HYCROFT MINING HOLDING CORP [HYMCL] Filings

10-Q 1 hymc-20220930.htm 10-Q hymc-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38387

HYCROFT MINING HOLDING CORPORATION


(Exact name of registrant as specified in its charter)

Delaware


(State or other jurisdiction of incorporation or organization)

4300 Water Canyon Road, Unit 1 Winnemucca, Nevada


(Address of Principal Executive Offices)

82-2657796


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

89445


(Zip Code)

(775) 304-0260


(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

HYMC

The Nasdaq Capital Market

Warrants to purchase common stock

HYMCW

The Nasdaq Capital Market

Warrants to purchase common stock

HYMCL

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of October 31, 2022, there were 199,770,599 shares of the Company’s common stock and no shares of the Company’s preferred stock issued and outstanding.

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HYCROFT MINING HOLDING CORPORATION

Quarterly Report on Form 10-Q

TABLE OF CONTENTS


			Page
PART	ITEM
I	1	Financial Statements	2
	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	3	Quantitative and Qualitative Disclosures about Market Risk	46
	4	Controls and Procedures	44

II	1	Legal Proceedings	42
	1A	Risk Factors	45
	2	Unregistered Sales of Equity Securities	46
	3	Defaults Upon Senior Secured Equity	46
	4	Mine Safety Disclosures	46
	5	Other Information	46
	6	Exhibits	46
		Signatures	48

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ITEM I. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS


			Page
Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Operations			5
Condensed Consolidated Statements of Cash Flows			6
Condensed Consolidated Statements of Stockholders’ Deficit			7
Notes to Condensed Consolidated Financial Statements			9

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HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)


	September 30, 2022		December 31, 2021
	(unaudited)
Assets:
Cash and cash equivalents	$	153,403	$	12,342
Accounts receivable	978		—
Income tax receivable	1,530		1,530
Interest receivable	294		—
Inventories - Note 3	12,095		11,069
Ore on leach pads - Note 3	—		10,106
Prepaids and deposits, net - Note 4	4,222		2,342
Current assets	172,522		37,389
Plant and equipment, net - Note 5	55,481		58,484
Restricted cash - Note 6	33,662		34,293
Other assets - Note 4	600		600
Assets held for sale - Note 7	10,183		11,558
Total assets	$	272,448	$	142,324
Liabilities:
Accounts payable and accrued expenses	$	5,595	$	9,430
Contract liabilities - Note 8	6,682		—
Debt, net - Note 10	2,327		16,666
Deferred gain on sale of royalty - Note 11	—		125
Other liabilities - Note 9	2,751		5,044
Current liabilities	17,355		31,265
Debt, net - Notes 10 and 20	142,507		143,638
Deferred gain on sale of royalty - Note 11	29,839		29,714
Warrant liabilities - Notes 12 and 20	1,133		669
Asset retirement obligation - Note 13	5,499		5,193
Other liabilities - Note 9	—		339
Total liabilities	$	196,333	$	210,818
Commitments and contingencies - Note 22
Stockholders’ equity (deficit):
Common stock, $0.0001 par value; 1,400,000,000 shares authorized; 199,770,599 issued and outstanding at September 30, 2022, and 60,433,395 issued and outstanding at December 31, 2021 - Note 14	$	20	$	6
Additional paid-in capital - Note 14	732,309		540,823
Accumulated deficit	(656,214)		(609,323)
Total stockholders’ equity (deficit)	76,115		(68,494)
Total liabilities and stockholders’ equity (deficit)	$	272,448	$	142,324

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues - Note 15	$	8,758	$	31,676	$	21,755	$	86,713
Cost of sales:
Production costs	8,803		30,616		22,020		77,927
Depreciation and amortization	1,025		1,577		2,577		4,191
Mine site period costs	1,409		11,467		10,429		24,445
Total cost of sales	11,237		43,660		35,026		106,563
Operating expenses:
General and administrative	3,032		3,313		11,352		12,271

Projects, exploration, and development	7,011		2,344		8,200		3,860
Write-off of deposit	—		916		—		916
Accretion - Note 13	102		102		306		306

Loss from operations	(12,624)		(18,659)		(33,129)		(37,203)
Other (expense) income:
Interest expense, net of capitalized interest - Note 10	(4,459)		(5,461)		(14,003)		(15,176)
Interest income	826		—		846		—
Fair value adjustment to warrants - Notes 12 and 20	1,133		812		(482)		10,956

