HYCROFT MINING HOLDING CORPORATION The following discussion, which has been prepared based on information available to us as ofMay 4, 2022 , provides information that we believe is relevant to an assessment and understanding of our consolidated operating results and financial condition. 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 condensed consolidated financial statements (the "Financial Statements") and the notes thereto (the "Notes") included in this Quarterly Report on Form 10-Q for the three months endedMarch 31, 2022 . 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 2022 and 2021 and year-to-year comparisons between 2022 and 2021.
Introduction to the Company
We are aU.S. -based gold and silver development company that is focused on developing our wholly ownedHycroft Mine in a safe, environmentally responsible, and cost-effective manner. Gold and silver sales represent 100% of our 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 inWinnemucca, Nevada . We recently filed the 2022 Hycroft TRS which contemplates processing gold and silver ore using milling and pressure oxidation to process sulfide ore along with heap leaching to process oxide and transition ore.
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 three months of 2022, we reported no lost time accidents.The Hycroft Mine's total recordable injury 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 three months of 2022 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 0.29 atMarch 31, 2022 , compared with approximately 0.64 atDecember 31, 2021 , an approximate 54% 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.
27--------------------------------------------------------------------------------
Table of Contents
Executive Summary
During the first three months endedMarch 31, 2022 , we continued producing gold and silver from ore on the leach pads and expect to continue as long as it remains economic. When the operation was re-started in 2019, mining oxide and transition ore allowed the Company to pre-strip overburden with some revenue offset to gain access to commercial scale sulfide mineralization. With the change in focus from the Novel Process 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 concluded in the first quarter of 2022, and metallurgical analysis and test work is expected to continue through third quarter of 2022. 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 oxidation or alkaline pressure 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 process has significantly better economics than other processes studied. Therefore, the Company focused its study efforts and resources solely on the Acid POX Initial Assessment which was prepared by Ausenco, with an effective date ofFebruary 18, 2022 . The Acid POX process included in the 2022 Hycroft TRS is 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.
2022 Highlights
•Safety - Hycroft's safety performance continued to improve with a 0.29 trailing 12-month TRIFR at the end of the first quarter of 2022. This represents an approximate 54% reduction in TRIFR compared with 0.64 at the end of 2021.
•Production - Gold production for the three months ended
•Strengthened balance sheet:
•Raised gross cash proceeds of
•Amended the Sprott Credit Agreement such that no further scheduled payments of principal are required prior to maturity, which was extended by two years toMay 31, 2027 , after raising the$50.0 million minimum equity and paying a$3.3 million fee in-kind. In addition, we made a prepayment of$23.9 million as required under the amended agreement.
•Amended the Subordinated Notes to extend debt maturity by two years to
•The Company ended the first quarter of 2022 with
•Finalized Initial Assessment Technical Report - The Company along with its third-party consultants, completed and filed the Initial Assessment Technical Report Summary for theHycroft Mine ("2022 Hycroft TRS") with an effective date ofFebruary 18, 2022 . As ofMarch 31, 2022 , theHycroft Mine had measured and indicated mineral resources of 9.6 million ounces of gold and 446.0 million ounces of silver and inferred mineral resources of 5.0 million ounces of gold and 150.4 million ounces of silver, which are contained in oxide, transitional and sulfide ores. Project Update •Drill Results - As we initially reported in ourFebruary 22, 2022 news release, results from our 2021 drill program continue to be delayed due to backlogs in the independent labs associated with reduced staffing levels from the Covid-19 pandemic and high demand for these services. To date, we have received results for approximately 30% of the drill samples. Additional results on the remaining samples are anticipated to be received over the course of the next two quarters, assuming no further delays. 28
--------------------------------------------------------------------------------
Table of Contents
•Potential under-estimation of silver in the resource model - Following our review of the resource in 2021, we announced onFebruary 22, 2022 , that silver may be under-estimated in the resource model noting that a significant portion of historical drilling in the database does not include assay information for silver. With silver currently estimated to contribute 40-50% of the potential value at theHycroft Mine under the milling process, we believe this information is an important factor to the overall understanding of the resource. This represents a significant potential opportunity at Hycroft. We have located a portion of the historical pulps and have sent them to an independent lab to re-analyze for the missing silver values. It may become necessary to conduct additional drilling to gather samples for the other areas of missing silver values as it could yield a significant opportunity for additional economic benefit. •Exploration - We have initiated work to conduct a robust exploration program during 2022 to follow up on the significant intercepts previously disclosed in our press releases ofSeptember 8, 2021 andFebruary 22, 2022 . There has been no exploration drilling at Hycroft since 2014 and no prior focus on understanding the potential feeder to the resource.
Recent Developments
COVID-19
We have implemented health and safety policies for employees, contractors, and visitors that follow the guidelines published by theCenter for Disease Control ("CDC") and theMine Safety and Health Administration ("MSHA"). During the three months endedMarch 31, 2022 , our operations faced certain limitations due to COVID-19, however the impact, while negative, did not materially and adversely impact our operations. Mineral Resource Update Gold equivalent mineral resources totaled 15.5 million ounces of measured and indicated and 6.9 million ounces of inferred. For this study, IMC developed theHycroft Mine resource block model which includes data from 1981 to 2018 and includes 5,501 holes, representing 2,482,722 ft of drilling. The current inflationary environment and change in processing technique has resulted in increased cost assumptions and an associated higher cut-off grade partially mitigated by higher recoveries leading to a change in the mineral resource estimate, when compared with the prior model.
