Hycroft Mining Holding Corporation Q1 FY2021 earnings call

• Safety: TRIFR reduced by over 50% by end of 2020, and further decreased to 0.93 in April 2021, placing below industry average of 1.22. - Financials: Q1 2021 revenue in line with plan, but no net income or positive cash flows due to low gold equivalent ounce production/sales and high operating costs. Cash balance decreased from $56.4M on Dec 31, 2020 to $36.5M at end of Q1 2021. - Operations: New Caterpillar 994K wheel loader parts arrived in March, commissioning expected in May; will eliminate expensive rental loading unit. Mine planning optimization work started in Jan, expected to complete in Q3. Variability drilling program underway with 34 pre-collar holes completed. Follow-up on high grade mineralization in Q3 and Q4.

In Q1 2021, Hycroft sold 9,830 ounces of gold at an average realized price of $1,784 per ounce and 57,236 ounces of silver at an average realized price of $26.12 per ounce. Ounces sold in Q1 2021 increased by 50% for gold and for silver compared to Q1 2020, as more ore tons were out on the pads under leach. Revenue contribution details aren't explicitly broken down by segment beyond gold and silver sales.

• Expect to start improving cost metrics with the new Caterpillar 994K wheel loader. - Goal to get free cash flow positive as soon as possible. - Ounces from pad stacking are expected to come out more in the third quarter rather than the second quarter. - Capital plan involves using leases for operating equipment and some investment in process facilities, with the plant upgrades estimated at around $3 million and refinery components also requiring significant investment.

• COVID impacts led to delays in putting material on leach pads, requiring longer use of rental fleet. - Higher costs from Q1 disruptions will have a delayed effect, flowing through the next couple of quarters.

Q: Good morning and sounds like the process group did a particularly nice job this quarter. So, well done there. Can you help us bridge the financial impact of the 1Q mining disruptions versus those improvements you made to the solution management system, the Merrill-Crowe plant, I mean, just kind of thinking as it relates to the cadence of operating cash flows to the balance of the year.

A: Operationally, early in the year, there were issues with COVID and safety stand downs impacting mine ops crews. We did work on coordinating ore placement stacking on the pad and converted a contractor pad operations crew to internal self-performance. The challenge was not being able to put as much material on leach pads due to COVID, leading to needing to run rental fleet longer. Costs came through but will roll through in the second quarter as we start stacking ore again.

Q: Okay. All right. Thank you. That's a perfect clarification there. And then I, you know, just kind of balancing that, those comments, you know, you had gold and silver production in the quarter ran pretty well ahead of ounces sold. Not too much of an impact to working capital or unit costs in aggregate. So, how should we think about that against a balance of some of those higher costs from the 1Q disruptions, just kind of flowing through the next couple of quarters?

A: Our expectation is that we'll be able to operate more efficiently and keep our costs in line, but they will be higher as we stack on the pad. Those ounces will come out probably more in the third quarter than being available to us in the second quarter. Consistency in getting material to the pad and working through the mine plan is being focused on to optimize costs and efficiency.

Q: Okay. And then, so you're in the final stages of planning out that pre-commercial, kind of phase of operations, as you mentioned in the report, but you know, how should we think about capital expenditures this year, the balance between cash burn and investment in some of these more critical assets, like the refining facilities that you mentioned?

A: For the existing plan, there’s minimal capital with the 994K wheel loader being leased with little money down and payments spread over 48 months. The biggest capital item is the $10 million variability program. The game plan is to finance a significant portion of capital through leases for operating equipment and there'll be investment in process facilities. The plant upgrades are about $3 million and refinery components also need investment. We're finalizing mine plans over the next couple of weeks to properly size equipment needed.

Q: Okay. And do you have a preliminary budget for the for the processing facilities?

A: The upgrades to the North Merrill-Crowe plant are about $3 million, and the refinery and various components on site also require an equal amount of money. We're finalizing operational stuff to ensure appropriate sized equipment for larger scale operation.

Q: Okay. So, it sounds like, you kind of wanted to do this holistically. There's no one specific area of the mine that you plan to, you know, really take those test results through to completion, and kind of phase within?

A: We've got a detailed distribution of drill holes set up to well define all geological and geo metallurgical domains. It's going to take some time as we need to get core samples in and run preliminary tests. The whole suite of testing won't be completed until end of Q1 next year, but we should have some indication as we go on.