Commissions expense - Note 7	(936)		—		(936)		—
Gain on sale of equipment and supplies inventories	211		—		813		—
Loss before income taxes	(15,849)		(23,308)		(46,891)		(41,423)
Income tax benefit - Note 17	—		95		—		95
Net loss	$	(15,849)	$	(23,213)	$	(46,891)	$	(41,328)

Loss per share:
Basic - Note 18	$	(0.08)	$	(0.39)	$	(0.29)	$	(0.69)
Diluted - Note 18	$	(0.08)	$	(0.39)	$	(0.29)	$	(0.69)
Weighted average shares outstanding:
Basic - Note 18	199,207,092		60,114,358		159,607,217		59,989,457
Diluted - Note 18	199,207,092		60,114,358		159,607,217		59,989,457

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows used in operating activities:
Net loss	$	(46,891)	$	(41,328)
Adjustments to reconcile net loss for the period to net cash used in operating activities:
Non-cash portion of interest expense - Note 10	10,129		13,042
Non-cash loss (gain) on fair value adjustment for warrant liabilities - Note 12	482		(10,956)

Depreciation and amortization	2,577		5,175
Stock-based compensation	1,750		2,227
Write-off of deposit	—		916
Accretion - Note 13	306		306
Gain on sale of equipment	(813)		—
Changes in operating assets and liabilities:
Accounts receivable	(978)		79
Income tax receivable	—		(95)
Interest receivable	(294)		—
Production-related inventories	8,632		5,351
Materials and supplies inventories	235		(1,141)
Prepaids and deposits	(1,880)		(1,634)
Accounts payable	(3,835)		(1,852)
Contract liabilities - Notes 8 and 15	6,682		1,598
Other liabilities	(1,401)		1,262
Net cash used in operating activities	(25,299)		(27,050)
Cash flows provided by (used in) investing activities:
Additions to plant, equipment, and mine development	(913)		(11,908)
Proceeds from sale of equipment - Note 5	2,007		—
Proceeds from assets held for sale - Note 7	1,375		—
Net cash provided by (used in) investing activities	2,469		(11,908)
Cash flows provided by (used in) financing activities:
Principal payments on debt	(25,506)		(2,978)
Principal payments on notes payable	(94)		(58)
Proceeds from issuance of common stock and warrants, net of issuance costs	188,860		—
Net cash provided by (used in) financing activities	163,260		(3,036)
Net increase (decrease) in cash, cash equivalents, and restricted cash	140,430		(41,994)
Cash, cash equivalents, and restricted cash, beginning of period	46,635		96,040
Cash, cash equivalents, and restricted cash, end of period	$	187,065	$	54,046
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	153,403	$	19,753
Restricted cash	33,662		34,293
Total cash, cash equivalents, and restricted cash	$	187,065	$	54,046

See Note 21 - Supplemental Cash Flow Information for additional details.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYCROFT MINING HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

(dollars in thousands)


	Common Stock			Additional Paid-in Capital	Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2021	59,901,306	$	6		$	537,370	$	(520,759)	$	16,617
Stock-based compensation costs	—	—			507		—		507
Vesting of restricted stock units	—	—			115		—		115
Net loss	—	—			—		(9,688)		(9,688)
Balance at March 31, 2021	59,901,306	$	6		$	537,992	$	(530,447)	$	7,551
Stock-based compensation costs	—	—			1,011		—		1,011
Vesting of restricted stock units	63,674	—			—		—		—
5-Year Private Warrants transferred to 5-Year Public Warrants	—	—			284		—		284
Net loss	—	—			—		(8,427)		(8,427)
Balance at June 30, 2021	59,964,980	$	6		$	539,287	$	(538,874)	$	419
Stock-based compensation costs	—	—			636		—		636
Vesting of restricted stock units	308,442	—			650		—		650
Net loss	—	—			—		(23,213)		(23,213)
Balance at September 30, 2021	60,273,422	$	6		$	540,573	$	(562,087)	$	(21,508)