The mineral resources were estimated based upon results of the 2022 Hycroft TRS, as conducted in accordance with the Modernization Rules.
Private Placement
OnMarch 14, 2022 , the Company entered into subscription agreements (the "Subscription Agreements" and each a "Subscription Agreement") with each ofAmerican Multi-Cinema, Inc. ("AMC") and 2176423Ontario Limited , an entity affiliated withEric Sprott ("Sprott" and together with AMC, the "Purchasers"), pursuant to which the Company agreed to sell to the Purchasers, in a private placement, an aggregate of 46,816,480 units ("Units") at a purchase price per Unit of$1.193 , with each Unit consisting of one share of common stock, and one warrant to purchase a share of common stock and the shares issuable upon exercise of the warrants (the "Warrant Shares"), providing for a total purchase price of approximately$55.9 million (the "Private Placement"). The Warrants issued in the Private Placement have an exercise price of$1.068 per Warrant Share and will expire five years after issuance. The closing of the sales of securities pursuant to the Subscription Agreements occurred onMarch 15, 2022 for gross proceeds to the Company of approximately$55.9 million before deducting expenses incurred in connection with the Private Placement. The Company intends to use the proceeds for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness, working capital or capital expenditures and other investments, which may include additional technical evaluations and studies, advancement of the Initial Assessment in the 2022 Hycroft TRS to a pre-feasibility and/or feasibility study and additional exploration at theHycroft Mine .
The Subscription Agreement with AMC, as amended, also provided AMC with the right to appoint a director to the Company's board of directors (the "Board") and the Company agreed to support such director's nomination so long as AMC retains at least 50% of the common stock purchased under the Subscription Agreement with AMC and holds at least 5% of the outstanding voting securities.
As required by the Subscription Agreements, the Company prepared and filed a
resale registration statement with the
29--------------------------------------------------------------------------------
Table of Contents
Agreement with
OnNovember 10, 2021 , the Company entered into a waiver with Sprott Private Resource Lending II (Collector) (the "Lender") of certain provisions of the Amended and Restated Credit Agreement effectiveNovember 10, 2021 (the "November 2021 Waiver"). Pursuant to theNovember 2021 Waiver, the Lender permitted the Company to cease active mining operations and 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 OnFebruary 28, 2022 the Company entered into a waiver and amendment agreement with the Lender (the "February 2022 Waiver and Amendment") amending the previous waiver and require that the Company maintain at least$7.5 million of Unrestricted Cash on the last day ofFebruary 2022 and at least$9.0 million on the last day of each month thereafter during the waiver period, waived all obligations of the Company to prepay the facility with the net cash proceeds of any mill asset sales until the earlier of the date on which the Company completes a private placement or other offering or issuance of its equity securities andMarch 31, 2022 , and extended the payment due date for the February additional interest payment and the February principal payment until the earlier of any such offering date andMarch 31, 2022 . OnMarch 11, 2022 , the Company entered into an agreement (the "March 2022 Sprott Agreement") with the Lender with respect to the Amended and Restated Credit Agreement, dated as ofMay 29, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the "Sprott Credit Agreement") among the Company, the Lender, the Guarantors (as defined in the Sprott Credit Agreement) and the other parties thereto. As described in theMarch 2022 Sprott Agreement, the Company was contemplating the sale or issuance of its equity securities pursuant to one or more transactions to be completed on or beforeMarch 31, 2022 (the "Equity Financing Transactions"). Pursuant to theMarch 2022 Sprott Agreement, if the Equity Financing Transactions resulted (or were likely to result pursuant to definitive subscription underwriting and/or similar legally binding agreements) in the Company's receipt of total gross cash proceeds (before deduction of fees and expenses) of at least$50 million on or beforeMarch 31, 2022 (the "Required Equity Amount"), the Lender and the Company were obligated to amend the principal repayment terms under the Sprott Credit Agreement such that no further scheduled payments of principal shall be required prior toMay 31, 2025 (the "Maturity Date") (i.e., there will be no required regular amortization payments of the facility and the full principal balance of the facility shall be due and payable in a single "bullet" payment on the Maturity Date). The consummation of the Private Placement as described under "Private Placement" above satisfied the Required Equity Amount condition in theMarch 2022 Sprott Agreement. TheMarch 2022 Sprott Agreement also provided that, in connection with the modification of the required facility amortization payments, the Company shall pay in-kind to the Lender an amount equal to$3.3 million , with such amount to be capitalized and added to the principal amount owing under the Sprott Credit Agreement and accrue interest at the same rate and upon the same terms as the existing loans under the Sprott Credit Agreement; provided, the payment or prepayment of such capitalized principal amount shall not be subject to the Prepayment Premium (as defined in the Sprott Credit Agreement) or any other penalty or premium.
