolverine Holdings”). Robert R. Bellick and Christopher L. Gust may be deemed to control Wolverine Trading Partners, Inc. (“WTP”), the general partner of Wolverine Holdings. Each of Robert R. Bellick, Christopher L. Gust, Wolverine Holdings, WTP, and WAM disclaims beneficial ownership of the securities held by the WF Fund. The business address of such holders is 175 W. Jackson Blvd., Suite 340, Chicago, Illinois 60604.

-31-

 

 

(7)

Sprott Resource Lending Corp. is the investment manager of Sprott Private Resource Lending II (Collector), LP and may be deemed to be the beneficial owner of the shares held by Sprott Private Resource Lending II (Collector), LP . Peter Grosskopf, Jim Grosdanis, Narinder Nagra and Varinder Bhathal are responsible for the investment and voting decisions made by Sprott Resource Lending Corp. The business address of such holders is 200 Bay Street, Suite 2600, Toronto, ON, Canada, M5J 2J1.


 

(8)

Includes 688,415 shares of common stock underlying warrants. The business address of Cantor Fitzgerald& Co. is 110 East 59th Street, New York, NY 10022. Howard W. Lutnick, through indirect beneficial ownership of the general partners of Cantor Fitzgerald & Co., has voting and investment control over the shares. Mr. Lutnick disclaims beneficial ownership of the shares except to the extent of any pecuniary interest therein.


 

(9)

Prisma Capital Partners LP is the investment manager of Prisma Pelican Fund LLC and may be deemed to be the beneficial owner of the shares held by Prisma Pelican Fund LLC. The business address of such holders is 9 West 57th Street, Suite 2600, New York, NY 10019.


 

(10)

Ninepoint Partners LP is the investment manager of Ninepoint Credit Income Opportunities Fund and may be deemed to be the beneficial owner of the shares held by Ninepoint Credit Income Opportunities Fund. The business address of such holders is 200 Bay Street, Suite 2700, Toronto, ON, Canada, M5J 2J2.


 

(11)

Resource Capital Investment Corp. is the investment manager of Natural Resource Investing LP and may be deemed to be the beneficial owner of the shares held by Natural Resource Investing LP. Arthur Rule, Varinder Bhathal and Thomas Ulrich are responsible for the investment and voting decisions made by Resource Capital Investment Corp. The business address of such holders is 1910 Palomar Point Way, Suite 200, Carlsbad, CA 92008.


 

(12)

Sprott Resource Streaming and Royalty Corp. is the investment manager of Sprott Private Resource Streaming and Royalty (Collector), LP and may be deemed to be the beneficial owner of the shares held by Sprott Private Resource Streaming and Royalty (Collector), LP. Michael Harrison and Varinder Bhathal are responsible for the investment and voting decisions made by Sprott Resource Streaming and Royalty Corp. Michael Harrison disclaims beneficial ownership of such shares. The business address of such holders is 200 Bay Street, Suite 2600, Toronto, ON, Canada, M5J 2J1.

 

Warrants

 

    Beneficial
Ownership Before
the Offering
    Shares to be Sold in
the Offering
    Beneficial
Ownership After 
 the Offering
 
Name of Selling Securityholder   Number of Shares     %(1)     Number of Shares     %     Number of Shares     %  
Mudrick Capital Management, L.P.(2)     13,718,114       31.3 %     10,495,892       23.9 %     3,222,222       7.3 %
Whitebox Advisors LLC(3)     913,017       2.1 %     913,017       2.1 %     0       *  
Highbridge Capital Management, LLC(4)     1,353,865       3.1 %     520,532       1.2 %     833,333       1.9 %
Aristeia Capital, L.L.C.(5)     1,979,806       4.5 %     350,573       *       1,629,233       3.7 %
Wolverine Asset Management, LLC(6)     169,985       *       169,985       *       0       *  
Cantor Fitzgerald & Co(7)     688,415       1.6 %     688,415       1.6 %     0       *  

 

 

 

*

Less than 1%

 

 

(1)

Based on 43,873,232 warrants issued and outstanding on March 22, 2021 of which 34,289,898 warrants have an exercise price of $11.50 per share and 9,583,334 warrants have an exercise price of $10.50 per share but excluding the Seller warrants which are significantly out of the money with an exercise price of $40.31 per share.