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	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders’ (Deficit) Equity
	Shares	Amount
Balance at January 1, 2022	60,433,395	$	6	$	540,823	$	(609,323)	$	(68,494)
Issuance of common stock and warrants - Note 14	136,370,064	14		189,398		—		189,412
Vesting of restricted stock units	—	—		37		—		37
Stock-based compensation costs	—	—		391		—		391
Net loss	—	—		—		(22,060)		(22,060)
Balance at March 31, 2022	196,803,459	$	20	$	730,649	$	(631,383)	$	99,286
Issuance of common stock and warrants - Note 14	—	—		(2,226)		—		(2,226)
Vesting of restricted stock units	460,858	—		40		—		40
Stock issuance - other - Note 14	137,500	—		158		—		158
Stock-based compensation costs	—	—		619		—		619
Net loss	—	—		—		(8,982)		(8,982)
Balance at June 30, 2022	197,401,817	$	20	$	729,240	$	(640,365)	$	88,895
Issuance of common stock and warrants - Note 14	—	—		(75)		—		(75)
Vesting of restricted stock units	654,104	—		650		—		650
5-Year Private Warrants transferred to 5-Year Public Warrants - Notes 12 and 14	—	—		18		—		18
Stock issuance - other - Note 14	1,714,678	—		1,749		—		1,749
Stock-based compensation costs	—	—		727		—		727
Net loss	—	—		—		(15,849)		(15,849)
Balance at September 30, 2022	199,770,599	$	20	$	732,309	$	(656,214)	$	76,115

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

1. Company Overview

Hycroft Mining Holding Corporation (formerly known as Mudrick Capital Acquisition Corporation (“MUDS”)) and its subsidiaries (collectively, “Hycroft”, the “Company”, “we”, “us”, “our”, “it”, “HYMC”) is a U.S.-based gold and silver company that is focused on exploring and developing its wholly owned Hycroft Mine in a safe, environmentally responsible, and cost-effective manner. The Hycroft Mine is located in the State of Nevada and the corporate office is located in Winnemucca, Nevada.

The Company restarted pre-commercial scale open pit mining operations at the Hycroft Mine during the second quarter of 2019 and began producing and selling gold and silver during the third quarter of 2019. The Company’s operating plan until November 2021 was primarily focused on developing the novel two-stage heap oxidation and leach process (“Novel Process”) detailed in the Hycroft Technical Report Summary (“TRS”), Heap Leaching Feasibility Study, prepared in accordance with the requirements of the Modernization of Property Disclosures for Mining Registrants (“Modernization Rules”), with an effective date of July 31, 2019 (“2019 Hycroft TRS”). Subsequent to November 2021, the Company’s operating plan has been focused on advancing evaluations and developing technical studies for milling sulfide ore through a well-established and proven pressure oxidation process (“POX”). Additionally, as announced on November 10, 2021, as a result of the then current and expected ongoing cost pressures for many of the reagents and consumables used at the Hycroft Mine, and the timeline for completing the updated technical studies in early 2022, the Company discontinued pre-commercial scale mining at its run-of-mine (“ROM”) operation. The Company will continue producing gold and silver from the drain down solutions as long as it is economic which is currently expected to continue through the end of 2022. In February 2022, Hycroft, along with its third-party consultants, completed and filed the Initial Assessment Technical Report Summary for the Hycroft Mine (“2022 Hycroft TRS”) which included a mineral resource estimate utilizing a POX process for sulfide mineralization and heap leaching process for oxide and transition mineralization. The Company will continue to build on the work to date and investigate opportunities identified through progressing the technical and data analyses leading up to the 2022 Hycroft TRS and will provide an updated technical report at an appropriate time.

In the first quarter of 2022, the Company completed an equity private placement and an at-the-market public offering program (“ATM Program”) that raised gross proceeds of $194.4 million before issuance costs. The Company plans to use a portion of the proceeds from these equity offerings to conduct additional exploration that will focus on the higher-grade opportunities identified during 2021 exploration drilling and a systematic approach to develop a better understanding of the Hycroft Mine deposit, including potential feeder systems.

2. Summary of Significant Accounting Policies

Basis of presentation

These condensed consolidated interim financial statements of the Company have been prepared, without audit, in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, these condensed consolidated financial statements do not include all information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2021. The Company continues to follow the accounting policies set forth in those audited consolidated financial statements with updates discussed below. In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements include all adjustments that are necessary for a fair presentation of the Company’s interim financial position, operating results, and cash flows for the periods presented.

Liquidity

As of September 30, 2022, the Company had available unrestricted cash on hand of $153.4 million and net working capital of $155.2 million which is expected to provide it with the necessary liquidity to fund its operating and investing requirements and future obligations as they become due within the next twelve months from the date of this filing.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

While the Company has continued to process gold and silver ore on the leach pads and in the drain down solutions to partially offset the cash that is projected to be used in its operations and investing activities, the Company does not expect to generate net positive cash from operations for the foreseeable future. Accordingly, the Company will be dependent on its unrestricted cash and other sources of cash to fund its business. As discussed in Note 14 - Stockholders’ Equity, the Company raised gross proceeds of $194.4 million in March 2022 through the following equity financings:

•On March 14, 2022, the Company entered into subscription agreements with American Multi-Cinema, Inc. (“AMC”) and 2176423 Ontario Limited, an entity affiliated with Eric Sprott, pursuant to which the Company agreed to sell an aggregate of 46,816,480 units at a purchase price of $1.193 per unit for total gross proceeds, before deduction of fees and expenses, of $55.9 million.