Second Amendment and Restatement of the Sprott Credit Agreement
OnMarch 14, 2022 , the Company reached an agreement in principle with the Lender to modify the terms of the Sprott Credit Agreement and other applicable loan documents. OnMarch 30, 2022 , the Company and Lender under the Sprott Credit Agreement entered into the Second Amended and Restated Credit Agreement datedMarch 30, 2022 ("Second A&R Agreement"), which (a) extended the maturity date for all of the loans and other principal obligations under the Sprott Credit Facility (as such term is defined in the Second A&R Agreement) by two years, toMay 31, 2027 ; (b) provided for the Company to prepay principal under the Sprott Credit Facility in the amount of$10.0 million promptly upon the Company's receipt of cash proceeds from the Private Placement offering (the "Initial Equity Proceeds Prepayment"); (c) provided for the Company to prepay principal under the Second A&R Agreement in the amount of$13.9 million (representing 10% of the subsequent issuance of its equity interests consummated on or prior toMarch 31, 2022 ) (the "Subsequent Equity Proceeds Prepayments"); and (d) eliminated the prepayment premiums otherwise payable with respect to the Initial Equity Proceeds Prepayment, the Subsequent Equity Proceeds Prepayments and all future prepayments of principal under the Sprott Credit Facility. In addition, the Company's obligations (i) to prepay principal with proceeds of asset sales were credited/offset by the$23.9 million aggregate amount of Initial Equity Proceeds Prepayment and the Subsequent Equity Proceeds Prepayments, and (ii) to maintain a minimum amount of Unrestricted Cash (as defined in the Second A&R Agreement) was increased to$15.0 million . Pursuant to the agreement in principle, the Company made the Initial Equity Proceeds Prepayment of$10.0 million and paid in kind a$3.3 million fee in connection with the modification and capitalized it to principal onMarch 16, 2022 and following the execution of the Second A&R Agreement onMarch 30, 2022 , the Company (i) paid the previously deferred additional interest payment of$0.5 million , and (ii) made the Subsequent Equity Proceeds Prepayment of$13.9 million . After giving effect to 30
--------------------------------------------------------------------------------
Table of Contents
such prepayments the outstanding principal balance under the Second A&R
Agreement was
At-the-market Offering of Common Shares
OnMarch 15, 2022 , the Company implemented an "at-the-market offering" program ("ATM Program") by entering into an At Market Issuance Sales Agreement (the "Sales Agreement") withB. Riley Securities, Inc. (the "Agent"). Under the terms of the Sales Agreement, the Company had the right from time to time to or through the Agent, acting as sales agent or principal, to offer and sell shares of the Company's common stock having a gross sales price of up to$500.0 million . The compensation payable to the Agent for sales of shares pursuant to the Sales Agreement was equal to 3.0% of the gross sales price for any shares of common stock sold through the ATM Program by Agent as sales agent under the Sales Agreement. Shares sold under the Sales Agreement, were issued pursuant to the Company's shelf registration statement on Form S-3 (No. 333-257567) (the "Registration Statement") that theSEC declared effective onJuly 13, 2021 , including the prospectus, datedJuly 13, 2021 , and the prospectus supplement, datedMarch 15, 2022 . OnMarch 25, 2022 , the Company terminated the ATM Program having sold 89,553,584 shares of common stock and generated aggregate gross proceeds before commissions and offering expenses of approximately$138.6 million .
Amendment to the 10% Senior Secured Notes and Note Exchange Agreement
OnMarch 14, 2022 , the Company entered into an amendment to the 10% Senior Secured Notes and Note Exchange Agreement (the "Note Amendment"), with (i) certain direct and indirect subsidiaries of the Company as Guarantors; (ii) holders of the 10% Senior Secured Notes (the "Subordinated Notes"), including certain funds affiliated with, or managed by,Mudrick Capital Management , L.P,Whitebox Advisors, LLC ,Highbridge Capital Management, LLC ,Aristeia Highbridge Capital Management, LLC andWolverine Asset Management, LLC (collectively, the "Amending Holders"), and (iii)Wilmington Trust, National Association , in its capacity as collateral agent. The Note Amendment amends the Note Exchange Agreement dated as ofJanuary 13, 2020 (the "Note Exchange Agreement") and the Subordinated Notes issued thereunder in order to extend the maturity date of the Subordinated Notes fromDecember 1, 2025 toDecember 1, 2027 . The Note Amendment also removes the requirements that a holder receive the consent of the Company and the other holders in order to transfer any Subordinated Note. The Amending Holders constituted all of the holders of the Subordinated Notes. The Note Amendment became effective upon the closing of the Private Placement Offering upon receipt of$55.9 million gross cash proceeds (before deduction of fees and expenses).
Amendment to the Company's Second Amended and Restated Certificate of Incorporation
OnMarch 11, 2022 , the Board approved an amendment to the Company's Second Amended and Restated Certificate of Incorporation increasing the number of authorized shares of the Company's common stock by 1,000,000,000 to a total of 1,400,000,000 (the "Certificate of Incorporation Amendment") and directed that the Certificate of Incorporation Amendment be submitted for consideration by the stockholders of the Corporation. OnMarch 15, 2022 , AMC, Sprott, and entities affiliated withMudrick Capital Management LP , who together constituted the holders of a majority of the common stock, approved the Certificate of Incorporation Amendment by written consent. The Certificate of Incorporation Amendment became effective upon filing of the Certificate of Incorporation Amendment with theDelaware Secretary of State onApril 22, 2022 , 20 days after the Company commenced distribution of an Information Statement on Schedule 14C to the stockholders of the Company.
2022 Outlook
Our current operating plan is to: (i) operate safely as we continue to process
heap leach inventory until it is no longer economic; (ii) complete the
metallurgical test work associated with the variability drilling program; (iii)
conduct exploration activities and targeted exploration drilling; and (iv)
continue to advance the Acid POX technical study to a pre-feasibility or
feasibility level.