-32-

 

 

(2)Includes (i) 4,604,204 warrants held by Mudrick Distressed Opportunity Fund Global L.P.; (ii) 1,530,893 warrants held by Mudrick Distressed Opportunity Drawdown Fund, L.P.; (iii) 1,717,473 warrants held by Mudrick Distressed Opportunity Drawdown Fund II, L.P.; (iv) 394,863 warrants held by Mudrick Distressed Opportunity Specialty Fund, LP; and (v) 14,722 warrants held by Mudrick Distressed Senior Secured Fund Global, L.P., (vi) 622,249 warrants held by Mudrick Distressed Opportunity Drawdown Fund II SC, L.P., and (vii) 4,833,710 warrants held by certain accounts managed by Mudrick Capital Management, L.P. (collectively, the “Mudrick Funds”). Mudrick Capital Management, L.P. is the investment manager of the Mudrick Funds other than the Sponsor and is the managing member of the Sponsor. Mudrick Capital Management, L.P. holds voting and dispositive power over the securities held by the Mudrick Funds. Mudrick Capital Management, LLC is the general partner of Mudrick Capital Management, L.P., and Jason Mudrick is the sole member of Mudrick Capital Management, LLC. As such, Mudrick Capital Management, L.P., Mudrick Capital Management, LLC and Jason Mudrick may be deemed to have beneficial ownership of the warrants held by the Mudrick Funds. Each such entity or person disclaims any beneficial ownership of the reported warrants other than to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of such holders is 527 Madison Avenue, 6th Floor, New York, New York 10022.

 

(3)Includes (i) 139,691 warrants held by Whitebox Asymmetric Partners, LP; (ii) 371,598 warrants held by Whitebox Credit Partners, LP; (iii) 89,476 warrants held by Whitebox Institutional Partners, LP; and (iv) 312,252 warrants held by Whitebox Multi-Strategy Partners, LP. Whitebox Advisors LLC is the investment manager of the Whitebox Funds and holds voting and disposable power over the warrants of the Company held by the Whitebox Funds. Whitebox Advisors LLC is owned by Robert Vogel, Paul Twitchell, Jacob Mercer, and Paul Roos and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in Whitebox Advisors LLC or such Whitebox Funds. The address of these persons is 3033 Excelsior Blvd., Suite 500, Minneapolis, Minnesota 55416.

 

(4)Includes (i) 423,996 warrants held by TCF and (ii) 929,869 warrants held by MSF. HCM, the trading manager of the Highbridge Funds, may be deemed to be the beneficial owner of the warrants held by the Highbridge Funds. Jonathan Segal and Jason Hempel are responsible for the investment and voting decisions made by HCM with respect to the warrants held by MSF and TCF. The Highbridge Funds and the foregoing individuals disclaim any beneficial ownership of these warrants. The business address of HCM is 277 Park Avenue, 23rd Floor, New York, NY 10172 and the business address of the Highbridge Funds is c/o HedgeServ (Cayman) Ltd., Cricket Square, Floor 6, George Town, Grand Cayman KY1-1104, Cayman Islands.

 

(5)Includes (i) 583,097 warrants held by ALSV Limited; (ii) 135,379 warrants held by Windermere Ireland Fund PLC; (iii) 871,224 warrants held by APSV, LLC; and (iv) 390,106 warrants held by ASIG International Limited. Aristeia may be deemed the beneficial owner of the securities described herein in its capacity as the investment manager of the Aristeia Funds, which are the holders of such securities. As investment manager of each Aristeia Fund, Aristeia has voting and investment control with respect to the securities held by each Aristeia Fund. Anthony M. Frascella and William R. Techar are the Co-Chief Investment Officers of Aristeia. Each of Aristeia and such individuals disclaim beneficial ownership of the securities referenced herein except to the extent of its or his direct or indirect economic interest in the Aristeia Funds. The business address of such holders is One Greenwich Plaza, Third Floor, Greenwich, Connecticut 06830.

