HYCROFT MINING HOLDING CORPORATION The following discussion, which has been prepared based on information available to us as ofNovember 10, 2021 , provides information that we believe is relevant to an assessment and understanding of our consolidated operating results and financial condition. As a result of the completion of the Recapitalization Transaction, the financial statements of Seller are now the financial statements of the Company. Prior to the Recapitalization Transaction, the Company had no operating assets but, upon consummation of the Recapitalization Transaction, the business and operating assets of Seller sold to the Company became the sole business and operating assets of the Company. Accordingly, the financial statements of Seller and its subsidiaries as they existed prior to the Recapitalization Transaction and reflecting the sole business and operating assets of the Company going forward, are now the financial statements of the Company. The following discussion should be read in conjunction with our other reports filed with theU.S. Securities and Exchange Commission (the "SEC") as well as our consolidated financial statements (the "Financial Statements") and the notes thereto (the "Notes") included in this Quarterly Report on Form 10-Q for the three and nine months endedSeptember 30, 2021 . Terms not defined herein have the same meaning defined in the Financial Statements and the Notes. The following MD&A generally discusses our condensed consolidated financial condition and results of operations for 2021 and 2020 and year-to-year comparisons between 2021 and 2020. Introduction to the Company We are aU.S. -based gold and silver company that is focused on operating and developing our wholly ownedHycroft Mine in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of our operating revenues and the market prices of gold and silver significantly impact our financial position, operating results, and cash flows.The Hycroft Mine is located in theState of Nevada and the corporate office is located inDenver, Colorado .The Hycroft Mine had proven and probable mineral reserves of 11.9 million ounces of gold and 478.5 million ounces of silver atDecember 31, 2020 , as determined by deducting mineral reserves mined throughDecember 31, 2020 from the mineral reserves estimated in the 2019 Technical Report. We are also evaluating alternative milling and processing methods for developing a commercial scale sulfide operation. As discussed throughout this MD&A, including within theHycroft Mine section, during the nine months endedSeptember 30, 2021 , while we have been able to achieve or improve on certain of our internal operating, processing, sales and production cost targets, because the Company is operating at a pre-commercial scale, it has incurred a net operating loss with negative cash flows before financing activities creating substantial doubt about our ability to continue as a going concern. Refer to the Going Concern subsection of the Recent Developments section of this MD&A for additional details. Health and Safety We believe that safety is a core value and we support that belief through our philosophy of safe work performance. Our mandatory mine safety and health programs include employee engagement and ownership of safety performance, accountability, employee and contractor training, risk management, workplace inspection, emergency response, accident investigation, and program auditing. This integrated approach is essential to ensure that our employees, contractors, and visitors operate safely. During the first nine months of 2021, we reported no lost time accidents.The Hycroft Mine's total reportable incident frequency rate ("TRIFR") for the trailing twelve months, which includes other reportable incidents, is one of the metrics we use to assess safety performance, and it is well below industry averages and significantly below historical levels experienced at theHycroft Mine . During the first nine months of 2021 we continued our critical focus on safety, including allocating additional personnel, resources, workforce time, and communications to mine safety. These actions contributed to a reduction in our TRIFR to approximately 0.41 atSeptember 30, 2021 , compared with approximately 2.30 atDecember 31, 2020 , an approximate 82% reduction. We will continue our safety efforts to reach the level of safety we expect and need to keep our workforce, contractors, and visitors safe. For health and safety actions specific to COVID-19, refer to the Recent Developments section of this MD&A. 34 -------------------------------------------------------------------------------- Table of Contents Executive Summary During the first nine months of 2021 we operated a conventional run-of-mine ("ROM") operation at 2020 pre-commercial scale using a mix of the Hycroft-owned mining fleet and a rental mining fleet. As a result of current and expected ongoing cost pressures for many of the reagents and consumables used at theHycroft Mine , and the timeline for completing our updated technical studies in early 2022, effective immediately the Company is discontinuing pre-commercial scale mining at its ROM operation. We will continue producing gold and silver from ore on the leach pads as long as it is economic and will right-size the workforce to meet ongoing operational requirements. When the operation was started up in 2019, mining oxide and transition ore allowed the Company to pre-strip overburden with some revenue offset to gain access to commercial scale sulfides ore. With the change in focus from the two-stage heap oxidation and leach to a milling operation, there is ample time to align the remaining pre-stripping with the start-up of commercial scale sulfide operations. We believe that this action will conserve cash and focus the Company's time and resources on its technical studies for sulfide ore. The metallurgical and variability drill program is ongoing with drilling expected to be completed by the end of 2021 and metallurgical analysis and test work continuing through the first half of 2022. The Company has previously discussed its strategy for developing an economic sulfide process for Hycroft. Based on the Company's findings to-date, including the analysis completed by an independent third-party research laboratory and the independent reviews by two metallurgical consultants, the Company does not believe the novel two-stage sulfide heap oxidation and leach process ("Novel Process"), as currently designed in the 2019 Technical Report, datedJuly 31 2019 ("2019 Technical Report"), is economic at current metal prices or those metal prices used in the 2019 Technical Report. Subject to the challenges discussed below, we will complete test work that is currently underway and may advance our understanding of the Novel Process in the future. Following a review of past and recent test work and based on the currently contemplated designs and operating parameters of the alternative sulfide processing methods being studied including the Novel Process, and milling with Atmospheric Alkaline or Alkaline Oxidation ("POX"), the Company, working closely with its industry leading technical consultants, completed pit optimization runs and trade-off analyses comparing the alternative processes which reflected that an acid POX ("Acid POX") process has significantly better economics than other processes studied. Therefore, the Company is focusing its study efforts and resources solely on the Acid POX pre-feasibility study ("PFS") being prepared byAusenco Engineering USA South Inc. ("Ausenco"), with completion expected in Q1 2022. The Acid POX process under study involves a conventional crushing, grinding, and flotation circuit that generates a concentrate to be fed to an autoclave facility commonly used for refractory gold ores in this region. Operations highlights for the first nine months of 2021 included: •Safety performance continued to improve with a 0.41 trailing 12-month total reportable incident frequency rate ("TRIFR") at the end of the third quarter of 2021, the lowest TRIFR achieved in the last 10 years at Hycroft. This represents an approximate 82% reduction in TRIFR compared with 2.30 at the end of 2020. •Production in