31--------------------------------------------------------------------------------
Table of Contents
Technical Activities
During the first quarter of 2022, 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 2022. The drilling program was completed inJanuary 2022 , and the metallurgical test work portion of the program is expected to be completed in the early third quarter of 2022. Lab testing continues to be challenged by labor shortages and equipment availability. As ofMarch 31, 2022 , we have spent$8.0 million under the program. Ongoing and future technical work for theHycroft Mine will be primarily focused on 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. •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 currently 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. •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.
32--------------------------------------------------------------------------------
Table of ContentsHycroft Mine Operations The following table provides a summary of operating results for theHycroft Mine : Three Months Ended March 31, 2022 2021 Ore mined - sulfide stockpile (ktons) - 419 Ore mined - crusher feed (ktons) - - Ore mined - ROM (ktons) - 2,466 Total ore mined (ktons) - 2,885 Waste mined (ktons) - 1,195 Total mined (ktons) $ - 4,080 Waste tons to ore tons strip ratio (#) - 0.41 Ore grade mined - gold (oz/ton) - 0.013 Ore grade mined - silver (oz/ton) - 0.258 Production - gold (oz) 5,358 13,858 Production - silver (oz) 16,861 94,845 Ounces sold - gold (oz) 4,773 9,830 Ounces sold - silver (oz) 10,934 57,236
Average realized sales price - gold ($/oz)
As shown above, tons mined, ounces produced and ounces sold decreased during the three months endedMarch 31, 2022 , compared with the same period of the prior year. These decreases reflect the Company's decision to cease mining operations inNovember 2021 . The Company expects to continue to process gold and silver ore on leach pads until such time that it is no longer economic to do so and as a result, due to the increases in the spot prices for gold during the first quarter of 2022, the average realized prices increased during the three months endedMarch 31, 2022 . 33
--------------------------------------------------------------------------------
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
March 31,
2022 2021
Gold revenue $ 8,906 $ 17,541
Gold ounces sold 4,773 9,830
Average realized price (per ounce)
During the three months endedMarch 31, 2022 , gold revenue was$8.9 million , compared to$17.5 million for the comparable period of 2021. The significant decrease in revenue during the 2022 period was attributable to the cessation of mining operations inNovember 2021 . As a result, significantly less ore was under leach during the 2022 period as compared to the prior period of 2021. This decrease was partially offset by an increase in the average realized price which was due to higher spot prices for gold during the three months endedMarch 31, 2022 . 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
March 31,
2022 2021
Silver revenue $ 260 $ 1,495
Silver ounces sold 10,934 57,236
Average realized price (per ounce)
During the three months endedMarch 31, 2022 , silver revenue was$0.3 million compared to$1.5 million for the comparable period of 2021. Similar to gold revenue, the decrease in silver revenue during the first quarter of 2022 was attributable to the cessation of mining activities inNovember 2021 . 34
--------------------------------------------------------------------------------
Table of Contents
Total cost of sales
Total cost of sales consists of Production costs, Depreciation and amortization,
and Mine site period costs. The table below summarizes total cost of sales for
the following periods (dollars in thousands):
Three Months Ended
March 31,
2022 2021
Production costs $ 9,583 $ 17,817
Depreciation and amortization 920 1,041
Mine site period costs 6,469 10,544
Total cost of sales $ 16,972 $ 29,402
Production costs
For the three months ended March 31, 2022 , the Company recognized $9.6 million ,
in Production costs, or $2,008 per ounce of gold sold, compared to $17.8 million
or $1,813 per ounce of gold, sold during the same period of 2021. The decrease
in Production costs was primarily due to a respective decrease in gold ounces
sold of 5,057 ounces sold, partly offset by a higher average inventory cost per
ounce during the three months ended March 31, 2022 compared to the same periods
of 2021.
Depreciation and amortization
Depreciation and amortization was$0.9 million or$193 per ounce of gold sold for the three months endedMarch 31, 2022 , respectively, compared to$1.0 million or$106 per ounce of gold sold, during the same periods of 2021. The increase in total depreciation and amortization costs per ounce of gold sold was largely due to a decrease of 5,057 gold ounces sold during the three months endedMarch 31, 2022 compared to the same period of 2021.
Mine site period costs
During the three months endedMarch 31, 2022 , inclusive of depreciation and amortization, the Company recorded$6.5 million of Cost of sales for costs that were in excess of the net realizable value per ounce of gold inventories, compared to$10.5 million during the same periods of 2021. Such period costs are generally the result of costs related to activities at theHycroft Mine that do not qualify for capitalization to production-related inventories or adjustments to production inventories that are 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.
General and administrative
General and administrative totaled$3.1 million during the three months endedMarch 31, 2022 compared to$3.8 million during the same period of 2021. The decrease of$0.7 million during the three months endedMarch 31, 2022 was primarily due to decreases in salary and compensation costs of$0.6 million due to reduced headcount and consulting fees associated with former employees of the Company that ended during 2021 of$0.2 million . Such decreases were offset by an increase in insurance related costs of$0.1 million .
