AMC makes unexpected leap into metals with Hycroft transaction
Cinema giant, investor pay US$56M total for equal stakes in gold and silver miner
AMC Entertainment Holdings Inc. said it's buying 22 per cent of a gold and silver mining company, marking an unorthodox move for the world's largest movie-theatre chain and a past darling of memestock investors.
The U.S. cinema giant is investing in Hycroft Mining Holding Corp. alongside Eric Sprott, a gold and silver investor, AMC said in a statement Tuesday. The parties' equal stakes total US$56 million, “which will help Hycroft considerably lengthen its financial runway,” AMC said.
The investment from AMC is a much-needed boost for Denver-based Hycroft Mining, which is trying to get the mine up and running on a sustainable, commercial basis. Hycroft's 71,000-acre mine in northern Nevada has 15 million ounces of gold deposits and 600 million ounces of silver, AMC said, pointing to third-party studies.
Shares of Hycroft, which reported US$31.7 million in revenue for the third quarter of 2021, surged 96 per cent to US$2.73 in premarket trading on Tuesday in New York. They ended the day at US$1.52, up 9.4 per cent. AMC rose 6.9 per cent to US$14.49.
AMC chief executive Adam Aron, known for his brash pronouncements as his company's shares ran up 1,183 per cent last year in volatile trading, cited the box-office success of Spider-Man: No Way Home and The Batman as boosting AMC's confidence in its recovery from pandemic-era struggles.
“Our strategic investment being announced today is the result of our having identified a company in an unrelated industry that appears to be just like AMC of a year ago,” Aron said in the statement. “It, too, has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue. We are confident that our involvement can greatly help it to surmount its challenges — to its benefit, and to ours.”
Hycroft said in November it was halting initial mining operations due to rising costs for chemicals and other goods needed at the site, and it would change the way it processes the ore. Production in the third quarter, the most recent period reported on, was 14,831 ounces of gold and 91,437 ounces of silver.
Sprott, who is investing alongside AMC, is well-known in mining circles as the founder of Canadian money manager Sprott Inc. The firm is a long-time promoter of gold, offering investment products such as the US$5.7-billion Sprott Physical Gold Trust.
In addition to buying its 22-percent stake, AMC said it has received an additional 23.4 million warrants in Hycroft at US$1.07 a share.
Traders piled into the shares and options of Hycroft and AMC last week, well ahead of Tuesday's surprise announcement that the movie theatre operator was buying a stake in the gold miner.
Hycroft's stock is up 413 per cent in a little more than a week, from 33 cents on March 7 to over US$1.70 on Tuesday. An average of 190 million Hycroft shares have traded each day over the past week. That's more than 800 times the average daily trading volume since the miner's deal to go public through a blank-cheque merger in June 2020.
Meanwhile, call options for the gold miner to trade above US$2.50 — a level it hadn't closed above since mid-July — also saw a spike in interest in the past week.
Some of the moves in Hycroft stocks and call options could be attributed to a rise in gold, up 7.7 per cent since its bottom on Jan. 6.