the third quarter of 2021 of 14,831 ounces of gold and 91,437 ounces of silver represented a 240% and 295% increase in ounces produced, respectively, compared with the corresponding quarter in 2020. As of the end of the third quarter, gold and silver production are approximately 91% and 75% of the mid-point of full-year 2021 guidance. •Sales in the third quarter of 2021 were 16,354 ounces of gold (average realized price of$1,781 per ounce) and 105,478 ounces of silver (average realized price of$24.15 per ounce), contributing to a$19.4 million increase in revenue compared with third quarter of 2020. •Despite the higher production and sales compared to the respective 2020 periods, we have consistently generated year-to-date losses and used cash in operating activities as a result of operating a pre-commercial scale direct leaching ROM operation with high relative operating costs due to insufficient recoveries resulting from lower grades mined combined with escalating prices of consumables and reagents. The$42.0 million reduction in cash since the beginning of the year was primarily due to cash used for operating activities of$27.1 million and cash used for investing activities of$11.9 million . •OnSeptember 3, 2021 , Hycroft announced drill results from the higher-gradeVortex Zone highlighted by 51.8 meters of 2.47 g/t gold and 25.5 g/t silver, some of the highest gold grades encountered at theHycroft Mine . •Metallurgical drilling continued through the third quarter of 2021 with 55 holes drilled to date totaling 51,166 feet. This drill program, as previously disclosed, is to complete the necessary variability and metallurgical work on geologic domains that were not sufficiently tested in the past but represent a significant portion of the estimated life-of-mine production. 35 -------------------------------------------------------------------------------- Table of Contents Recent Developments Going concern As discussed in Note 2 - Summary of Significant Accounting Policies to the Notes to the Financial Statements, events and conditions exist that, when considered individually or in the aggregate, raise substantial doubt about our ability to continue as a going concern because without additional funding we may be unable to meet our obligations as they become due within one year after the date that the financial statements for the period endedSeptember 30, 2021 were issued. Although we completed the Recapitalization Transaction during the 2020 second quarter and completed the underwritten public offering onOctober 6, 2020 , for estimated proceeds net of discount and equity issuance costs of$83.1 million , using our internal forecasts and cash flow projection models, we currently project we will likely require additional cash from financing activities in six to nine months from the date of this Quarterly Report on Form 10-Q to meet our operating and investing requirements and future obligations as they become due. Our ability to continue as a going concern is contingent upon securing additional funding for working capital, capital and project expenditures, satisfying debt covenants required under the Sprott Credit Agreement, and other corporate expenses so that we can continue to develop theHycroft Mine by conducting targeted exploration and completing the necessary technical studies to determine the likely timeline to bring the sulfides into commercial scale operation. Historically, we have been dependent on various forms of debt and equity financing to fund our business. While we monitor and evaluate opportunities on an ongoing basis to appropriately fund the Company and address our going concern, currently we do not have any agreements or understandings to issue any securities, including any securities under the$500 million universal shelf that was filed inJuly 2021 . COVID-19 InMarch 2020 , theWorld Health Organization declared the outbreak of a novel coronavirus ("COVID-19") as a pandemic, which continues to spread throughoutthe United States with new variants of the virus. Efforts implemented by local and national governments, as well as businesses, including temporary closures, have had adverse impacts on local, national and global economies. We have implemented health and safety policies and protocols for employees, contractors, and visitors that follow guidelines published by theCenter for Disease Control (CDC) and the Mine Safety andHealth Administration (MSHA). During the first nine months of 2021, and the fourth quarter of 2020, our operations were limited by COVID-19 related absences, however the impact while negative, did not materially and adversely affect our operations. The extent of the impact of COVID-19 on our operational and financial performance going forward will depend on certain developments, including but not limited to the duration and continued spread of the outbreak and strand mutations, the availability and use of vaccines, the development of therapeutic drugs and treatments, and the direct and indirect impacts on our employees, vendors, and customers, all of which are uncertain and cannot be fully anticipated or predicted. Since theHycroft Mine represents the entirety of our operations, any further COVID-19 outbreaks at the mine site or any governmental restrictions implemented to combat the pandemic could result in a partial or an entire shutdown of theHycroft Mine itself, which would adversely impact our financial position, operating results, and cash flows. During the third quarter of 2021, the site continued to manage COVID-19 control restrictions in accordance with state, national, andCDC guidelines and will continue to monitor and follow those guidelines going forward. To date, COVID-19 related absences have limited our operations from time-to-time, but did not materially disrupt our operations. Additionally, we have not experienced any material disruptions to our supply chain because of COVID-19. However, we can provide no assurance that our operations will not be materially adversely affected by the COVID-19 pandemic in the future that could result from any worsening of the pandemic, the effect of mutating strains, additional outbreaks of the pandemic, actions taken to contain the pandemic's spread or treat its impact, continued availability of vaccines, and their distribution, acceptance and efficacy, and governmental, business and individual actions taken in response to the pandemic including government-imposed regulations regarding, among other things, COVID-19 testing, vaccine mandates and related workplace restrictions. 36 -------------------------------------------------------------------------------- Table of Contents Technical and operations review summary The new leadership team established at the mine in late 2020 launched an extensive and detailed review of theHycroft Mine and took immediate steps to rectify operational shortcomings, significantly reduce costs, and put in place an operating team aligned with the Company's long-term strategy to establish theHycroft Mine as a safety-focused, long-life, low-cost gold and silver producer. Incident and near miss reporting improved as expected as the team initiated numerous campaigns to recognize, report and eliminate safety hazards. To date, the team has made significant strides at theHycroft Mine through elevating the safety performance with a marked decrease in the twelve-month trailing TRIFR, improving the culture at Hycroft, and establishing operational improvements, including managing the leach pad operations with no write-off of leach pad ounces since the second quarter of 2020, and increasing operational efficiencies to reduce costs by idling high-cost equipment. In addition, a review of consumable consumption has resulted in lower costs by reducing consumption and utilizing vendors with lower unit costs. We have also continued to reduce our reliance on contractors which tend to be higher cost and less efficient. In the fourth quarter of 2020, we formed a technical team to support the new leadership team in ongoing data analysis, developing processing models for future larger-scale sulfide leach operations and reviewing data and results from the pre-commercial leach pads. The technical team is comprised of Hycroft's technical team and industry leading consultants with expertise in metallurgy, open pit mining and heap leach processing, heap leach stacking and modeling and other process technologies, and the team also has access to a leading research and development laboratory. The mine site's process team and leadership in conjunction with the industry leading consultants focused its efforts on identifying and investigating opportunities for improvements in operating parameters in the sulfide heap oxidation and leach process and additional processing alternatives resulting in work plans as described in the following 2021 Outlook section. 