Projects, exploration and development
During the three months endedMarch 31, 2022 , Projects, exploration and development costs totaled$1.0 million compared to$0.5 million for the same period of 2021. Projects, exploration and development are related to: (i) completing technical studies; (ii) conducting geological studies; (iii) oversight and project management; and (iv) exploration drilling, engineering, and metallurgical activities. The increase of$0.5 million during the three months endedMarch 31, 2022 was the result of additional costs for the 2022 Hycroft TRS that was issued inFebruary 2022 without established mineral reserves. 35
--------------------------------------------------------------------------------
Table of Contents
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$5.3 million during the three months endedMarch 31, 2022 , compared to$4.4 million during the same period in 2021. The increase of$0.9 million during the three months endedMarch 31, 2022 was the result of a higher balance outstanding on the Subordinated Notes atMarch 31, 2022 as compared to the same period in 2021. The higher outstanding balance for the Subordinated Notes was due to quarterly interest payments that are paid in-kind as additional indebtedness.
Fair value adjustments to warrants
During the three months ended
During the three months ended
Refer to Note 11 - Warrant Liabilities to the Notes to the Financial Statements for further detail.
Income taxes There was no income tax benefit or expense, net, recognized during the three months endedMarch 31, 2022 and 2021. The Company has not recorded any future income tax benefits for net losses, due to a full valuation allowance recorded against the net operating loss carryforward. Section 382 of the Internal Revenue Code ("IRC") imposes limitations on the use ofU.S. federal net operating losses ("NOLs") upon a more than 50% change in ownership in the Company (as defined in the IRC) within a three-year period. In connection with its at-the-market equity offering, the Company underwent a Section 382 ownership change onMarch 25, 2022 . As a result, utilization of the Company's NOL's and certain unrealized losses are limited on an annual basis. If the Section 382 annual limitation amount is not fully utilized in a particular tax year, then the unused portion from that tax year is added to the Section 382 annual limitation in subsequent years. The Company's annual limitation under Section 382 is estimated to be approximately$1.3 million .
For additional details, refer to Note 16 - Income Taxes to the Notes to the Financial Statements.
Net loss
For the reasons discussed above, the Company recorded a net loss of$22.1 million for the three months endedMarch 31, 2022 , which included a loss from Fair value adjustments to warrants of$5.3 million compared to net losses of$9.7 million for the three months endedMarch 31, 2021 , which included a$9.5 million gain from Fair value adjustment to warrants.
Liquidity and Capital Resources
General
The Company's unrestricted cash position atMarch 31, 2022 was$172.8 million as compared with$12.3 million atDecember 31, 2021 . While the Company plans to continue processing gold and silver ore on the leach pads after ceasing mining operations and partially offset the cash that is projected to be used in operations and investing activities, the Company does not expect to generate net positive cash for the foreseeable future. Accordingly, the Company will be dependent on its unrestricted cash and other sources of cash to fund the business. As discussed in Note 13 - Stockholders' Equity in the Notes to the Financial Statements, the Company raised gross proceeds of approximately$194.4 million inMarch 2022 , before deduction of commissions and expenses, through the following equity financings: •OnMarch 14, 2022 , the Company entered into the Subscription Agreements withAmerican Multi-Cinema, Inc. and 2176423Ontario Limited pursuant to which the Company sold onMarch 15, 2022 an aggregate of 46,816,480 units, each unit consisting of one share of common stock and one warrant to purchase one share of common stock, at a purchase price of$1.193 per unit for total gross proceeds, before deduction of fees and expenses, of$55.9 million . •OnMarch 15, 2022 , the Company implemented the ATM Program. OnMarch 25, 2022 the Company terminated the ATM Program and announced that it had sold 89,553,584 shares of common stock under the ATM Program and generated aggregate gross proceeds before commissions and offering expenses of approximately$138.6 million . 36
--------------------------------------------------------------------------------
Table of Contents
In addition, the Company will continue to evaluate alternatives to raise additional capital necessary to fund the future development of theHycroft Mine and will continue to explore other strategic initiatives to enhance stockholder value. Historically, the Company has been dependent on various forms of debt and equity financing to fund its business. While the Company has been successful in the past raising funds through equity and debt financings, no assurance can be given that additional financing will be available to it in amounts sufficient to meet the Company's needs or on terms acceptable to the Company. In the event that funds are not available, the Company may be required to materially change its business plans. To avoid potential non-compliance with the Sprott Credit Agreement, the Company obtained a series of waivers and entered into amendments to the Sprott Credit Agreement. Please see Debt Covenants below and Note 9 - Debt, Net in the Notes to the Financial Statements for information regarding additional waivers received and modifications to the Sprott Credit Agreement, including the Second A&R Agreement. The Company's future liquidity and capital resources management strategy entails a disciplined approach to monitor the timing and depth of any drilling, metallurgical and mineralogical studies and the continuation of processing the remaining leach pad inventory while attempting to remain in a position that allows the Company to respond to changes in the business environment, such as a decrease in metal prices or lower than forecasted future cash flows, and changes in other factors beyond the Company's control. The Company has undertaken efforts aimed at managing its liquidity and preserving its capital resources by, among other things: (i) monitoring metal prices and the impacts (near-term and future) they have on the business and cash flows; (ii) ceasing 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 the workforce to reflect the cessation of mining operations; (iv) controlling 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, as available; 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. The Company has undertaken and continue to undertake additional efforts to: (i) monetize non-core assets and excess materials and 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) sell 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. Cash and liquidity The Company has placed substantially all of its 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 current assets, Cash and metal inventories represent substantially all of the liquid assets on hand. Additionally, the Company is 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 customers.