 

(6)WF Fund is the record holder of such warrants. WAM is the investment manager to WF Fund and has voting and investment power over these securities. The sole member and manager of WAM is Wolverine Holdings. Robert R. Bellick and Christopher L. Gust may be deemed to control WTP, the general partner of Wolverine Holdings. Each of Robert R. Bellick, Christopher L. Gust, Wolverine Holdings, WTP, and WAM disclaims beneficial ownership of the securities held by the WF Fund. The business address of such holders is 175 W. Jackson Blvd., Suite 340, Chicago, Illinois 60604.

 

(7)The business address of Cantor Fitzgerald& Co. is 110 East 59th Street, New York, NY 10022. Howard W. Lutnick, through indirect beneficial ownership of the general partners of Cantor Fitzgerald & Co., has voting and investment control over the warrants. Mr. Lutnick disclaims beneficial ownership of the shares except to the extent of any pecuniary interest therein.

 

Each of the Selling Securityholders that is a broker-dealer or an affiliate of a broker-dealer has represented to us that it purchased the securities offered by this prospectus in the ordinary course of business and, at the time of purchase of those securities, did not have any agreements, understandings or other plans, directly or indirectly, with any person to distribute those shares.

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Material Relationships with the Selling Holders

 

For a description of our relationships with the Selling Securityholders and their affiliates see the section entitled “Certain Relationships and Related Transactions” and “Description of Securities to be Registered.

 

Other Material Relationships

 

David Kirsch, the Chairman of our Board, has no pecuniary interest in shares of our Common Stock or warrants and disclaims any beneficial ownership of the shares of our Common Stock or warrants beneficially owned by Mudrick Capital Management, L.P. and its affiliates.

 

Michael Harrison, a member of our board of directors, has an indirect pecuniary interest in shares of our Common Stock beneficially owned by Sprott Private Resource Streaming and Royalty (Collector), LP. and Sprott Private Resource Lending II (Collector), LP as chief executive officer of Sprott Resource Streaming and Royalty Corp. and/or through his fiduciary role as a Managing Partner of Sprott Private Resource Streaming and Royalty (Collector), LP. and Managing Director of Sprott, Inc. Mr. Harrison disclaims any beneficial ownership of the shares of our Common Stock beneficially owned by Sprott Private Resource Streaming and Royalty (Collector), LP. and Sprott Private Resource Lending II (Collector), LP.

 

DESCRIPTION OF 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. We are a U.S.-based gold producer focused on operating and developing its wholly owned 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 west of Winnemucca, Nevada. Mining operations at the Hycroft Mine were restarted in 2019. As part of the restart, Hycroft, along with third party consultants, completed the Hycroft Technical Report for our proprietary two-stage heap oxidation and leach process for sulfide ore, for further detail see “Description of Property” . 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 May 29, 2020, we, formerly known as Mudrick Capital Acquisition Corporation (“MUDS”), consummated a business combination transaction (the “Recapitalization Transaction”) that resulted in 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, 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 Subordinated Notes (as such are defined herein). Upon closing of the Recapitalization Transaction, our unrestricted cash available for use totaled $68.9 million.

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Segment Information

 

The Hycroft Mine is our only operating segment and includes the operations, development, and exploration activities and contains 100% of our revenues and production costs. Corporate and Other includes corporate general and administrative costs. See Note 17 - Segment Information to the Notes to the Financial Statements for additional information on our segments.

 

Principal Products, Revenues, and Market Overview

 

The principal products produced at the Hycroft Mine are unrefined gold and silver bars (doré) and in-process inventories (metal-laden carbons and slags), both of which are sent to third party refineries before being sold, generally at prevailing spot prices, to financial institutions or precious metals traders. Doré bars and metal-laden carbons and slags are sent to refineries to produce bullion that meets 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-laden carbons and slags are refined for a fee, and our share of the separately recovered refined gold and refined silver are credited to our account or delivered to our buyers.

 

Product Revenues and Customers

 

In 2020, revenues from gold and silver made up 94% 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.

 

Gold Uses

 

Gold has two main categories of use: fabrication and investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses, medals, medallions and coins. Gold investors buy gold bullion, coins and jewelry.

 

Gold 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, gold production from mines decreased slightly for 2020 compared to 2019 totaling approximately 3,401 metric tons (or 109.3 million troy ounces) and represented approximately 73.4% of the 2020 global gold supply. Gold demand in 2020 was approximately 3,760 tons (or 120.9 million troy ounces) and totaled approximately $214 billion in value. In 2020, gold demand by sector was comprised of jewelry (38%), bar and coin (24%), ETF investments (23%), technology (8%), and central bank purchases (7%).

