My Thoughts on AMC's 22% Purchase of Hycroft Mining NASDAQ: HYMC

Equity Capital Investment Recapitalizes the Balance Sheet and Provides the Opportunity to Unlock Value of its World-Class Hycroft Gold and Silver Deposit in Northern Nevada

This will provide liquidity to HYMC, cash needed to grow their business. This announcement will also drive retail investors to HYMC - with a sub $100M market cap

AMC CEO Aaron Adam Tweets about HYMC

This is getting a lot of attention due to the massive following AMC has. I would not be surprised to see HYMC run over 100% in the next few days. Social Sentiment Dashboard allows you to track how AMC and HYMC are trending on Twitter

Let's break down the news release

WINNEMUCCA, Nev., March 15, 2022 /PRNewswire/ -- Hycroft Mining Holding Corporation (Nasdaq: HYMC) ("Hycroft" or the "Company"), a precious metals development company that owns the Hycroft Mine located in the world-class mining region of Northern Nevada, today announced a $56 million equity private placement with precious metals investor Eric Sprott and AMC Entertainment Holdings, Inc. (NYSE: AMC).

Both AMC and Sprott are investing, which is a good sign that another investor who has experience in the mining industry is buying in.

Diane Garrett, President, CEO and Acting Chairman of Hycroft, commented, "We couldn't be more pleased to announce this transformational investment in the future of Hycroft, anchored by Eric Sprott, one of the world's leading precious metals investors, and AMC Entertainment Holdings, which has proven its expertise and ability to address liquidity challenges and to raise capital to optimize the value of significant underlying assets. Collectively, their investment dramatically improves Hycroft's liquidity position and provides years of financial runway. Additionally, their confidence underscores the world-class nature of Hycroft's gold and silver deposit and our potential to unlock value at a pivotal moment in its development. We look forward to working alongside our new investors to advance Hycroft up the value chain."

If you read between the lines you can assume that they are looking for strong retail support to help address liquidity challenges and raise capital.

Mr. Sprott and AMC will each invest $27.9 million in cash in Hycroft in exchange for 23,408,240 units, with each unit consisting of one common share of Hycroft and one common share purchase warrant (the "Units"). The Units are priced at $1.193 per Unit, which is the minimum bid price required by Nasdaq for an at-the-market purchase of a Unit. Each purchase warrant will be exercisable for one common share of Hycroft at a price of $1.068 per share and will carry a five-year term from the date of issuance. The closing of the Private Placement is expected to occur on or about March 15, 2022.

This is a great price for AMC and Sprott to buy in, and it also sets a strong floor for other investors.

With its investment, AMC has been granted the right to appoint a representative to the Hycroft Board of Directors. After closing of the Private Placement, Mr. Sprott and AMC will become the Company's second largest stockholders, each holding approximately 21.8% of the outstanding common shares of Hycroft.

It will be interesting to see who Adam Aaron appoints to the board of directors, it could even be himself.

HYMC Use of New Capital from AMC and Sprott

Hycroft intends to use the net proceeds from this private placement for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness, working capital or capital expenditures and other investments, advancement of the Initial Assessment in the 2022 Technical Report Summary to a pre-feasibility and/or feasibility study and additional exploration at the Hycroft Mine.

The cash will be used to improve their financial position and feasibility of continuing to explore Hycroft

HYMC Unlocking Additional Flexibility through Balance Sheet Recapitalization

The Company also announced that it has reached an agreement in principle with its primary lending partner, Sprott Private Resource Lending II (Collector), LP ("Sprott"), acting as Facility Agent, to extend all principal debt repayments to one bullet payment in May 2027, from current maturity date of May 2025, subject to $50 million of new equity, and upon payment of a $3.3 million lender interest adjustment which will be capitalized and added to the principal due upon maturity. The extension of the maturity date from May 2025 to May 2027 will be subject to certain loan coverage conditions.

HYMC gets to extend their maturity date for debt payment to Sprott into 1 principal payment due at the end of 2027

Hycroft has also reached an agreement with its second lien holders whereby, subject to $50 million of new equity, they will extend the life of the loan by two years to December 2027 with continuing 10% annual payment-in-kind interest payments.

Hycroft will have to continue to pay 10% interest, but it is extended out into 2027, for the other secondary lenders

AMC Investing in HYMC: Final Thoughts

This is a bit of a puzzling move since Adam was talking about diversifying into crypto not too long ago. Gold is typically a decent hedge, but it would have been more appropriate for AMC to add gold to its balance sheet. The main upside I see is that sport is also investing at the same terms, and they have significant experience in the mining space. This should bode well in the long run for AMC, especially at the price they are acquiring shares. Retail investors will likely run this up, so if you are looking to trade HYMC just be cautious.