The following table summarizes projected sources of future liquidity, as recorded within the Financial Statements (dollars in thousands):
March 31, 2022 December 31, 2021
Cash $ 172,778 $ 12,342
Metal inventories(1) 6,976 6,693
Ore on leach pads(2) 3,680 10,106
Assets held-for-sale 10,308 11,558
Total projected sources of future liquidity
40,699
(1)Metal inventories contained approximately 3,869 recoverable ounces of gold that are expected to be sold within the next 12 months. Assuming a gold selling price of$1,942 per ounce (theMarch 31, 2022 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from metal inventories would provide$7.5 million of revenue. See Note 3 - Inventories and Ore on Leach Pads to the Notes to the Financial Statements for additional information. (2)Ore on leach pads contained approximately 2,693 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$1,942 per ounce (theMarch 31, 2022 P.M. fix) and excluding any proceeds from silver sales, the sale of all gold ounces estimated to be recovered from ore on leach pads would provide$5.2 million of revenue. See Note 3 - Inventories and Ore on Leach Pads to the Notes to the Financial Statements for additional information. 37
--------------------------------------------------------------------------------
Table of Contents
Three months ended
The following table summarizes sources and uses of cash for the following periods (dollars in thousands):
Three Months Ended
March 31,
2022 2021
Net loss $ (22,060) $ (9,688)
Net non-cash adjustments 9,954 (2,846)
Net change in operating assets and liabilities 5,190 (2,227)
Net cash used in operating activities (6,916)
(14,761)
Net cash used in investing activities 1,610
(5,082)
Net cash (used in) provided by financing activities 165,742
-
Net (decrease) increase in cash 160,436
(19,843)
Cash and restricted cash, beginning of period 46,635
96,040
Cash and restricted cash, end of period$ 207,071 $
76,197
Cash used in operating activities
During the three months endedMarch 31, 2022 , the Company used$6.9 million of cash in operating activities primarily attributable to a net loss of$22.1 million , the cash impact of which was equal to$12.1 million , and$5.2 million was provided by working capital, which included a$6.1 million decrease for production-related inventories as the Company continues to process the remaining gold and silver ore on its leach pads which was partly offset by cash used to reduce Accounts payable of$2.8 million . The largest non-cash items included in net loss during the three months endedMarch 31, 2022 included a$5.3 million loss from Fair value adjustments to warrants and Non-cash portion of interest expense of$3.8 million . For the three months endedMarch 31, 2021 , the Company used$14.8 million of cash in operating activities primarily attributable to a net loss of$9.7 million , the cash impact of which was$12.5 million , and$2.2 million was used for working capital, which included$4.0 million used to increase production-related inventories. The largest non-cash items included in net loss for the three months endedMarch 31, 2021 included a$9.5 million gain from Fair value adjustments to warrants and Non-cash portion of interest expense of$4.4 million .
Cash provided by (used in) investing activities
For the three months endedMarch 31, 2022 , investing activities provided cash of$1.6 million primarily from the sale of a regrind mill, which was included in Assets held for sale, for gross proceeds of$1.3 million and other mobile mine equipment and materials and supplies for proceeds of$0.7 million . In addition, the Company purchased mobile mine equipment of$0.4 million . For the three months endedMarch 31, 2021 , the Company used$5.1 million in investing activities which primarily related to expenditures of$2.5 million (exclusive of capitalized interest of$0.7 million ) for the leach pad expansion project and$1.4 million for purchased equipment. The Company completed construction of the leach pad to the appropriate point at which the Company believes there would be minimal risk of adverse impacts to the leach pad.
Cash provided by financing activities
During the three months endedMarch 31, 2022 cash provided by financing activities of$165.7 million was primarily related to the equity offerings completed during the period: (i) the Private Placement offering completed onMarch 15, 2022 for gross proceeds of$55.9 million , and (ii) the ATM Program completed onMarch 25, 2022 for net proceeds of$134.3 million . These amounts were offset by the required prepayments under the Second A&R Agreement of$24.4 million , including$0.5 million of additional interest.