 

Gold Prices

 

The price of gold is volatile and is affected by many factors beyond our control, such as 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 producing countries throughout the world. The following table presents the annual high, low, and average afternoon fixing prices for gold over the past ten 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

 

On March 22, 2021, the afternoon fixing price for gold and silver on the London Bullion Market was $1,736 per ounce and $25.74 per ounce, respectively.

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Competition

 

The top 10 producers of gold comprise approximately one third of total worldwide mined gold production. We are a developing producer with a single mine. The Hycroft Mine has 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 included in the Hycroft Technical Report. We have not fully developed our operation and we 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 position over the long-term is 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 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 see “Risk Factors—Industry Related Risks—We face intense competition in the mining industry” for additional discussion related to our current and potential competition.

 

Employees

 

At December 31, 2020, we had approximately 240 employees, of which 228 were employed at the Hycroft Mine. None of our employees are represented by unions.

 

COVID-19

 

We have implemented health and safety policies for employees, contractors, and visitors that follow guidelines from the Center for Disease Control (CDC) and the Mine Safety and Health Administration (MSHA). During 2020, especially the fourth quarter, our operations faced certain limitations due to COVID-19 related absences, however the impact did not significantly adversely affect our operations.

 

Please see “Risk Factors— Industry Related Risks—The COVID-19 pandemic may adversely impact our business, financial condition, and results of operations” as well as “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, 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 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.

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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);

 

 

govern the generation, treatment, storage and disposal of solid waste and hazardous waste (the Federal Resource Conservation and Recovery Act);

 

 

restrict the emission of air pollutants from many sources, including mining and processing activities (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);

 

 

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);

 

 

restrict and control the discharge of pollutants and dredged and fill materials into waters of the United States (the Clean Water Act); and

 

 

regulate the drilling of subsurface injection wells (the Safe Drinking Water Act and the Underground Injection Control program 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. 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 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 “Risk Factors - Industry Related Risks”:

 

 

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;

 

 

Changes in environmental regulations could adversely affect our cost of operations or result in operations delays;

 

 

Environmental regulations could require us to make significant expenditures or expose us to potential liability; and

 

 

Our exploration and development operations are subject to extensive environmental regulations, which could result in the incurrence of additional costs and operational delays.

 

During 2020 and 2019, there were no 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. We did not incur material capital expenditures for environmental control facilities during 2020 and 2019 and do not expect to incur any material expenditures in 2021 for such environmental control facilities.

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Reclamation

 

We are required to mitigate long-term environmental impacts by 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. Our most recent reclamation cost estimate was approved by the BLM and the State of Nevada in July 2020. At December 31, 2020, our surface management surety bonds totaled $59.9 million, of which $58.3 million secures the financial assurance requirements for the Hycroft Mine, $1.0 million secures the financial assurance requirements for the adjacent water supply well field and exploration project, and $0.6 million secures the financial assurance requirements for an archaeological mitigation project. Based on the December 31, 2020 estimate, no material reclamation expenditures are expected to be incurred until 2047 and the reclamation work is projected to be completed by 2065. 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 to Note 11 – Asset Retirement Obligation to the Notes to our Financial Statements.

 

Mine Safety and Health Administration Regulations

 

Safety and health is a core value 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 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 (the “Mine Act”). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (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, and the dollar penalties assessed for such citations, have generally increased in recent years.

 

Property Interests and Mining Claims

 

Our 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 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 to “Description of Property” in this registration statement for which this prospectus forms a part. For information about the risks to our business related to our property interests and mining claims, see “Risk Factors - Industry Related Risks” in this prospectus:

 

 

There are uncertainties as to title matters in the mining industry. Any defects in such title could cause us to lose our 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 operations on our unpatented mining claims or the amount of Net Proceeds Mineral Tax we pay to the State of Nevada.