2021 Outlook Our current operating plan is to: (i) operate safely as we cease pre-commercial scale open pit mining and continue to process heap leach inventory until it is no longer economic in order to conserve cash; (ii) complete the variability drilling and advance the associated metallurgical test work; (iii) conduct targeted exploration drilling; and (iv) advance the Acid POX technical study for sulfide ore. Based on the findings and results of that study, we plan to file a new technical report prior to or concurrent with our 2021 Annual Report on Form 10-K, that will include associated mineral reserves and mineral resources after which we plan to be in a position to provide an update in the second quarter of 2022 on the path forward for our commercial scale sulfide operations. 37 -------------------------------------------------------------------------------- Table of Contents Technical Activities During the first nine months of 2021, we continued to work alongside our industry leading consultants to provide additional and expanded information on the ore body and investigate opportunities for improvements in operating parameters for commercial scale operations at theHycroft Mine . This information is critical in understanding the mineralogical properties of the deposit and ultimately the most economic processing technology for the various ore domains. Accordingly, we developed an approximate$10 million program for drilling and additional metallurgical and mineralogical studies in 2021 and early 2022. The program is expected to be completed in the first quarter of 2022, and the metallurgical test work portion of the program in the second quarter of 2022. As ofSeptember 30, 2021 , we have spent$5.6 million under the program. Ongoing and future technical work for theHycroft Mine will be primarily focused on the PFS and technical report for the Acid POX milling for processing sulfide ore and completing the variability and metallurgical test work. We also plan to evaluate exploration opportunities targeting higher ore grades and expect to continue to advance the Novel Process as time and resources permit. •Exploration - We have identified exploration drilling opportunities to follow up on higher grade areas that would benefit from expanded drilling in order to convert inferred blocks to measured or indicated blocks, and areas that are prospective for higher grade material. We have plans to opportunistically and cost effectively drill these areas as we have drilling capacity with the drill rigs that were contracted to complete the variability drilling program. •Mill sulfide processing options - While our technical team has continued to progress and develop an understanding of the requirements for implementing the Novel Process on a commercial scale, we recently received a completed peer reviewed report from one of our independent technical consultants stating that, for reasons outlined below as well as increased commodity costs, it does not appear that the proprietary two-stage oxidation and leaching process as detailed in the 2019 Technical Report, will be economic as designed at current metal prices or those metal prices used in the 2019 Technical Report. Based on scoping level economic analyses on multiple processing options completed by our technical team, together with independent engineering firms and consultants and on the currently contemplated designs and operating parameters of the alternative sulfide milling processes being studied, we completed pit optimization runs comparing the alternative processes. The comparison indicates that using an Acid POX process is significantly more economic than the alternatives. Accordingly, we are focusing our efforts and resources solely on the pre-feasibility level technical study for milling and processing using an Acid POX process. We plan to file a new technical report that will include associated mineral reserves and mineral resources, as discussed in 2021 Outlook above. •Two-stage sulfide heap oxidation and leach process - As a result of challenges to consistently achieve targeted oxidation and recoveries from the Novel Process, our new technical and operating team, together with our industry leading metallurgical consultants, initiated detailed reviews of the technical information and prior work. We also had fresh samples of material from our Brimstone deposit metallurgically tested and launched a$10.0 million expanded variability drilling and metallurgical test program in late Q1 2021. While the variability metallurgical test work is on-going, the information to date supports our view that milling is likely the preferred method of processing sulfide ores at theHycroft Mine . Additionally, while the chemistry of the two-stage sulfide oxidation and leach process has been confirmed, the commercial scale application of the process as currently understood will be economically challenged due to: •Higher operating costs - In the field work on the pre-commercial test pads, higher levels of soda ash were being applied to oxidize the transitional ore, and we were challenged to achieve the targeted oxidation levels consistently and repeatedly across the ore body. The test work has confirmed soda ash consumption is now estimated to be significantly in excess of what was estimated in the 2019 Technical Report. Moreover, the cost of soda ash and other reagents has increased substantially since 2019, which will negatively impact operating costs. •Higher capital costs - We identified a number of critical areas that had not been previously addressed and as a result, due to the implementation of on/off pads to avoid comingling solutions on the heap, the addition of a materials handling system, an agglomeration circuit and forced air injection pumping, capital costs are expected to be materially higher. Additionally, working capital is projected to be higher due to slower oxidation rates for some ores. •Lower recoveries on some ores - After reviewing all the column tests and considering additional factors in measuring oxidation and recovery rates, we were not able to consistently replicate a strong correlation between oxidation rates and gold recoveries. We believe that more test work is required before implementing this process in a commercial setting. 38 -------------------------------------------------------------------------------- Table of Contents •Finer crush size will be required - The results from the Brimstone samples demonstrated that heavy silicification caused the gold in pyrite to be surrounded in gangue material which precluded oxidation and leach solutions from accessing and liberating the precious metals in pyrite at a ½ inch crush size. We believe that a milling operation is needed to achieve the finer grind size required to liberate the pyrite and allow solution contact. We believe that more test and development work is required to demonstrate that this Novel Process can be applied successfully on a commercial scale and the analysis to date indicates the process may not be amenable to all ore domains at theHycroft Mine . For the near term, we plan to complete the following test work which is important and will benefit all processing methods for theHycroft Mine : •Column test work - Column tests are being performed on sulfide ores mined during the nine months endedSeptember 30, 2021 . These column tests will provide additional information for the Novel Process. •Variability test work - The variability test work that is underway is necessary for all commercial scale sulfide processing options. The test work includes a suite of laboratory tests designed to: ?understand the metallurgical characteristics of each geologic domain and their amenability to various processing technologies; ?understand the metallurgical characteristics of sulfide material below the water table; ?understand the role other minerals may play in the overall oxidation process; ?determine amenability to oxidation in each geologic domain; and ?establish a relationship between oxidation levels and gold recoveries across each geologic domain. 39