•On March 15, 2022, the Company implemented an ATM pursuant to which the Company registered the offer and sale from time to time of its common stock having an aggregate offering price of up to $500.0 million of gross proceeds. Under the ATM Program, which was completed on March 25, 2022, the Company sold 89,553,584 shares of common stock for gross proceeds, before commissions and offering expenses, of $138.6 million.

Also, as discussed in Note 10 - Debt, Net, as a result of the equity financings above, the Company reached an agreement with Sprott Private Resource Lending II (Collector), LP (the “Lender”) with respect to the Credit Agreement among Hycroft Mining Holding Corporation, as borrower, Autar Gold Corporation, MUDS, MUDS Holdco Inc., Allied VGH LLC, Hycroft Resources and Development, LLC, Sprott Private Resource Lending II (Collector) Inc., and Sprott Resources Lending Corp. (“Sprott Credit Agreement”), which required the Company to prepay principal under the facility in the amount of $10.0 million following the Company’s receipt of the $55.9 million cash proceeds discussed above. The Company also made an additional prepayment of $13.9 million on March 30, 2022.

In addition to the above equity financings, the Company will continue to evaluate alternatives to raise additional capital necessary to fund the future exploration and development of the Hycroft Mine and will continue to explore other strategic initiatives to enhance stockholder value.

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.

Use of estimates

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that affect amounts reported in these condensed consolidated financial statements and accompanying notes. The more significant areas requiring the use of management estimates and assumptions relate to: recoverable gold and silver ounces on leach pads and in-process inventories; timing of near-term ounce production and related sales; the useful lives of long-lived assets; estimates of mineral resources; estimates of life-of-mine production timing, volumes, costs and prices; future mining and current and future processing plans; environmental reclamation and closure costs and timing; deferred taxes and related valuation allowances; estimates of the fair value of liability classified warrants, and estimates of fair value for asset impairments and financial instruments. The Company bases its estimates on historical experience and various other assumptions that are believed to be reasonable at the time the estimate is made. Actual results may differ from amounts estimated in these condensed consolidated financial statements, and such differences could be material. Accordingly, amounts presented in these condensed consolidated financial statements are not indicative of results that may be expected for future periods.

Cash and cash equivalents

During the third quarter of 2022, the Company invested in the AAAm rated US Government Money Market Funds that are readily convertible to cash and, as such, the Company has included them in Cash and cash equivalents. As of December 31, 2021, cash consisted of cash balances. The Company has not experienced any losses on cash balances and believes that no significant risk of loss exists with respect to its cash.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Recently adopted accounting pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). 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 after December 15, 2022. The Company early adopted ASU 2020-06 as of January 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 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 after December 15, 2021 and the Company adopted ASU 2019-12 as of January 1, 2022, with no material impact on its condensed consolidated financial statements or the related disclosures.

In May 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 the FASB 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 after December 15, 2021 and the Company adopted ASU 2021-04 as of January 1, 2022, with no material impact on its condensed consolidated financial statements or the related disclosures.

3. Inventories and Ore on Leach Pads

The following table provides the components of Inventories and the estimated recoverable gold ounces therein (dollars in thousands):


	September 30, 2022			December 31, 2021
	Amount		Gold Ounces	Amount		Gold Ounces
Inventories:
Materials and supplies	$	3,800	—	$	4,376	—
Merrill-Crowe process plant	—		—	11		6
Carbon-in-column (on-site)	7,388		6,142	3,493		2,044
Finished goods (doré and off-site carbon)	907		565	3,189		1,799
Total	$	12,095	6,707	$	11,069	3,849

As of September 30, 2022 and December 31, 2021, in-process inventories and finished goods inventories included $0.8 million and $0.4 million, respectively of capitalized depreciation and amortization costs. As of September 30, 2022, there were no indicators of impairment that would necessitate a write-down of the Company’s Inventories.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

The following table summarizes Ore on leach pads and the estimated recoverable gold ounces therein (dollars in thousands):


	September 30, 2022			December 31, 2021
	Amount		Gold Ounces	Amount		Gold Ounces
Ore on leach pads	$	—	—	$	10,106	7,130

As of September 30, 2022, the Company recovered all previously estimated gold ounces from the leach pad inventory. The Company continues to recover ounces in excess of previous estimates during the drain down period. As of December 31, 2021, Ore on leach pads included $0.6 million of capitalized depreciation and amortization costs.