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DESCRIPTION OF PROPERTY

 

Our sole property is the Hycroft Mine. The Hycroft Mine is an open-pit (surface) gold and silver mine with a long history of operations as discussed below. Commencing in January 2019, Seller began efforts to restart mining operations. During the first quarter of 2019, Seller worked to bring our six haul trucks, two hydraulic shovels and one wheel loader back into operation. In addition, Seller began the rehabilitation of the crushing system and 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 rehabilitation of the crushing system was completed, additional mobile fleet equipment was rented, headcount increased, repairs and restoration of processing facilities were continued, 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.

 

Hycroft Technical Report

 

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 Hycroft Technical Report prepared in compliance with the SEC’s Modernization of Property Disclosures for Mining Registrants. 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 Hycroft Technical Report, as previously filed with the SEC on February 14, 2020.

 

Overview and Highlights

 

The Hycroft Mine Technical Report contemplates average annual production of approximately 366,000 gold equivalent ounces, based on a 34-year mine life for mining and processing 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 infrastructure at the Hycroft Mine including administration buildings, mobile maintenance shop, light vehicle maintenance shop, warehouse, leach pads, crushing system, a refinery, and two Merrill-Crowe process plants, after refurbishment. Additionally, a second refinery is planned using existing equipment. In order to ramp up and maintain our operation to tonnage and production levels contemplated by the Hycroft Technical Report, we will need to construct additional leach pad space, add crusher capacity, add material handling systems, and construct a rail spur 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, particularly the North Merrill-Crowe process plant. In 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Hycroft Mine.”

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The following shows where our Hycroft Mine and Advanced Exploration Properties are located as well as areas of the Hycroft Mine.

 

image

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image

Additionally, the map below shows the current property and facilities layout.

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image

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image

 

The Hycroft Mine and related facilities are located approximately 54 miles west of Winnemucca, Nevada. Winnemucca, a city with a population of approximately 7,800 (2019), 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 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 our 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 adequate to support our planned future heap leach operations. The 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 mine area range between 4,500 and 5,500 feet above sea level.

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The climate of the region is arid, with precipitation averaging 2.1 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 hold 30 private patented claims and 3,247 unpatented mining claims that constitute our Hycroft Mine operating property. The total acreage covered by unpatented claims is approximately 68,759 acres and an additional 1,912 acres is covered by patented claims. Combining the patented and unpatented claims, total claims cover approximately 70,671 acres. Our Hycroft Mine patented claims occupy private lands and our 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. 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 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 million remained payable as of December 31, 2020. There is no expiration date on the net profit royalty.

 

The Hycroft Mine is also subject to the Sprott Royalty Agreement (as defined herein) that 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 our 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”), 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. Seller acquired the Hycroft Mine in 2007 pursuant to an arrangement agreement where Vista transferred its Nevada mining properties to Seller’s predecessor. Seller restarted the Hycroft Mine in 2008 and suspended mining operations on July 8, 2015. During 2016, Seller was actively processing and producing gold from the ore within the heap leach pads. On January 1, 2017, 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’s maintenance activities on the Hycroft Mine. In January 2019 Seller began the restart of mining operations. During the first 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.

 

On site facilities include an administration building, mobile maintenance shop, light vehicle maintenance shop, warehouse, leach pads, crushing system, two Merrill-Crowe process plants and a refinery. The components for a second refinery are on-site and will be constructed as part of the expansion of mining activities. The crushing system was refurbished as part of the restart activities and all other facilities are operational with the exception of the North Merrill-Crowe plant which is currently expected to be needed in 2022. The gross book value of plant and equipment associated with the Hycroft Mine as of December 31, 2020, was $85.3 million.

 

Geology

 

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-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-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 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.

-44-

 

Mineralization at Hycroft 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 cut by later, steeply dipping quartz alunite veins. Late 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 sulfides 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.

 

Proven and Probable Mineral Reserves

 

Our mineral reserve estimates 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-45-

 

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.

 

Numbers in the table have been rounded to reflect the accuracy of the estimate and may not sum due to rounding.

 

We did not use metal or equivalent metal cut-off grades in estimating proven and probable mineral reserves set forth 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.

 

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).

-46-

 

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

)%

-47-

 

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

 

-48-

 

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 12 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

-49-

 

Additional parameters used to calculate NSR included: (i) Whittle input parameters of 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 utilized in the Whittle optimization in mineral reserve determinations varying by redox, domain and process method, as set forth in Table 12-3 of the Hycroft Technical Report.