-------------------------------------------------------------------------------- Table of ContentsHycroft Mine Operations The following table provides a summary of operating results for theHycroft Mine : Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Ore mined - sulfide stockpile (ktons) 402 - 1,424 - Ore mined - crusher feed (ktons) - 1,542 - 2,507 Ore mined - ROM (ktons) 1,633 488 6,654 501 Total ore mined (ktons) 2,035 2,030 8,078 3,008 Waste mined (ktons) 1,559 1,345 4,516 1,437 Total mined (ktons) 3,594 3,375 12,594 4,445 Waste tons to ore tons strip ratio (#) 0.77 0.66 0.56 0.48 Ore grade mined - gold (oz/ton) 0.015 0.015 0.014 0.014 Ore grade mined - silver (oz/ton) 0.590 0.284 0.409 0.205 Production - gold (oz) 14,831 4,357 45,532 12,342 Production - silver (oz) 91,437 23,164 320,812 73,717 Ounces sold - gold (oz) 16,354 6,056 43,244 16,854 Ounces sold - silver (oz) 105,478 27,251 352,480 97,954 Average realized sales price - gold ($/oz)$ 1,781 $ 1,919 $ 1,794 $ 1,735 Average realized sales price - silver ($/oz)$ 24.15
As shown above, tons mined, ounces produced, ounces sold and average realized prices increased during the nine months endedSeptember 30, 2021 , compared with the same period of the prior year due to higher tons mined in 2021. The average price decreased during the three months endedSeptember 30, 2021 consistent with the decrease in the spot price of gold compared with the same period of the prior year. The crusher did not operate during the first nine months of 2021, as planned, as all mined ore was routed to the leach pad as ROM and sulfide ore encountered was stockpiled. Production and sales in the first nine months of 2021 increased over the comparable 2020 period due to increased quantities of ROM ounces placed in the fourth quarter of 2020 and the first quarter of 2021. The recovered ounces produced in the first nine months of 2021 resulted from continued leach production of those existing inventory ounces, additional ounces placed under leach, higher leach solution flows to the pad, and improved recovery performance from the Brimstone plant. 40 -------------------------------------------------------------------------------- Table of Contents Results of Operations Revenues Gold revenue The table below summarizes gold sales, ounces sold and average realized prices for the following periods (dollars in thousands, except per ounce amounts): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Gold revenue$ 29,129 $ 11,623 $ 77,570 $ 29,234 Gold ounces sold 16,354 6,056
43,244 16,854
Average realized price (per ounce)
During the three and nine months endedSeptember 30, 2021 , gold revenue was$29.1 million and$77.6 million , respectively, compared to$11.6 million and$29.2 million for the comparable periods of 2020. The significant increase in revenue during the 2021 periods was attributable to the mine having more ore under leach as mining and processing operations increased beginning in the second quarter of 2020, resulting in higher production-related inventory balances and gold revenue during the three and nine months endedSeptember 30, 2021 . Gold revenue was also adversely affected during the three and nine months endedSeptember 30, 2020 due to lower gold ounces available for sale as a result of write-downs of recoverable gold ounces on the leach pads (see Note 4 - Inventories to the Notes to the Financial Statements). Silver revenue The table below summarizes silver sales, ounces sold and average realized prices for the following periods (dollars in thousands, except per ounce amounts): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Silver revenue$ 2,547 $ 668 $ 9,143 $ 1,817 Silver ounces sold 105,478 27,251 352,480 97,954 Average realized price (per ounce)$ 24.15 $ 24.51 $
25.94
During the three and nine months endedSeptember 30, 2021 , silver revenue was$2.5 million and$9.1 million , respectively, compared to$0.7 million and$1.8 million for the comparable periods of 2020. Similar to gold revenue, the increase in silver revenue during the third quarter of 2021 was attributable to the mine having more ore under leach as compared to the same 2020 period. During the nine-month period, we also benefited from favorable silver prices, which were over$7 per ounce higher compared to the same period of 2020. Silver revenue was also adversely affected during the three and nine months endedSeptember 30, 2020 due to lower silver ounces available for sale as a result of write-downs of recoverable ounces on the leach pads. 41 -------------------------------------------------------------------------------- Table of Contents Total cost of sales Total cost of sales consists of Production costs, Depreciation and amortization, Mine site period costs, and Write-down of production inventories. The table below summarizes total cost of sales for the following periods (dollars in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Production costs$ 30,616 $ 10,865 $ 77,927 $ 27,286 Depreciation and amortization 1,577 675 4,191 1,999 Mine site period costs 11,467 14,230 24,445 34,292 Write-down of production inventories - - - 17,924 Total cost of sales$ 43,660 $ 25,770 $ 106,563 $ 81,501 Production costs For the three and nine months endedSeptember 30, 2021 , we recognized$30.6 million and$77.9 million , respectively, in Production costs, or$1,872 and$1,802 , respectively, per ounce of gold sold, compared to$10.9 million and$27.3 million respectively, or$1,794 and$1,619 per ounce of gold, sold during the same period of 2020. The increase in Production costs was primarily due to a respective increase in the sales volumes of gold and silver of 10,298 and 26,390 ounces sold, respectively, at a higher average inventory cost per ounce during the three and nine months endedSeptember 30, 2021 compared to the same periods of 2020. As discussed in the below Mine site period costs section, throughout 2020 and the nine months endedSeptember 30, 2021 , a high operating cost structure at current levels of production has resulted in Mine site period costs to adjust ending inventory values of gold that approximate the net realizable value per ounce of gold (after considering future costs to complete and sell) as determined in accordance with our accounting policies. Accordingly, production costs per ounce of gold sold has been partially limited by the impact of recognizing Mine site period costs, which lowers the carrying value of production-related inventories. Reductions in the spot price of gold at the reporting periods as compared to prior reporting periods can result in additional Mine site period costs. Depreciation and amortization Depreciation and amortization was$1.6 million and$4.2 million , or$96 and$97 per ounce of gold sold for the three and nine months endedSeptember 30, 2021 , respectively, compared to$0.7 million and$2.0 million , or$111 and$119 per ounce of gold sold, during the same periods of 2020. The decrease in total depreciation and amortization costs per ounce of gold sold was largely due to an increase of 10,298 and 26,390 gold ounces sold during the three and nine months endedSeptember 30, 2021 compared to the same periods of 2020. Mine site period costs During the three and nine months endedSeptember 30, 2021 , inclusive of depreciation and amortization, we recorded$11.5 million and$24.4 million , respectively, of Mine site period costs for costs that were in excess of the net realizable value per ounce of gold inventories, compared to$14.2 million and$34.3 million during the same periods of 2020. Such period costs are generally the result of recurring or significant downtime or delays, unusually high levels of repairs, inefficient operations, overuse of processing reagents, inefficient cost-volume structures, or other unusual costs and activities, and cannot be recorded to production-related inventories based on the threshold established by the calculation of the estimated net realizable value per ounce of gold. Write-down of production inventories We did not record any production-related inventory write-downs during the three and nine months endedSeptember 30, 2021 . As discussed in Note 4 - Inventories to the Notes to the Financial Statements, based on metallurgical balancing results, during the three and nine months endedSeptember 30, 2020 , we determined that 6,512 and 10,492 ounces of gold that had been placed on the leach pads were no longer recoverable and recognized $Nil and$17.9 million , respectively, of Write-down of production inventories on the consolidated statements of operations, which included production costs of$10.2 million and$16.7 million , and capitalized depreciation and amortization costs of$0.8 million and$1.2 million , respectively. 