4. Prepaids and Deposits, Net

The following table provides the components of Prepaids and deposits, net and Other assets (dollars in thousands):


	September 30, 2022		December 31, 2021
Prepaids and deposits, net
Prepaids
Insurance	$	2,107	$	1,014
Mining claims and permitting fees	1,498		891

License fees	376		186
Other	50		56
Deposits	191		195
Total	$	4,222	$	2,342

Other assets
Royalty - advance payment on Crofoot Royalty	600		600

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

5. Plant and Equipment, Net

The following table provides the components of Plant and equipment, net (dollars in thousands):


	Depreciation Life or Method	September 30, 2022		December 31, 2021
Production leach pads	Units-of-production	$	11,190	$	11,190
Test leach pads	18 months	6,241		6,241
Process equipment	5 - 15 years	17,302		17,735
Buildings and leasehold improvements	10 years	9,280		9,280
Mine equipment	5 - 7 years	4,838		6,224
Vehicles	3 - 5 years	1,589		1,454
Furniture and office equipment	7 years	370		330
Construction in progress and other		35,674		35,794
		$	86,484	$	88,248
Less, accumulated depreciation and amortization		(31,003)		(29,764)
Total		$	55,481	$	58,484

During the three and nine months ended September 30, 2022, there were no events or changes in circumstances that would have required the Company to evaluate the current carrying value of its Plant and equipment, net for recoverability. Depreciation expense related to Plant and equipment, net was $0.8 million and $2.7 million for the three and nine months ended September 30, 2022, respectively, and $2.2 million and $5.6 million for the three and nine months ended September 30, 2021, respectively.

6. Restricted Cash

The following table provides the components of Restricted cash (dollars in thousands):


	September 30, 2022		December 31, 2021
Reclamation and other surety bond cash collateral	$	33,662	$	34,293

As of September 30, 2022 and December 31, 2021, the Company’s surface management surety bonds totaled $58.7 million and $59.3 million, respectively, of which $58.3 million secured the financial assurance requirements for the Hycroft Mine. The remaining portion related to the securitization of the financial assurance requirements for the adjacent water supply well field and exploration project. The financial assurance requirement for the adjacent water supply well field was reduced to $0.4 million during the second quarter of 2022. This reduction was achieved by canceling a $1.0 million surety bond and replacing it with a $0.4 million increase to an existing surety bond. The $1.0 million surety bond was collateralized with $0.6 million cash which, upon cancellation, was returned to the Company. The $0.4 million increase to the existing surety bond was achieved without additional cash collateral. Also in the second quarter of 2022, the Company began receiving interest on its cash collateral for certain surety bonds. Interest received on cash collateral balances is restricted as to its use and is included as an increase to Restricted cash with a corresponding increase to Interest income when earned.

Table of Contents

HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

7. Assets Held For Sale

The following table summarizes the Company’s Assets held for sale by asset class as of September 30, 2022 and December 31, 2021 (dollars in thousands):


	September 30, 2022		December 31, 2021
Equipment not in use	$	9,913	$	11,163
Mine equipment	—		125
Materials and supplies	270		270
Total	$	10,183	$	11,558

The Assets held for sale are being marketed for sale and the Company has received interest from potential purchasers. It is the Company’s intention to complete the sales of these assets within the upcoming year. In February 2022, the Company completed the sale of a regrind mill that was included in equipment not in use for gross proceeds of $1.3 million. In August 2022, the Company completed the sale of the Mine equipment for gross proceeds of $0.1 million.

In June 2022, the Company entered into an Asset Option and Purchase Agreement to sell a dual pinion ball mill and related assets included in equipment not in use for an aggregate purchase price of $6.3 million. Payment terms, as amended, included: (i) an upfront non-refundable option payment of $0.6 million which the Company received in June 2022, (ii) a non-refundable option payment of $4.8 million which the Company received in August 2022, (iii) a non-refundable payment of $0.3 million to complete the partial purchase of the related assets which was received in October 2022, and (iv) a non-refundable payment of $0.6 million to complete the remaining sale of the ball mill and related assets expected to be received no later than December 29, 2022. In conjunction with this sale, the Company incurred Commissions expense of $0.9 million which was calculated as 17.5% of the proceeds received to date. The Company will be required to pay a further commission of 17.5% on the remaining non-refundable payments once received.

