Planned capital increase of $ 65,000,000 Link:
https://sec.report/Document/0001104659-20-101012/
It is now clear why the price of HYMC fell on August 31, 2020; with the appointment of Diane Garrett, the provisional prospectus for a capital increase of $ 65m was announced. The prospectus is extensive, the two decisive conditions are open: price per share and number of shares for the dilution.
As already known, Hycroft needs around $ 230m Capex to start the mine. This is the first third and should be a test of whether the shares can be placed in the market at a reasonable price. Currently there are 50m shares, 90% resp. 45m are with the four largest shareholders:
- 43.8% Mudrick Capital Management, L.P.
- 24.1% whitebox advisors
- 13.8% Highbridge Capital Management
- 9.2% Aristeia Capital, L.L.C.
I went through the prospectus. It roughly consists of the following:
- 20 pages of risk management. Everything was really mentioned that could go wrong. The only thing missing (according to chaos theory) is that if a sack of rice falls over in China, there could be an earthquake in north-west Nevada near Winnemucca (larger city near Hycroft). Earthquakes - in addition to Covid-19 in detail - were of course dealt with.
- 5 pages current shareholder structure / warrants / financial key figures
- 30 pages business, plus / minus feasibility study
- 50 pages of explanations and explanations: financial, operational, personnel, etc.
- Twice as many pages (> 200) attachments - I haven't looked through.
Two interesting points from this: Diane Garrett's business outlook and terms of employment.
1. Business outlook (quote)
"While we anticipate the level of crushing and production in the second half of 2020 to match the levels of the first half of 2020 or above, we anticipate that mining, crushing and production will increase significantly in 2021 and beyond if we continue to build infrastructure, including large ones. A new leach field is currently under construction to the north of the property. We continue to believe that the production levels (or higher) reported in Hycroft's technical report will ultimately be attainable once the infrastructure is up and we can work successfully. "
2. Compensation agreements with Diane R. Garrett
As I wrote, Diane Garrett is at the absolute height of her professional career; she is 60 years old (is also in the prospectus)
Quote:
"The Company has entered into an employment contract with Diane R. Garrett, Ph.D., dated August 31, 2020 (the" Garrett Employment Agreement ") for a three-year term as President and Chief Executive Officer ...
... Under the terms of the Garrett employment contract, Dr. Garrett is entitled to an annual base salary of $ 550,000, an annual cash incentive bonus originally targeted at 70% of their annual base salary, and an initial long-term stock incentive of $ 1,000,000. "
Personaly thinking:
I am of course extremely excited to see how the market will absorb the $ 65m. According to the last rate on September 1, 2020, there is a rather modest potential dilution of around 13%. Hycroft has 34m warrants outstanding and an exercise price of $ 11.50.
I stay invested. I consider prices below $ 10 attractive.
urai58