42 -------------------------------------------------------------------------------- Table of Contents General and administrative General and administrative totaled$3.3 million and$12.3 million during the three and nine months endedSeptember 30, 2021 , respectively, compared to$5.7 million and$18.1 million during the same periods of 2020. The decrease of$2.4 million during the three months endedSeptember 30, 2021 was primarily due to decreases in: (i) salary and compensation costs of$2.1 million due to severance costs for our former CEO and CFO recorded during the third quarter of 2020; and (ii) legal, professional, and consulting fees associated with general corporate matters and obligations as a public company of$0.5 million . Such decreases were offset by an increase in insurance related costs of$0.2 million . The decrease of$5.8 million during the nine months endedSeptember 30, 2021 was primarily due to decreases in: (i) salary and compensation costs of$5.7 million ; (ii) insurance costs of$1.6 million ; and (iii) employer and property related taxes of$0.7 million , partially offset by increases in: (i) legal, professional, and consulting fees associated with general corporate matters and obligations as a public company of$1.3 million ; and (ii) director compensation for the members of our committees created upon becoming a public company of$0.7 million . Projects and development During the three and nine months endedSeptember 30, 2021 , Projects and development costs totaled$2.3 million and$3.9 million and were related to the following activities: (i) analyzing established feasibility studies; (ii) conducting geological studies; (iii) oversight and project management; and (iv) exploration drilling, engineering, and metallurgical activities. We did not incur any such costs during the three and nine months endedSeptember 30, 2020 . Accretion We recorded$0.1 million and$0.3 million of Accretion during both the three and nine months endedSeptember 30, 2021 and 2020, which related to our Asset retirement obligation and future reclamation costs. Refer to Note 12 - Asset Retirement Obligation to the Notes to the Financial Statements for further detail. Interest expense, net of capitalized interest As discussed and detailed in Note 9 - Debt, Net to the Notes to the Financial Statements, Interest expense, net of capitalized interest totaled$5.5 million and$15.2 million during the three and nine months endedSeptember 30, 2021 , respectively, compared to$4.3 million and$39.3 million during the same periods in 2020. The decrease of$1.1 million and$24.2 million during the three and nine months endedSeptember 30, 2021 was a result of completing the Recapitalization Transaction onMay 29, 2020 , which caused the exchange or conversion of the majority of Seller's$627.8 million outstanding indebtedness to equity, thus resulting in post-Recapitalization Transaction indebtedness totaling$159.8 million for the Sprott Credit Agreement and Subordinated Notes. Fair value adjustments to warrants During the three and nine months endedSeptember 30, 2021 , the Fair value adjustments to warrants resulted in a non-cash gain of$0.8 million and$11.0 million , respectively, as the market trading values of our publicly listed warrants decreased, which was primarily due to a decrease in the underlying trading price of our common shares. We did not incur any such warrant adjustment during the three and nine months endedSeptember 30, 2020 . Refer to Note 11 - Warrants to the Notes to the Consolidated Financial Statements for further detail. Write-off of deposit During the third quarter of 2021, the Company determined that additional equipment was no longer expected to be purchased under the current mine plan. Accordingly, a full reserve was applied against the$0.9 million deposit previously paid by the Company to an equipment supplier. Refer to Note 5 - Prepaids and Other, Net to the Notes to the Consolidated Financial Statements for further detail. Interest income Interest income totaled approximately $Nil during both of the three and nine months endedSeptember 30, 2021 , respectively, compared with$9,000 and$0.2 million during the same periods in 2020. During the quarter endedSeptember 30, 2021 the Company replaced certain surety bonds with new surety bonds with lower cash collateral requirements, in which none of the accounts holding the cash collateral earns interest income, resulting in no Interest income for the three and nine months endedSeptember 30, 2021 . 43 -------------------------------------------------------------------------------- Table of Contents Income taxes During the three and nine months endedSeptember 30, 2021 , we recognized an income tax benefit of$0.1 million which was the result of a discrete item related to estimated tax payments made during prior periods which will be refunded. There was no income tax benefit or expense, net, recognized during the three and nine months endedSeptember 30, 2020 . We have not recorded any future income tax benefits for net losses generated after the completion of the Recapitalization Transaction, due to a full valuation allowance recorded against our net operating loss carryforward earned after the Recapitalization Transaction. For additional details, refer to Note 15 - Income Taxes to the Notes to the Financial Statements. Net loss For the reasons discussed above, we recorded a net loss of$23.2 million and$41.3 million for the three and nine months endedSeptember 30, 2021 , respectively, which included a gain from Fair value adjustments to warrants of$0.8 million and$11.0 million , compared to net losses of$32.3 million and$117.6 million for the three and nine months endedSeptember 30, 2020 . Liquidity and Capital Resources General The Company's unrestricted cash position atSeptember 30, 2021 was$19.8 million as compared with$56.4 million atDecember 31, 2020 . While the Company plans to continue processing gold and silver ore on the leach pads after ceasing mining operations for the pre-commercial scale ROM operation and partially offset the cash that is projected to be used in operations and investing activities, we do not expect to generate net positive cash for the foreseeable future. Accordingly, we will be dependent on our unrestricted cash and other sources of cash to fund our business. We are actively evaluating alternatives to raise additional capital necessary to fund future development and ongoing working capital needs while exploring other strategic initiatives to enhance stockholder value. To avoid potential non-compliance with our first lien loan, the Company has received a waiver for six months to permit it to cease active mining operations, and, in alignment with our current forecasts, reduce the minimum unrestricted cash balance to$9 million . Depending on our ability to obtain additional cash and the timing of any such cash, we may need to obtain additional waivers from our first lien lender in 2022 to comply with our debt covenants. While our first lien lender has indicated a willingness to work with the Company, we cannot provide any assurance that we will be able to timely obtain cash or receive waivers from debt covenants that will allow us to avoid a default under our credit agreements and to continue