In August 2022, the Company entered into an Equipment Purchase Agreement to sell a second ball mill and a semi-autogenous mill (“SAG mill”) and related assets included in equipment not in use for an aggregate purchase price of $12.0 million. Payment terms include: (i) an initial payment of $0.5 million received upon the effective date of the Equipment Purchase Agreement, (ii) a second payment of $0.5 million received in September 2022, and (iii) a final payment of $11.0 million by December 31, 2022, with the Company holding such final payment in escrow pending the delivery of the equipment to the Delivery Point (as defined in the Equipment Purchase Agreement). In addition, the buyer is permitted to extend the payment of all or any portion of the final payment of $11.0 million up to and including March 31, 2023, provided that the buyer pays the Company interest at a rate of 5% per annum on any outstanding balance.

As of September 30, 2022, the Company still held title to and risk of loss of the ball mills and SAG mill and, as such, all payments received toward the purchase of these assets have been included in Contract liabilities. Please see Note 8 - Contract Liabilities below for additional information..

Table of Contents

HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

8. Contract Liabilities

The following table summarizes the components of Contract liabilities (dollars in thousands):


	September 30, 2022		December 31, 2021
Assets held for sale
Equipment not in use(1)	$	6,355	$	—
Plant and equipment
Process equipment(2)	327		—
Total	$	6,682	$	—

(1)As of September 30, 2022, the Company has received two non-refundable option payments: (i) $5.4 million in accordance with the sales agreement for one ball mill, for which the Company will receive final payments totaling $0.9 million no later than December 29, 2022 and (ii) $1.0 million in accordance with the sales agreement for one SAG mill and one ball mill, for which the Company will receive final payment of $11.0 million no later than March 31, 2023. Please see Note 7 - Assets Held for Sale for additional details.

(2)As of September 30, 2022, the Company has received a non-refundable option payment of $0.3 million in accordance with the sales agreement for one mercury retort. The Company will receive the final payment of $0.1 million once the asset is received by the buyer.

9. Other Liabilities

The following table summarizes the components of current and non-current portions of Other liabilities (dollars in thousands):


	September 30, 2022		December 31, 2021
Other liabilities, current
Accrued compensation	$	2,022	$	2,641
Salary continuation payments	185		935
Restricted stock units	—		714
Deferred payroll tax liability	471		471
Excise tax liability	13		268
Accrued directors’ fees	39		15
Operating lease liability	21		—
Total	$	2,751	$	5,044

Other liabilities, non-current
Finance lease liability	$	—	$	286
Operating lease liability	—		53
Total	$	—	$	339

10. Debt, Net

Second Amendment to Sprott Credit Agreement

On March 30, 2022, the Company and Lender under the Sprott Credit Agreement entered into the Second Amended and Restated Credit Agreement (“Second A&R Agreement”), which: (i) extended the maturity date for all of the loans and other principal obligations under the Sprott Credit Facility by two years, to May 31, 2027; (ii) provided for the Company to prepay principal under the facility in the amount of $10.0 million promptly upon the Company’s receipt of cash proceeds from the Private Placement Offering with AMC and 2176423 Ontario Limited (the “Initial Equity Proceeds Prepayment”); (iii) provided for the Company to prepay principal under the Sprott Credit Facility in the amount of $13.9 million (representing 10% of the subsequent issuance of its equity interests consummated on or prior to March 31, 2022) (the “Subsequent Equity Proceeds Prepayments”); and (iv) eliminated the prepayment premiums otherwise payable with respect to the Initial Equity Proceeds

Table of Contents

HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Prepayment, the Subsequent Equity Proceeds Prepayments and all future prepayments of principal under the Sprott Credit Facility. In addition, the Company’s obligations: (i) to prepay principal with proceeds of asset sales will be credited/offset by the aggregate amount of Initial Equity Proceeds Prepayment and the Subsequent Equity Proceeds Prepayments ($23.9 million); and (ii) to maintain a minimum amount of Unrestricted Cash (as defined in the Second A&R Agreement) was increased to $15.0 million. The Company: (i) paid the previously deferred additional interest of $0.5 million; (ii) made the Initial Equity Proceeds Prepayment of $10.0 million and paid in-kind a $3.3 million fee in connection with the modification and capitalized it to principal on March 16, 2022; and (iii) made the Subsequent Equity Proceeds Prepayment of $13.9 million on March 30, 2022. The Company accounted for the Second A&R Agreement as a debt modification as the Second A&R Agreement did not result in debt that was substantially different.