 

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. 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 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.

-50-

 

The Hycroft Mine contains a large precious metals deposit, based on measured and indicated mineral resource size. The resource information provided below was calculated by SRK during 2019 and also reflects the resource information as of December 31, 2019 and December 31, 2020 as Hycroft did not deplete any resources from mining activities through December 31, 2020.

  

     

Contained Grade

 

Contained Metal

 

Classification

 

Material

 

Tons (kt)

 

AuFa OPT

 

AuCn OPT

 

AgFa OPT

 

S%

 

 Au (koz)

 

 

Ag (koz) 

 

Measured

 

Oxide

 

5,650

 

0.011

 

0.008

 

0.224

 

1.79

 

60

 

 

1,267

 

 

 

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

 

Oxide

 

2,619

 

0.006

 

0.005

 

0.229

 

1.89

 

17

 

 

599

 

 

 

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

 

Inferred

 

Oxide

 

6,191

 

0.007

 

0.005

 

0.267

 

1.72

 

44

 

 

1,651

 

 

 

Transitional

 

20,148

 

0.008

 

0.004

 

0.276

 

1.74

 

156

 

 

5,570

 

 

 

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

 

-51-

 

 

Mineral resources are not 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 reserves in the Hycroft Technical Report.

 

 

Open pit resources stated as contained within a potentially economically minable open pit; pit optimization was based on assumed prices for gold of $1,400 per ounce and for silver of $18 per ounce, variable Au and Ag Recoveries based on geometallurgical domains, a mining cost of $1.45 per ton, variable ore processing costs based on geometallurgical domains, and G&A cost of $0.65 per ton, and a pit slope of 45 degrees;

 

 

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;

 

 

Mineral resources are reported exclusive of mineral reserves.

 

We did not use metal or equivalent metal cut-off grades in estimating measured, indicated or inferred mineral resources set forth in 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, and the complexity of the ore body resulted 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 were used as the basis for measured, indicated and inferred mineral resources estimations and open pit mineral resources are reported based on calculated NSR block values and the cutoff therefore varies from block to block. SRK worked with our predecessor to construct updated three-dimensional wireframes for alteration and oxidation zones uses geo software. Estimation of gold, silver, sulfur and rock hardness in a three-dimensional block model was completed by SRK and is reflected in Section 11 of the Hycroft Technical Report.

 

Metallurgical recovery factors used to estimate measured, indicated or inferred mineral resources set forth in the table above, are variable based upon the domain and processing method applied. Detailed domain specific metallurgical recoveries used to estimate measured, indicated or inferred mineral resources are set forth in Table 11-21 in Section 11 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.

 

Measured, indicated and inferred mineral resources were estimated based upon an open pit optimization utilizing the following assumptions:

 

 

assumed prices for gold of$1,400 per ounce and for silver of $18 per ounce;

 

 

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; and

 

 

NSR incorporates Au and Ag sales costs of $0.75 per ounce beyond the costs used for pit optimization.

 

Please see Table 11-21 in Section 11 of the Hycroft Technical Report for a more detailed tabular presentation of the resource pit optimization parameters for oxide, transitional and sulfide ores and multiple cost and metallurgical recovery factors by domain that were also used in the calculation of block NSR values for reporting purposes.

-52-

 

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 Investors

 

Information concerning our mineral properties in the Hycroft Technical Report and in this Registration Statement of which this prospectus forms a part includes information that has been prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants set forth in subpart 1300 of Regulation S-K which we elected to adopt early and became widely applicable on January 1, 2021. These standards differ significantly from the previously applicable disclosure requirements of Industry Guide 7 in that mineral resource information was not permitted and mineral reserves have been calculated in accordance with the provision of subpart 1300 of Regulation S-K.

 

Under SEC standards, mineralization, such as mineral resources, may not be classified as a “mineral reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time of the mineral reserve determination by a qualified person as defined by subpart 1300 of Regulation S-K. The term “economically,” has been interpreted to mean 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 to the definition of mineral reserves, has been interpreted 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 prospectus, the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “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. 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 cautioned that, except for that portion of mineral resources 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. 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.

-53-

 

Internal Controls 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 OK 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