Hycroft Mining Holding Corporation a gold and silver producer operating the Hycroft Mine in the prolific mining region of Northern Nevada, today reported its operating and financial results for the first quarter ended March 31, 2021.
Highlights
Diane R. Garrett, President & Chief Executive Officer, said, “I am very pleased with the progress we continue to make on many fronts. We remain focused on our health and safety culture achieving another almost 50% decrease in TRIFR at the end of the first quarter of 2021 compared with where we were at year end 2020. We have continued to see the benefits of the diligence of our safety teams and workforce, and I am pleased to say we are currently below the industry average at the end of April. We’re also seeing the benefits of the improved safety culture as equipment incidents have decreased and operational performance is improving. Drilling for metallurgical samples commenced as planned during March 2021 and that material will be used for the previously reported variability test work program. This program is critical to completing the database of information on how each geologic domain will perform under the two-step novel sulfide oxidation and heap leach process technology. The oxide and transitional material ROM plan is in the final stages of planning. Our goal is to achieve a cash flow positive ROM heap leach operation while we introduce the sulfide oxidation process on sulfide ores in 2022. The process group has made improvements to the solution management system and Brimstone Merrill-Crowe plant resulting in production and sales being slightly ahead of plan. While we did experience COVID-related workforce shortages that affected our ability to achieve targeted mining rates for the quarter, we are working to make up for these shortfalls and expect to achieve our 2021 production or sales outlook.”
Results of Operations
The following table provides a summary of operating results for the Hycroft Mine, which was restarted in April 2019:
Quarter Ended March 31, |
|||
2021 |
2020 |
||
Ore mined – sulfide/crusher feed |
(ktons) |
419 |
957 |
Ore mined – run-of-mine |
(ktons) |
2,466 |
305 |
Total ore mined |
(ktons) |
2,885 |
1,262 |
Waste mined |
(ktons) |
1,195 |
165 |
Total mined |
(ktons) |
4,080 |
1,427 |
Waste tons to ore tons strip ratio |
(#) |
0.41 |
0.13 |
Ore grade mined – gold |
(oz/ton) |
0.013 |
0.018 |
Ore grade mined – silver |
(oz/ton) |
0.258 |
0.150 |
Production – gold |
(oz) |
13,858 |
6,972 |
Production – silver |
(oz) |
94,845 |
41,911 |
Sales – gold |
(oz) |
9,830 |
6,560 |
Sales – silver |
(oz) |
57,236 |
49,373 |
Average realized sales price – gold |
($/oz) |
$1,784 |
$1,574 |
Average realized sales price – silver |
($/oz) |
$ 26.12 |
$ 16.12 |
As shown in the table above, tons mined, ounces produced, and ounces sold significantly increased during the three months ended March 31, 2021, compared with the prior year corresponding period due to ramping up of mining operations in 2020. However, mining activity during the first quarter of 2021 was below plan due to lack of manpower resulting from indirect exposure to COVID-19 and subsequent quarantine, COVID-19 related illnesses, and operational issues from the blast hole drill contractor.
The gold grades of ore mined during 2021 were as planned and decreased from the comparable period of 2020 in which existing higher grade stockpile ore was mined prior to starting any drilling and blasting. Silver grades were also as planned and higher than the corresponding period in 2020 as we began mining in higher grade areas of the mine in 2021.
The crusher did not operate during the first quarter of 2021, as all our mined ore was routed to the Brimstone leach pad as ROM. Based on the current ROM plan for 2021 we do not plan to operate the crusher in 2021.
During 2021, ore placed on the pre-commercial leach pads was transitional ore, which based on studies and processing results in the second half of 2020, indicate this ore is more amenable to direct leach, as the costs and time associated with oxidizing transitional ore do not yield significantly better recoveries than routing transitional ore as direct leach. The ore mined over the next twelve months will be oxide ore and transitional ore ROM material.
Our 2021 production and sales levels increased over 2020 due to increased quantities of ROM tons and ounces placed in the fourth quarter of 2020. The recovered ounces realized in the first quarter of 2021 resulted from continued leach production of those inventory ounces, higher leach solution flows to the pad and improving recovery performance from the Brimstone plant. Average realized gold prices per ounce increased during the first quarter of 2021 and combined with the higher volumes resulted in revenue of $19.0 million as compared to $11.1 million in the comparable 2020 period.
In the fourth quarter of 2020 we developed a stacking plan for the 2021 ROM plan that utilizes existing leach pads, preserving the new leach pad for sulfide ores, deferring the capital expenditures to complete and commission the new leach pad into late 2022 or 2023. During the first quarter of 2021 we completed construction activities on the new leach pad to the appropriate point in which we believe there is minimal risk of adverse impacts to the leach pad. We also completed the purchase of certain long-lead time items and no further activity is planned for 2021. Sufficient capacity remains on the existing Brimstone leach pad (approximately 34 million tons) to meet our production needs with a conventional leach operating plan for approximately three years.
Liquidity & Capital Resources
At the end of the first quarter of 2021, the Company had $36.5 million in cash (excluding $39.7 million of restricted cash), a $19.9 million decrease from December 31, 2020, resulting from cash used in operating activities of $14.8 million and cash used in investing activities of $5.1 million.
2021 Outlook
During 2021, we intend to focus our efforts on placing the Hycroft Mine in a position for a future ramp up of production at the appropriate time. Our focus for 2021 will entail mining and processing ROM oxide and transitional ores aimed at maximizing ounce production and cash flows and preserving our cash. Compared to sulfide ore, ROM oxide and transitional ore can be processed at a lower cost because this material does not require crushing, rehandling, or soda ash reagent application, and the shorter recovery cycle reduces working capital. The ROM operating plan for 2021 will provide us the opportunity to complete and evaluate the results of the ongoing technical and optimization work for the proprietary two-stage heap oxidation and leach process. Based upon the findings and results of this evaluation process, we may update or file a new technical report. We currently have established goals and budgeted estimated costs for this work in 2021 or 2022.
Production outlook
As disclosed in our 2020 10-K Outlook, although the 2021 ROM budgeted operating plan reduces annual mining activity from 2020, we continue to expect to increase total annual production to 45,000 – 55,000 ounces of gold and 400,000 – 450,000 ounces of silver. At current metal prices, our full-year 2021 production costs are expected to exceed gold and silver revenues due to fixed costs and lower planned ROM volumes. The ROM volumes reflect the current processing capacity which is limited until we can complete expenditures necessary to refurbish the North Merrill-Crowe plant and construct the second refinery.
Technical activities
During the first quarter of 2021, we continued to work alongside our industry leading consultants to identify and investigate opportunities for improvements in operating parameters for the Hycroft operation. Areas under review and development include:
The additional variability test work will also include detailed mineralogy studies as it is important to understand the role other minerals may play in the overall oxidation process and to enhance our ability to measure oxidation rates accurately and consistently. We do not expect any changes to the previously announced $10 million program for drilling and additional metallurgical and mineralogical studies in 2021.
About Hycroft Mining Holding Corporation
Hycroft is a US-based, gold and silver producer operating the Hycroft Mine located in the world-class mining region of Northern Nevada. The Hycroft Mine ranks among the top 20 largest primary gold deposits in the world and is the second largest in the United States.