Movie-theater chain AMC Entertainment (AMC) is putting its meme-stock fortune to use — on a gold and silver miner.
AMC on Tuesday said it was buying 22% of Hycroft Mining Holding Corp. (HYMC) and its Hycroft mine in Nevada. The deal restructure a debt-repayment deadline for the struggling miner. AMC stock edged higher in morning trade. Hycroft shares, which trade well below 5, bolted 20% higher.
The deal gives the theater chain 23.4 million shares, each share with a warrant, in Hycroft. The combined share/warrant units were priced at $1.19 apiece. AMC, in a release, said the 71,000 acre mine in Nevada had around 15 million ounces of gold deposits and around 600 million ounces of silver deposits, citing what it said was independent research.
The perhaps-unexpected move is part of a $56 million investment AMC is making with Eric Sprott, a gold and silver investor. Both AMC and Sprott will throw in $27.9 million in cash in the gold miner. Sprott will also take an equal 22% stake in Hycroft, AMC CEO Adam Aron said.
Aron, in a statement, said that at AMC’s urging, the maturity of $156 million in Hycroft’s debt had been extended until 2027.
Hycroft initially jumped 30% to 1.80 on the news in the stock market today. AMC stock slipped 0.5% to 13.63 on Tuesday.
‘Severe Liquidity Challenge’ As Guidance
AMC’s investment comes after the theater-chain took a massive hit due to pandemic-related restrictions on movie theaters. But last year, AMC stock, along with GameStop (GME) and others, got swept up in the retail meme stocks frenzy, equipping it with $1.8 billion to spend on expansion.
For Hycroft, the investment deal lands after an increase in gold prices rise amid concerns about inflation And it follows several years of financial difficulties for the company.
“To state the obvious, one would not normally think that a movie theater company’s core competency includes gold or silver mining,” Aron said in a statement.
“In recent years, however, AMC Entertainment has had enormous success and demonstrated expertise in guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets, as well as communicating with individual retail investors,” he added.
“It is all that experience and skill that we bring to the table to assist the talented mining professionals at Hycroft.”
‘Going Concern’
The Hycroft mine restarted mining operations in 2019, after the company that ran it emerged from bankruptcy protection in 2015 in the wake of falling gold and silver prices. In November, the mine halted some pre-commercial mining at its “run-of-mine” operation. Hycroft Mining cited costs for some chemicals and other materials and the timeline for finishing technical studies.
In a filing in November, Hycroft Mining said that its financial statements “raise substantial doubt about the Company’s ability to continue as a going concern.” The company said that it without additional capital, it might not be able to meet obligations.
Hycroft had a net loss of $41.3 million for the nine months ending on Sept. 30, according to a filing from November. Over that time, it had available cash on hand of $19.8 million.
AMC stock has fallen from last year’s high of 72.62. Shares were below both their 50-day and 200-day lines. The stock has a 24 Composite Rating and a 55 EPS Rating.
Among other meme stocks, GameStop initially rallied 10.2%, then pared gains to 23.5%, on Tuesday.
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Read More:AMC Spends Its Meme-Stock Windfall On A Gold Mine; AMC Stock Slips| Investor’s Business Daily
2022-03-15 16:11:45
