Hycroft Mining (HYMC) - 2022 Q2 - Quarterly Report

PART I Financial Statements Unaudited Q2 2022 financial statements reflect improved financial position and equity from financing, despite operational decline and increased net loss Condensed Consolidated Balance Sheets The balance sheet significantly strengthened by June 30, 2022, with cash increasing to $157.8 million and a shift to positive stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $157,781 | $12,342 | | Total current assets | $181,092 | $37,389 | | Total assets | $282,182 | $142,324 | | Liabilities & Equity | | | | Total current liabilities | $15,607 | $31,265 | | Total liabilities | $193,287 | $210,818 | | Total stockholders' equity (deficit) | $88,895 | $(68,494) | Condensed Consolidated Statements of Operations Revenues sharply declined in Q2 and H1 2022 due to ceased mining, leading to increased net losses of $9.0 million and $31.0 million respectively Condensed Consolidated Statements of Operations Highlights (unaudited, in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $3,831 | $36,001 | $12,997 | $55,037 | | Total cost of sales | $6,817 | $33,501 | $23,789 | $62,903 | | Loss from operations | $(8,487) | $(3,789) | $(20,505) | $(18,544) | | Net loss | $(8,982) | $(8,427) | $(31,042) | $(18,115) | | Basic and Diluted Loss per share | $(0.05) | $(0.14) | $(0.22) | $(0.30) | Condensed Consolidated Statements of Cash Flows Net cash increased by $144.7 million in H1 2022, driven by $164.0 million from financing activities, despite $22.1 million used in operations Six Months Ended June 30, Cash Flow Summary (unaudited, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(22,083) | $(21,317) | | Net cash provided by (used in) investing activities | $2,783 | $(9,065) | | Net cash provided by (used in) financing activities | $163,956 | $(583) | | Net increase (decrease) in cash and restricted cash | $144,656 | $(30,965) | | Cash and restricted cash, beginning of period | $46,635 | $96,040 | | Cash and restricted cash, end of period | $191,291 | $65,075 | Notes to Condensed Consolidated Financial Statements Notes detail the operational shift to a POX process, improved liquidity with $157.8 million cash from $194.4 million equity raises, and extended debt maturities to 2027 - The company's operating plan shifted from a novel two-stage heap leach process to developing technical studies for milling sulfide ore via a pressure oxidation (POX) process, with pre-commercial scale mining discontinued in November 2021[27] - As of June 30, 2022, the company had $157.8 million in unrestricted cash and net working capital of $165.5 million, expected to fund operations and investing requirements for the next twelve months[30] - In March 2022, the company raised gross proceeds of $194.4 million through a $55.9 million private placement and a $138.6 million at-the-market (ATM) program[28][32][37] - Debt agreements were modified in March 2022, extending the maturity dates for both the Sprott Credit Facility and the Subordinated Notes to 2027[58][59] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A details the transition to an Acid POX process, improved balance sheet from $194.4 million equity raises, declining revenues, and extended debt maturities to 2027 Executive Summary & Recent Developments The company strengthened its balance sheet with $194.4 million in equity, extended debt to 2027, finalized an Acid POX technical report, and launched a major exploration program - Raised gross cash proceeds of $194.4 million through a $55.9 million private placement and a $138.6 million at-the-market (ATM) equity offering[128] - Amended the Sprott Credit Agreement and Subordinated Notes to extend debt maturities by two years to 2027[128] - Initiated the 2022-2023 exploration program, the largest in nearly a decade, to focus on higher-grade opportunities and understand the deposit's genesis[128] - Completed and filed the Initial Assessment Technical Report Summary (2022 Hycroft TRS), which identified an Acid POX process as having significantly better economics than other processes studied[126][128] Results of Operations H1 2022 revenues significantly decreased due to ceased mining, with gold revenue falling to $12.6 million and total cost of sales decreasing to $23.8 million Revenue Comparison (in thousands) | Revenue Source | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Gold revenue | $12,601 | $48,441 | | Silver revenue | $396 | $6,596 | | Total Revenue | $12,997 | $55,037 | Total Cost of Sales Comparison (in thousands) | Cost Component | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Production costs | $13,217 | $47,311 | | Depreciation and amortization | $1,552 | $2,614 | | Mine site period costs | $9,020 | $12,978 | | Total cost of sales | $23,789 | $62,903 | Liquidity and Capital Resources Liquidity significantly improved with unrestricted cash reaching $157.8 million by June 30, 2022, driven by $194.4 million in equity financings, and debt covenants were amended - Unrestricted cash position increased to $157.8 million at June 30, 2022, compared to $12.3 million at December 31, 2021[172] - The company raised gross proceeds of $194.4 million in March 2022 from a private placement ($55.9M) and an ATM program ($138.6M)[172] - The Sprott Credit Agreement was amended, increasing the minimum Unrestricted Cash covenant to $15.0 million, and the company was in compliance with all debt covenants as of June 30, 2022[190][194] Contractual Cash Obligations as of June 30, 2022 (in thousands) | Obligation | Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Net smelter royalty | $241,000 | $500 | $— | $— | $240,500 | | Remediation & reclamation | $70,100 | $— | $— | $— | $70,100 | | Interest payments | $21,560 | $4,385 | $13,155 | $4,019 | $— | | Repayments of debt principal | $149,565 | $126 | $262 | $149,177 | $— | | Additional interest payments | $6,599 | $2,200 | $4,399 | $— | $— | Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, these disclosures are not required and have been omitted from the filing[206] Controls and Procedures As of June 30, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022, and concluded they were effective[208][209] PART II - OTHER INFORMATION Legal Proceedings Management believes no pending or threatened legal matters will materially adversely affect the company's financial statements - The company does not believe that any pending or threatened legal matter will have a material adverse effect on its financial statements[211] Risk Factors As a smaller reporting company, the company is not required to include risk factors in this quarterly Form 10-Q filing - Risk factors are not required to be included in this Quarterly Report as the company qualifies as a smaller reporting company[212] Unregistered Sales of Equity Securities and Use of Proceeds On July 28, 2022, the company issued 1,714,678 shares of common stock to a financial advisor as part of a settlement agreement - On July 28, 2022, the Company issued 1,714,678 shares of common stock to a financial advisor as consideration for a settlement agreement[213] Mine Safety Disclosures The company prioritizes mine safety and health, with required disclosures included in Exhibit 95.1 of this report - The company has a mandatory mine safety and health program, with required mine safety violation disclosures included in Exhibit 95.1 to this report[215][216] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, credit facility agreements, and CEO/CFO certifications