operating. OnMay 29, 2020 , we completed the Recapitalization Transaction that provided cash available for use of$68.9 million . As part of the Recapitalization Transaction, Seller's indebtedness existing prior to the Recapitalization Transaction was either repaid, exchanged for indebtedness of the Company, exchanged for shares of our common stock or converted into shares of Seller common stock, and our post-Recapitalization Transaction indebtedness included amounts drawn under the Sprott Credit Agreement and the assumption of the newly issued Subordinated Notes. Additionally, onOctober 6, 2020 , the Company issued 9,583,334 units in an underwritten public offering at an offering price to of$9.00 per unit (the "Public Offering"), with each unit consisting of one share of our common stock and one warrant to purchase one share of our common stock at an exercise price of$10.50 per share, for total proceeds net of discount and equity issuance costs of$83.1 million . Prior to the closing of the Recapitalization Transaction, our primary source of liquidity was proceeds received from the issuance of related-party debt instruments, which were used to finance the 2019 restart of mining operations at theHycroft Mine and all working capital and capital expenditures thereafter. 44 -------------------------------------------------------------------------------- Table of Contents Our future liquidity and capital resources management strategy entails a disciplined approach to monitor the timing and amount of any drilling, metallurgical and mineralogical studies and operational tonnage ramp-up or ramp-down of theHycroft Mine while attempting to remain in a position that allows us to respond to changes in our business environment, such as a decrease in metal prices or lower than forecasted future cash flows, and changes in other factors beyond our control. As discussed in the Going concern subsection of the Recent Developments section of this MD&A, using estimates of future production levels and costs, operational metrics, and planned capital, project, drilling, and development costs, at current metal spot prices, we do not expect theHycroft Mine to report positive net operating cash flows during the 12 months following the issuance date of this report. We have undertaken efforts aimed at managing our liquidity and preserving our capital resources by, among other things: (i) monitoring metal prices and the impacts (near-term and future) they have on our business and cash flows; (ii) adopting a plan to cease open pit mining operations to reduce net cash outflows while continuing to process leach pad inventory until such time as it is no longer economic; (iii) reducing the size of our workforce to reflect the cessation of mining operations; (iv) controlling our working capital and managing discretionary spending; (v) reviewing contractor usage and rental agreements for more economic options, including termination of certain agreements in accordance with their terms; (vi) decreasing restricted cash balances that collateralize bonds; and (vii) planning the timing and amounts of capital expenditures and drilling, metallurgical and mineralogical study costs at theHycroft Mine and deferring such items that are not expected to benefit our near term operating plans. We are also undertaking additional efforts to: (i) monetize non-core assets and excess supplies inventories; (ii) return excess rental and leased equipment; (iii) sell certain uninstalled grinding mills that are not expected to be needed for a future milling operation; (iv) evaluate selling other uninstalled grinding mills if the proceeds contribute to enhancing a future milling operation; and (v) work with existing debt holders to adjust debt service requirements. In addition, as ofOctober 6, 2021 , we entered into an agreement withRandy Buffington , our former Chairman, President and Chief Executive Officer to terminate$0.7 million in aggregate future cash payments in exchange for the termination of the remainder of his restrictive covenant of non-competition and issuance of up to 275,000 shares of HYMC common stock. We are actively evaluating alternatives to raise additional capital necessary to fund future development and ongoing working capital needs and exploring other strategic initiatives to enhance stockholder value. Cash and liquidity We have placed substantially all of our cash in operating accounts with a well-capitalized financial institution, thereby ensuring balances remain readily available. Due to the nature of our operations and the composition of our current assets, our Cash, Accounts receivable, and metal inventories represent substantially all of our liquid assets on hand. Additionally, we are provided with additional liquidity as ounces are recovered from the Ore on leach pads, processed into finished goods, and sold at prevailing spot prices to our customers. The following table summarizes our projected sources of future liquidity, as recorded within our financial statements (dollars in thousands): September 30, 2021 December 31, 2020 Cash $ 19,753 $ 56,363 Accounts receivable 347 426 Metal inventories(1) 9,243 6,418 Ore on leach pads(2) 29,588 38,041 Total projected sources of future liquidity $
58,931 $ 101,248
(1)Metal inventories contained approximately 5,383 recoverable ounces of gold that are expected to be sold within the next 12 months. Assuming a gold selling price of$1,743 per ounce (theSeptember 30, 2021 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from our metal inventories would provide us with$9.4 million of revenue. See Note 4 - Inventories to the Notes to the Financial Statements for additional information. (2)The current portion of Ore on leach pads contained approximately 17,454 ounces of gold that are expected to be processed into finished goods and then sold within the next 12 months. Assuming a gold selling price of$1,743 per ounce (theSeptember 30, 2021 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from our ore on leach pads would provide us with$30.4 million of revenue. We also have ore on leach pads that is not expected to be processed into finished goods within the next 12 months of$6.3 million ; accordingly, we exclude this inventory from our projected sources of future liquidity. See Note 4 - Inventories to the Notes to the Financial Statements for additional information. 45 -------------------------------------------------------------------------------- Table of Contents Nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 The following table summarizes our sources and uses of cash for the following periods (dollars in thousands): Nine Months Ended September 30, 2021 2020 Net loss$ (41,328) $ (117,608) Net non-cash adjustments 10,710 68,973 Net change in operating assets and liabilities 3,568
(36,577)
Net cash used in operating activities (27,050)
(85,212)
Net cash used in investing activities (11,908)
(19,237)
Net cash (used in) provided by financing activities (3,036) 106,641 Net (decrease) increase in cash
(41,994) 2,192
Cash and restricted cash, beginning of period 96,040
48,967
Cash and restricted cash, end of period$ 54,046 $
51,159