Amendment to the 10% Senior Secured Notes and Note Exchange Agreement

On March 14, 2022, the Company entered into an amendment to the 10% Senior Secured Notes and Note Exchange Agreement (the “Note Amendment”), with: (i) certain direct and indirect subsidiaries of the Company as Guarantors; (ii) holders of the 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, and Aristeia Capital, LLC (collectively, the “Amending Holders”); and (iii) Wilmington Trust, National Association, in its capacity as collateral agent. The Note Amendment amends the Note Exchange Agreement dated as of January 13, 2020 (the “Note Exchange Agreement”) and the Subordinated Notes issued thereunder in order to extend the maturity date of the Subordinated Notes from December 1, 2025 to December 1, 2027. The Note Amendment also removed the requirements that a holder receive the consent of the Company and the other holders in order to transfer any Subordinated Note. The Amending Holders constituted all of the holders of the Subordinated Notes. The Note Amendment became effective upon the closing of a private placement upon receipt of $55.9 million gross cash proceeds (before deduction of fees and expenses). The Company accounted for the Note Amendment as a debt modification as the Note Amendment did not result in debt that was substantially different. The Company incurred a $1.8 million liability management fee attributable to the completion of the Note Amendment. As the Note Amendment was accounted for as a debt modification, the $1.8 million paid to a third-party was charged to General and administrative. See Note 22 - Commitments and Contingencies for further details.

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.

As of September 30, 2022, the Company was in compliance with all covenants under its debt agreements.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Debt balances

The following table summarizes the components of Debt, net (dollars in thousands):


	September 30, 2022		December 31, 2021
Debt, net, current:
Sprott Credit Agreement	$	2,200	$	17,223
Note payable	127		115
Less, debt issuance costs	—		(672)
Total	$	2,327	$	16,666

Debt, net, non-current:
Sprott Credit Agreement, net of original issue discount ($11.6 million, net)	$	43,606	$	51,809
Subordinated Notes	100,879		93,599
Note payable	237		345
Less, debt issuance costs	(2,215)		(2,115)
Total	$	142,507	$	143,638

The following table summarizes the Company’s contractual payments of Debt, net, including current maturities, for the five years subsequent to September 30, 2022 (dollars in thousands):


October 1, 2022 through December 31, 2022	$	581
2023	1,777
2024	2,879
2025	1,154
2026	22
2027	151,683
Total	158,096
Less, original issue discount, net of accumulated amortization ($9.3 million)	(11,047)
Less, debt issuance costs, net of accumulated amortization ($2.7 million)	(2,215)
Total debt, net	$	144,834

Table of Contents

HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

Interest expense, net of capitalized interest

The following table summarizes the components of recorded Interest expense, net of capitalized interest (dollars in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Sprott Credit Agreement	$	1,261	$	2,820	$	3,848	$	8,227
Subordinated Notes	2,514		2,227		7,279		6,520
Amortization of original issue discount	561		358		2,279		1,043
Amortization of debt issuance costs	117		—		571		—
Other interest expense	6		56		26		40
Capitalized interest	—		—		—		(654)
Total	$	4,459	$	5,461	$	14,003	$	15,176

The Company capitalizes interest to Plant and equipment, net for construction projects in accordance with ASC Topic 835, Interest. Interest expense incurred under the Subordinated Notes is payable-in-kind. In May 2021, the Company began paying cash for interest expense incurred under the Sprott Credit Agreement. Prior to May 2021, interest expense incurred under the Sprott Credit Agreement was payable-in-kind.

11. Deferred Gain on Sale of Royalty

As of September 30, 2022, the Company classified the entire deferred gain from the sale of its royalty as a non-current liability as a result of the cessation of mining operations in November 2021.

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HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

12. Warrant Liabilities

The following table summarizes the Company’s outstanding warrants (dollars in thousands):


	Balance at			Fair Value			Transfers to an			Balance at
	December 31, 2021			Adjustments(1)			Unrelated Third Party			September 30, 2022
	Warrants	Amount		Warrants	Amount		Warrants	Amount		Warrants	Amount
Warrant liabilities
5-Year Private Warrants	9,478,830	$	664	—	$	482	(75,201)	$	(18)	9,403,629	$	1,128
Seller Warrants	12,721,901	5		—	—		—	—		12,721,901	5
Total	22,200,731	$	669	—	$	482	(75,201)	$	(18)	22,125,530	$	1,133


	Balance at			Fair Value			Transfers to an			Balance at
	December 31, 2020			Adjustments(1)			Unrelated Third Party			September 30, 2021
	Warrants	Amount		Warrants	Amount		Warrants	Amount		Warrants	Amount
Warrant liabilities
5-Year Private Warrants	9,888,415	$	15,326	—	$	(10,917)	(394,863)	$	(284)	9,493,552	$	4,125
Seller Warrants	12,721,901	63		—	(38)		—	—		12,721,901	25
Total	22,610,316	$	15,389	—	$	(10,956)	(394,863)	$	(284)	22,215,453	$	4,150

(1)Liability classified warrants are subject to fair value remeasurement at each balance sheet date in accordance with ASC 814-40, Contracts on Entity’s Own Equity. As a result, fair value adjustments related exclusively to the Company’s liability classified warrants. Refer to Note 20 - Fair Value Measurements for further detail on the fair value of the Company’s liability classified warrants.