There were no cash financing activities during the three months ended
38--------------------------------------------------------------------------------
Table of Contents
Future capital and cash requirements
The following table provides the Company's gross contractual cash obligations as ofMarch 31, 2022 , which are grouped in the same manner as they were classified in the cash flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information. The Company believes that the following provides the most meaningful presentation of near-term obligations expected to be satisfied using current and available sources of liquidity (dollars in thousands): Payments Due by Period Less than 1 - 3 3 - 5 More than Total 1 Year Years Years 5 Years Operating activities: Net smelter royalty(1)$ 292,181 $ 1,766 $ 23,609 $ 25,806 $ 241,000 Remediation and reclamation expenditures(2) 70,100 - - - 70,100 Interest payments(4) 22,665 4,398 13,157 5,110 - Crofoot royalty(3) 4,630 - - - 4,630 Financing activities: Repayments of debt principal(4) 147,171 126 301 146,744 - Additional interest payments(5) 7,149 2,200 4,949 - - Total$ 543,896 $ 8,490 $ 42,016 $ 177,660 $ 315,730 (1)Under the Sprott Royalty Agreement, the Company is required to pay a perpetual royalty equal to 1.5% of the Net Smelter Returns from theHycroft Mine , payable monthly that also includes an additional amount for withholding taxes payable by the royalty holder. Amounts presented above incorporate estimates of the current life-of-mine plan for mineral resources 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)The Company is required to pay a 4% net profits royalty, including advance royalty payments of$120,000 in any year where mining occurs on the Crofoot claims and an additional$120,000 if tons mined from the Crofoot claim blocks exceed 5.0 million tons. See Note 21 - Commitments and Contingencies to the Notes to the Financial Statements for additional information.. Amounts shown represent the current estimates of cash payment timing using consensus pricing for gold and silver. (4)Repayments of principal on debt consists of amounts due under the Sprott Credit Agreement (as amended by the Second A&R 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 (as amended by the Second A&R Agreement) for the first 12 months after the initial advance. Also included in the repayment of the Sprott Credit Agreement is the$3.3 million fee that has been capitalized as payable in-kind in connection with the Second A&R Agreement. See Note 9 - Debt, Net to the Notes to the Financial Statements for additional information. (5)Additional interest payments consist of repayments of additional interest under the Sprott Credit Agreement (as amended by the Second A&R Agreement), commencingFebruary 28, 2021 (with the first cash payment due three months after such date) and ending on the maturity date. See Note 9 - Debt, Net to the Notes to the Financial Statements for additional information. 39
--------------------------------------------------------------------------------
Table of Contents
Debt covenants
The Company's debt agreements contain representations and warranties, events of default, restrictions and limitations, reporting requirements, and covenants that are customary for agreements of these types. The Sprott Credit Agreement (as amended by the Second A&R Agreement) contains covenants that, among other things, restrict or limit the ability of the Company to enter into encumbrances (other than Permitted Encumbrances), incur indebtedness (other than Permitted Indebtedness), dispose of its assets (other than Permitted Disposals), pay dividends, and purchase or redeem shares, as such terms are defined in the Sprott Credit Agreement (as amended by the Second A&R Agreement). The Sprott Credit Agreement (as amended by the Second A&R Agreement) requires the Company to ensure that, at all times, both its Working Capital and Unrestricted Cash are at least$10.0 million (subsequently reduced by the Waiver and Waiver Amendment discussed below), as such terms are defined in the Sprott Credit Agreement (as amended by the Second A&R Agreement), and that at least every six months the Company demonstrates its ability to repay and meet all present and future obligations as they become due with a financial model that uses consensus gold prices discounted by 5.0%. The Subordinated Notes 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 ofMarch 31, 2022 , the Company was in compliance with all covenants under its debt agreements. OnFebruary 28, 2022 , the Company entered into theFebruary 2022 Waiver and Amendment with the Lender amending theNovember 2021 Waiver. Pursuant to theFebruary 2022 Waiver and Amendment, the Lender: (i) waived the Company's obligation under the Sprott Credit Agreement to maintain at least$9.0 million of Unrestricted Cash on the last day of each calendar month during the period endingMay 10, 2022 (the "Waiver Period"), provided that, the Company maintained at least$7.5 million of Unrestricted Cash on the last day ofFebruary 2022 and at least$9.0 million on the last day of each month thereafter during the Waiver Period; (ii) waived all obligations of the Company to prepay the facility with the net cash proceeds of any Mill Asset Sales (as defined in theFebruary 2022 Waiver and Amendment) until the earlier of: (A) the date on which the Company completes a private placement or other offering or issuance of its equity securities (the "Offering Date"); and (B)March 31, 2022 ; and (iii) extended the payment due date for the additional February interest payment and the February principal payment until the earlier of: (A) the Offering Date; and (B)March 31, 2022 . Further, pursuant to theFebruary 2022 Waiver and Amendment, any failure by the Company to comply with the terms of the preceding sentence would constitute an immediate Event of Default under the Credit Agreement. OnMarch 11, 2022 , the Company entered into theMarch 2022 Sprott Agreement with the Lender with respect to the Sprott Credit Agreement. As described in theMarch 2022 Sprott Agreement, the Company was contemplating Equity Financing Transactions to be completed on or beforeMarch 31, 2022 . Pursuant to theMarch 2022 Sprott Agreement, if the Equity Financing Transactions result (or are likely to result pursuant to definitive subscription underwriting and/or similar legally binding agreements) in the Company's receipt of total gross cash proceeds (before deduction of fees and expenses) of the Required Equity Amount on or beforeMarch 31, 2022 , the Lender and the Company were obligated to amend the principal repayment terms under the Sprott Credit Agreement such that no further scheduled payments of principal shall be required prior toMay 31, 2025 (the "Maturity Date") (i.e., there will be no required regular amortization payments of the facility and the full principal balance of the facility shall be due and payable in a single "bullet" payment on the Maturity Date). The consummation of the Private Placement satisfied the Required Equity Amount condition in theMarch 2022 Sprott Agreement. TheMarch 2022 Sprott Agreement also provides that, in connection with the modification of the required facility amortization payments, the Company shall pay to the Lender an amount equal to$3.3 million , with such payment to be capitalized and added to the principal amount owing under the Sprott Credit Agreement and accrue interest at the same rate and upon the same terms as the existing loans under the Sprott Credit Agreement; provided, the payment or prepayment of such capitalized principal amount shall not be subject to the Prepayment Premium (as defined in the Sprott Credit Agreement) or any other penalty or premium. OnMarch 14, 2022 , the Company reached an agreement in principle with the Lender to modify the terms of the Sprott Credit Agreement and other applicable loan documents. OnMarch 30, 2022 , the Company and Lender under the Sprott Credit Agreement entered into the Second A&R Agreement, which: (a) extended the maturity date for all of the loans and other principal obligations under the Sprott Credit Facility by two years, toMay 31, 2027 ; (b) provided for the Initial Equity Proceeds Prepayment in the amount of$10.0 million promptly upon the Company's receipt of cash proceeds from the Private Placement; (c) provided for the Subsequent Equity Proceeds Prepayments in the amount of$13.9 million (representing 10% of the subsequent issuance of its equity interests consummated on or prior toMarch 31, 2022 ); and (d) eliminated the prepayment premiums otherwise payable with respect to the Initial Equity Proceeds Prepayment, the Subsequent Equity Proceeds Prepayments and all future prepayments of principal under the Sprott Credit Facility. In addition, the Company's obligations to: (i) prepay principal with proceeds of asset sales were credited/offset by the$23.9 million aggregate amount of Initial Equity 40
--------------------------------------------------------------------------------
Table of Contents
Proceeds Prepayment and the Subsequent Equity Proceeds Prepayments; and (ii) to maintain a minimum amount of Unrestricted Cash was increased to$15.0 million . Pursuant to the agreement in principle, the Company made the Initial Equity Proceeds Prepayment of$10.0 million and paid in kind a$3.3 million fee in connection with the modification and capitalized it to principal onMarch 16, 2022 and following the execution of the Second A&R Agreement onMarch 30, 2022 , the Company: (i) paid the previously deferred additional interest payment of$0.5 million ; and (ii) made the Subsequent Equity Proceeds Prepayment of$13.9 million . After giving effect to such prepayments the outstanding principal balance under the Second A&R Agreement was estimated as ofMarch 31, 2022 to be$57.9 million (before issuance discounts) including unpaid additional interest of approximately$7.1 million .