Cash used in operating activities During the nine months endedSeptember 30, 2021 , we used$27.1 million of cash in operating activities primarily attributable to a net loss of$41.3 million , the cash impact of which was equal to$30.6 million , and$3.6 million used for working capital, which included$5.4 million used to increase production-related inventories. The largest non-cash items included in net income during the nine months endedSeptember 30, 2021 included a$11.0 million gain from Fair value adjustments to warrants and Non-cash portion of interest expense of$13.0 million . For the nine months endedSeptember 30, 2020 , we used$85.2 million of cash for operating activities primarily attributable to a net loss of$117.6 million , the cash impact of which was equal to$48.6 million , and$36.6 million used for working capital, including the operational ramp up following the 2019 restart of theHycroft Mine using a net$39.8 million to increase production-related inventory balances. Cash outflows during the nine months endedSeptember 30, 2020 were partially offset by certain non-cash expenses included in Net loss, including$34.7 million of non-cash interest expense and a$17.9 million Write-down of production inventories. Cash used in investing activities For the nine months endedSeptember 30, 2021 and 2020, we used$11.9 million and$19.2 million , respectively, in investing activities. For the nine months endedSeptember 30, 2021 , expenditures included (i)$3.7 million for purchased equipment and refurbishments; (ii)$5.6 million related to metallurgical and mineralogical studies; and (iii)$2.5 million spent for the leach pad expansion project (which excludes$0.7 million of capitalized interest) to complete construction to the appropriate point in which we believe there would be minimal risk of adverse impacts to the leach pad. For the nine months endedSeptember 30, 2020 , the majority of the capital expenditures related to construction of new leach pad space. Cash (used in) provided by financing activities During the nine months endedSeptember 30, 2021 we repaid$3.0 million of the Additional Interest and principal which is classified as debt under the terms of our Sprott Credit Agreement. Cash provided by financing activities was$106.6 million for the nine months endedSeptember 30, 2020 , which included proceeds from financing instruments consummated in connection with the Recapitalization Transaction of$254.8 million , offset by principal payments on debt of$132.4 million and payments for legal and consulting fees related to the Recapitalization Transaction of$15.8 million . 46 -------------------------------------------------------------------------------- Table of Contents Future capital and cash requirements The following table provides our gross contractual cash obligations as ofSeptember 30, 2021 , which are grouped in the same manner as they were classified in the cash flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information. We believe the following provides the most meaningful presentation of near-term obligations expected to be satisfied using current and available sources of liquidity (dollars in thousands): Payments Due by Period Less than 1 - 3 3 - 5 More than Total 1 Year Years Years 5 Years Operating activities: Net smelter royalty(1)$ 403,121 $ 1,766 $ 23,609 $ 25,806 $ 351,940 Remediation and reclamation expenditures(2) 62,032 - - - 62,032 Interest payments(3) 13,582 6,004 7,575 3 - Operating lease requirements(4) 8,185 2,616 5,569 - - Crofoot royalty(5) 4,630 120 480 480 3,550 Consignment inventory(6) 833 833 - - - Financing activities: Repayments of debt principal(7) 211,584 11,392 62,235 137,957 - Additional interest payments(8) 8,249 2,200 6,049 - - Total$ 712,216 $ 24,931 $ 105,517 $ 164,246 $ 417,522 (1)Under the Sprott Royalty Agreement, we are required to pay a perpetual royalty equal to 1.5% of the Net Smelter Returns from ourHycroft Mine , payable monthly that also includes an additional amount for withholding taxes payable by Sprott. Amounts presented above incorporate estimates of our current life-of-mine plan, and are based on consensus pricing for gold and silver. See Note 10 - Deferred Gain on Sale of Royalty to the Notes to the Financial Statements for additional information. (2)Mining operations are subject to extensive environmental regulations in the jurisdictions in which they are conducted and we are required, upon cessation of operations, to reclaim and remediate the lands that our operations have disturbed. The estimated undiscounted cash outflows of these remediation and reclamation obligations are reflected here. In the above presentation, no offset has been applied for the$59.3 million of our reclamation bonds or for the$34.3 million of cash collateral for those bonds included in Restricted Cash. (3)Under the Sprott Credit Agreement, we are required to pay interest beginning in the 13th month after the initial advance onMay 29, 2020 toSprott Private Resource Lending II (Collector), LP . (4)As noted below in the Off-balance sheet arrangements section of this MD&A, we have operating leases for mine equipment and office space. (5)We are required to pay a 4% net profits royalty, including advance royalty payments of$120,000 in any year where mining occurs on the Crofoot claims and an additional$120,000 if tons mined from the Crofoot claim blocks exceed 5.0 million tons. See Note 20 - Commitments and Contingencies. Amounts shown represent our current estimates of cash payment timing using consensus pricing for gold and silver. (6)As noted below in the Off-balance sheet arrangements section of this MD&A, and as discussed in Note 5 - Prepaids and Other, Net to the Notes to the Financial Statements, we have future purchase obligation for consignment inventory. (7)Repayments of principal on debt consists of amounts due under the Sprott Credit Agreement, the Subordinated Notes and notes payable for equipment purchases. Included in the repayment of the Subordinated Notes principal is interest that has been capitalized as payable in-kind on a quarterly basis, and on a monthly basis for the Sprott Credit Agreement for the first 12 months after the initial advance. (8)Additional interest payments consist of repayments of additional interest under the Sprott Credit Agreement, commencingFebruary 28, 2021 (with the first cash payment due three months after such date) and ending on the maturity date. 47 -------------------------------------------------------------------------------- Table of Contents Debt covenants Our debt agreements contain representations and warranties, events of default, restrictions and limitations, reporting requirements, and covenants that are customary for agreements of these types. The Sprott Credit Agreement contains covenants that, among other things, restrict or limit the ability of the Company to enter into encumbrances (other than Permitted Encumbrances), incur indebtedness (other than Permitted Indebtedness), dispose of its assets (other than Permitted Disposals), pay dividends, and purchase or redeem shares, as such terms are defined in the Sprott Credit Agreement. The Sprott Credit Agreement requires the Company to ensure that, at all times, both its Working Capital and Unrestricted Cash are at least$10.0 million , as such terms are defined in the Sprott Credit Agreement, and that at least every six months we demonstrate our ability to repay and meet all present and future obligations as they become due with a financial Model that uses consensus gold prices discounted by 5.0%, as such terms are defined in the Sprott Credit Agreement. The Subordinated Notes (as defined herein) include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non-compliance with security documents. As ofSeptember 30, 2021 , the Company was in compliance with all covenants under its debt agreements. OnNovember 9, 2021 , we entered into a waiver (the "Waiver") withSprott Private Resource Lending II (Collector), LP (the "Lender") of certain provisions of the Sprott Credit Agreement. Pursuant to the Waiver, the Lender has: (i) permitted the Company to cease active mining operations; and (ii) to reduce the amount of unrestricted cash required to be maintained by the Company from not less than$10.0 million to not less than$9.0 million for the period endingMay 10, 2022 . Off-balance sheet arrangements As ofSeptember 30, 2021 , our off-balance sheet arrangements consisted of operating lease agreements, a net profit royalty arrangement, a net smelter royalty arrangement (see Note 20 - Commitments and Contingencies to the Notes to the Financial Statements), and a future purchase obligation for consignment inventory (see Note 5 - Prepaids and Other, Net to the Notes to the Financial Statements). Subsequent Events Waiver and amendment of certain compensatory arrangements OnOctober 6, 2021 , the Company entered in a Waiver and Amendment to the Transition and Succession Agreement and Consulting Agreement withRandy Buffington , the former Chairman of the Board, President and Chief Executive Officer of the Company. The Waiver and Amendment amends the Transition and Succession Agreement and the Consulting Agreement between the Company andMr. Buffington , datedJuly 1, 2020 . The Waiver and Amendment terminated the remaining unpaid cash payments toMr. Buffington