The following table summarizes additional information on the Company’s outstanding warrants as of September 30, 2022:

Exercise Price

Exercise Period

Expiration Date

Warrants Outstanding

Warrant liabilities

5-Year Private Warrants

11.50

5 years

May 29, 2025

9,403,629

Seller Warrants(1)

39.90

7 years

October 22, 2022

12,721,901

(1)On October 22, 2022, the Seller Warrants expired pursuant to their terms and as of such time were no longer exercisable or outstanding. The remaining warrants outstanding totaled 9,403,629.

Warrant Liabilities

5-Year Private Warrants

The 5-Year Private Warrants cannot be redeemed and can be exercised on a cashless basis if the 5-Year Private Warrants are held by the initial purchasers or their permitted transferees. If the 5-Year Private Warrants are transferred to someone other than the initial purchasers or their permitted transferees (an "Unrelated Third Party"), such warrants become redeemable by the Company under substantially the same terms as the 5-Year Public Warrants. Since the original issue of private warrants, transfers to an Unrelated Third Party totaled 836,371, including 75,201 and 394,863 during the nine months ended September 30, 2022 and 2021, respectively, and therefore became classified as 5-Year Public Warrants.

Seller Warrants

On August 3, 2022, the Company issued a notice under the Seller Warrant Agreement notifying the holders of its Seller Warrants that the terms of the Seller Warrants have been adjusted effective as of August 3, 2022 as a result of the issuance or deemed issuance of additional equity awards under the HYMC 2020 Performance and Incentive Pay Plan to “Restricted Persons” (as defined in the Seller Warrant Agreement) through August 3, 2022 in the aggregate amount of 2,570,602 restricted stock units convertible into shares of common stock and for the prospective issuance of up to 500,000 shares of common stock

Table of Contents

HYCROFT MINING HOLDING CORPORATION

Notes to Unaudited Condensed Consolidated Financial Statements

to participants who may be deemed to be Restricted Persons. These shares of common stock were not prospectively adjusted for previously under the Seller Warrant provisions.

In accordance with the adjustment provisions of the Seller Warrant Agreement: (1) the exercise price of each Seller Warrant was decreased from $40.31 per share of common stock to $39.90 per share of common stock; (2) the number of shares of common stock issuable upon exercise of each Seller Warrant was increased from 0.28055 to 0.28347; and (3) as adjusted, the aggregate number of shares of common stock issuable upon full exercise of the 12,721,901 outstanding Seller Warrants was increased from 3,569,051 to 3,606,256 shares of common stock.

Pursuant to the terms of the Seller Warrant Agreement, the Seller Warrants expired on October 22, 2022, seven years following the original issuance date. As of their expiration, the Seller Warrants were no longer exercisable or outstanding.

13. Asset Retirement Obligation (“ARO”)

The following table summarizes changes in the Company’s ARO (dollars in thousands):

HYCROFT MINING HOLDING CORP [HYMCL] Filings
HYCROFT MINING HOLDING CORP [HYMC] Filings
HYCROFT MINING HOLDING CORP [HYMCW] Filings
10-Q	[2022-11-01]
10-Q	[2022-08-04]
10-Q	[2022-05-04]
S-1	[2022-04-14]
10-K	[2022-03-31]
10-Q	[2021-11-12]
10-Q	[2021-08-04]
10-Q	[2021-05-17]
10-K	[2021-03-24]
10-Q	[2020-11-09]
S-1	[2020-09-01]
10-Q	[2020-08-10]
S-1	[2020-07-13]
10-Q	[2020-05-08]
10-K	[2020-03-12]
10-Q	[2019-11-07]
10-Q	[2019-08-14]
10-Q	[2019-05-13]
10-K	[2019-03-25]
10-Q	[2018-11-13]
10-Q	[2018-08-10]
10-Q	[2018-05-14]
S-1	[2018-01-16]

HYCROFT MINING HOLDING CORP [HYMCL] Filings

HYCROFT MINING HOLDING CORP [HYMC] Filings

HYCROFT MINING HOLDING CORP [HYMCW] Filings