Off-balance sheet arrangements
As of
Accounting Developments
The following accounting pronouncements were adopted by the Company during the
three months ended
InAugust 2020 , the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"). ASU 2020-06 simplifies guidance on accounting for convertible instruments and contracts in an entity's own equity including calculating diluted earnings per share. For emerging growth companies, the new guidance is effective for annual periods beginning afterDecember 15, 2022 . The Company early adopted ASU 2020-06 as ofJanuary 1, 2022 , with no material impact on its condensed consolidated financial statements or the related disclosures. In December of 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), as part as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of ASC 740, Income Taxes and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. For emerging growth companies, the new guidance was effective for annual periods beginning afterDecember 15, 2021 and the Company adopted ASU 2019-12 as ofJanuary 1, 2022 , with no material impact on its condensed consolidated financial statements or the related disclosures. InMay 2021 , the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of theFASB Emerging Issues Task Force ). ASU 2021-04 clarifies and reduces diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (e.g., warrants) that remain equity classified after modification or exchange. ASU 2021-04 provides guidance that will clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (i) an adjustment to equity and, if so, the related earnings per share effects, if any, or (ii) an expense and, if so, the manner and pattern of recognition. For emerging growth companies, the new guidance was effective for annual periods beginning afterDecember 15, 2021 and the Company adopted ASU 2021-04 as ofJanuary 1, 2022 , with no material impact on its condensed consolidated financial statements or the related disclosures.
Critical Accounting Estimates
This MD&A is based on the 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, 2021 .
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 41
--------------------------------------------------------------------------------
Table of Contents
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 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, 2021 , 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:
•Risks related to changes in our operations at the
•Risks associated with the cessation of pre-commercial scale mining operations
at the
•Uncertainties concerning estimates of mineral resources;
•Risks related to a lack of a completed feasibility study; and
•Risks related to our ability to re-establish commercially feasible mining operations.
•Industry related risks including:
•Fluctuations in the price of gold and silver;
•Uncertainties related to the ongoing COVID-19 pandemic;
•The intense competition in recruitment and retention of qualified employees within the mining industry;
•The commercial success of, and risks related to, our development activities;
•Uncertainties and risks related to our reliance on contractors and consultants;
•Availability and cost of equipment, supplies, energy, or reagents;
•The inherently hazardous nature of mining activities, including environmental risks;
•Potential effects of
•Uncertainties related to obtaining or retaining approvals and permits from governmental regulatory authorities;
•Cost of compliance with current and future government regulations, including environmental regulations;
•Potential challenges to title in our mineral properties;
•Our insurance may not be adequate to cover all risks associated with our business;
42--------------------------------------------------------------------------------
Table of Contents
•Risks associated with proposed legislation could significantly increase the cost of mine development on our unpatented mining claims;
•Risks associated with regulations and pending legislation governing issues involving climate change could result in increased costs, which could have a material adverse effect on our business; and
•Changes to the climate and regulations regarding climate change.
•Business-related risks including:
•Risks related to our ability to raise capital on favorable terms or at all;
•The loss of key personnel or our failure to attract and retain personnel;
•Risks related to our substantial indebtedness, including operating and financial restrictions under existing indebtedness, cross acceleration and our ability to generate sufficient cash to service our indebtedness;
•The costs related to our land reclamation requirements;
•Risks related to technology systems and security breaches;
•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;
•Risks related to potential dilution as a result of future equity offerings;
•Risks associated with future offerings of senior debt or equity securities;
•Risks related to delisting by Nasdaq;
•Risks that warrants may expire worthless and that certain warrants are being accounted for as a liability;
•Anti-takeover provisions could make a third-party acquisition of us difficult; and
•Risks related to limited access to our financial disclosure, as we have elected to take advantage of the disclosure requirement exemptions granted to emerging growth companies and smaller reporting companies.
© Edgar Online, source