pursuant to the Transition and Succession Agreement and Consulting Agreement in the aggregate amount of$0.7 million , in exchange for the issuance of an aggregate of up to 275,000 shares of the Company's common stock, of which 137,500 was issued onOctober 8, 2021 , and the remaining shares to be issued onJune 30, 2022 . Waiver of certain Sprott Credit Agreement provisions OnNovember 9, 2021 , the Company entered into a waiver (the "Waiver") withSprott Private Resource Lending II (Collector), LP (the "Lender") of certain provisions of the Sprott Credit Agreement. Pursuant to the Waiver, the Lender has: (i) permitted the Company to cease active mining operations; and (ii) to reduce the amount of unrestricted cash required to be maintained by the Company from not less than$10.0 million to not less than$9.0 million for the period endingMay 10, 2022 . Appointment of New Chairman to Board of Directors OnNovember 9, 2021 ,David Kirsch notified the Company's board of directors of his resignation as a director and Chairman of the board of directors, effective immediately.Mr. Kirsch's decision was not the result of any dispute or disagreement with the Company on any matter relating to the Company's operations, policies or practices. OnNovember 9, 2021 , the Company's board of directors appointed its independent lead director,Eugene Davis , to replaceMr. Kirsch as Chairman of the board of directors. Retirement of Executive Officer Mr.Jack Henris has announced his retirement effective as of the end of 2021 and will remain available to assist with the finalization of the Acid POX PFS and other technical work. 48 -------------------------------------------------------------------------------- Table of Contents Accounting Developments For a discussion of any recently issued and/or recently adopted accounting pronouncements, see Note 2 - Summary of Significant Accounting Policies to the Notes to the Financial Statements. Critical Accounting Estimates This MD&A is based on our Condensed Financial Statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of these statements requires us to make assumptions, estimates, and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. For information on the most critical accounting estimates used to prepare the Condensed Financial Statements, see the Critical Accounting Estimates section included in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , as amended onMay 14, 2021 . The following new critical accounting estimate was adopted during the nine months endedSeptember 30, 2021 , see Note 2 - Summary of Significant Accounting Policies to the Notes to the Financial Statements for additional information. Fair value of warrant liability Estimate Required: We account for the 5-Year Private Warrants to purchase shares of our common stock that are not indexed to our own stock as liabilities at fair value on the balance sheet. The warrants are subject to remeasurement at each balance sheet date, and any change in fair value is recognized as a component of Other (expense) income, net on the statement of operations. We will continue to adjust the liability for changes in fair value of the 5-Year Private Warrants until the earlier of the (i) exercise or expiration of the 5-Year Private Warrants or (ii) the transfer of any 5-Year Private Warrants to any personwho is not a permitted transferee, at which time the applicable warrant liability will be extinguished and will be reclassified to additional paid-in capital. We use the closing market price to estimate the fair value of our 5-Year Public Warrants and our Public Offering Warrants. The terms of the 5-Year Private Warrants are substantially identical to the 5-Year Public Warrants except the 5-Year Private Warrants, while held by theSPAC sponsor and/orSPAC underwriter and their permitted transferees, are precluded from mandatory redemption and are entitled to exercise on a "cashless basis" at the holder's election. Accordingly, we use a Black-Scholes model with an appropriate estimate of volatility considering volatility of the 5-Year Public Warrants and using a Monte Carlo simulation model to incorporate the redemption and cashless exercise features in the 5-Year Private Warrants. Significant judgment is required in determining the expected volatility of our common stock. Due to the limited history of trading of our common stock, we determined expected volatility based on a peer group of publicly traded companies. Increases (decreases) in the assumptions result in a directionally similar impact to the fair value of the Warrant liability.
Impact of Change in Estimate:
A
Cautionary Statement Regarding Forward-Looking Statements In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by theSEC , all as may be amended from time to time. All statements, other than statements of historical fact, included herein or incorporated by reference, that address activities, events or developments that we expect or anticipate will or may occur in the future, are forward-looking statements, including but not limited to such things as: The words "estimate", "plan", "anticipate", "expect", "intend", "believe", "project", "target", "budget", "may", "can", "will", "would", "could", "should", "seeks", or "scheduled to", or other similar words, or negatives of these terms or other variations of these terms or comparable language or any discussion of strategy or intentions identify forward-looking statements. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefit of the "safe harbor" provisions of such laws. These statements involve known and unknown risks, uncertainties, assumptions, and other factors that 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 49 -------------------------------------------------------------------------------- Table of Contents statements. Forward-looking statements are based on current expectations. Important factors that could cause actual results, performance, or achievements to differ materially from those in the forward-looking statements include, but are not limited to: 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. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results, performance or achievements may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results, performance, or achievements are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results, performance or achievements may not be indicative of results, performance or achievements in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. Please see "Risk Factors" set forth in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , as amendedMay 14, 2021 , and in this Quarterly Report on Form 10-Q, for more information about these and other risks. These risks may include the following and the occurrence of one or more of the events or circumstances 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 price 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 ofU.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 legislation inNevada 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 theHycroft 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 the decline of our gold and silver production; 50
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Table of Contents •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 delays in completing the Acid POX PFS and providing updated information on our mining process and mineral reserves and mineral resources; •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 operation and net losses in the future; •Uncertainties related to our ability to replace and expand our ore 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; •Any failure to remediate any possible litigation as a result of a material weakness in our internal controls over financial reporting; 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; •Potential declines in the value of our common stock and warrants due to substantial future sales of our common stock and/or warrants; •Risks that the warrants may expire worthless; •The valuation of our 5-Year Private Warrants could increase the volatility in our net income (loss). •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.
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