Movie-theater chain AMC Entertainment is putting its meme-stock fortune to use — on a struggling gold and silver miner whose biggest investor briefly scooped up AMC stock last year.
In an unexpected move, AMC on Tuesday said it was buying 22% of Hycroft Mining Holding Corp. and its Hycroft mine in Nevada. The deal also extends a debt-repayment deadline for the miner.
AMC stock slipped in afternoon trade, after edging higher earlier. Hycroft shares, which trade well below 5, bolted around 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 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 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. Aron described Hycroft as a company with "rock-solid assets" but that was down on its luck.
"We are confident that our involvement can greatly help it to surmount its challenges — to its benefit, and to ours," he said.
Hycroft initially jumped 30% to 1.80 on the news in the stock market today. It later pared those gains, and was up 20% on Tuesday afternoon. Still, the jump in Hycroft shares prompted Aron to cancel an interview with CNBC.
"I am excited about our investment in HYMC, but there has been so much volume in that stock today, lawyers insisted I stay off air," he tweeted.
AMC stock was down 0.4% to 13.50 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 and others, got swept up in the retail meme stocks frenzy, equipping it with $1.8 billion to spend on expansion. AMC has since tried to more actively engage its retail-shareholder base, offering things like free popcorn at its theaters.
For Hycroft, the investment deal lands after an increase in gold prices amid concerns about inflation. But it follows several years of 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. It had total liabilities of $216.9 million and an accumulated deficit of $562.1 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 2.7%, on Tuesday.
