After nearing bankruptcy in early March, Hycroft Mining Holding Corp. has been riding a wave of retail investor interest and a major influx of cash from AMC Entertainment Holdings Inc. and mining investor Eric Sprott to turn its fortunes around.

Investors long hoped the mining company could extract the precious metals from the vast resources at its namesake Hycroft gold-silver property in Nevada, but a proprietary leaching process turned out to be uneconomic, pushing the company to the brink of bankruptcy.

Hycroft President and CEO Diane Garrett was looking for a solution when she was introduced to AMC CEO Adam Aron, a figure known for capitalizing on his company's popularity with an online community of investors interested in driving up the price of low-cost stocks by making them popular regardless of the company's fundamentals. Garrett learned from Aron how to make the most of having an audience of spirited but not necessarily savvy retail investors, and she is learning how to use social media to reach them.

As it turned out, Aron had more to offer than advice: In a surprise March 15 announcement, AMC and prominent precious metals investor Eric Sprott each outlined plans to sink $27.9 million into Hycroft Mining. The stock had been trading at 31 cents on March 1 and hit $1.52 after the announcement, though it had been spiking in the week preceding the investment, hitting $1.88 four days prior to the news.

Hycroft immediately took advantage of its newly boosted valuation by issuing a follow-on equity offering after the AMC announcement, selling 89.6 million shares for $138.6 million by March 25. The extra cash from the AMC investment and follow-on offering will allow Hycroft to pivot to conventional mining techniques.

"It has been a wild ride, for sure," Garrett said in an interview.

Learning to love the meme

The Hycroft property in Nevada hosts resources containing 14.7 million ounces of gold and 596.3 million ounces of silver, according to a mid-February estimate that incorporated a combination of processing methods. However, it is unclear if Hycroft will be able to profitably extract those mineral resources. The company stopped commercial production in November 2021 amid heavy financial losses, which Sprott and AMC hope to offset.

The low share price and the potential for big upside made Hycroft a good prospect for retail investors talking about cheap investments on message boards such as Reddit. These groups showed interest in silver as an undervalued precious metal during the meme stock phenomenon in early 2021.

At the time, AMC was faced with bankruptcy and was scrambling to reengineer its balance sheet to survive persistent pandemic-related theater closures. Reddit's army of meme stock investors could not have turned their attention to AMC at a better time, and Aron was quick to turn the company's unprecedented spike in market capital into valuable equity.

In statements explaining the Hycroft investment, Aron said Hycroft was in a similar position to the one AMC had been in a year prior, as it was struggling financially but held valuable assets. Despite operating in different industries, AMC was in a unique position to invest in and advise Hycroft, the CEO said.

Garrett said a mutual connection introduced her to Aron. The Wall Street Journal previously reported that hedge-fund manager Jason Mudrick of Mudrick Capital Management LP, a mutual investor of Hycroft and AMC, asked Aron to give Garrett advice on raising funds from individual investors as the company faced the risk of bankruptcy.

Mudrick was instrumental in AMC's debt restructuring during the pandemic, and he was also involved in Mudrick Capital Acquisition Corp., which was acquired by Hycroft through a special purpose acquisition corporation in 2020. Garrett took the Hycroft CEO position following its SPAC IPO.

"One of the conversations Adam and I had when we were first introduced is how he embraced those followers of his, and that has worked extremely well," Garrett said.

Garrett said she has always tried to stay close to her companies' shareholders, which typically meant interacting with institutional investors. Since AMC's involvement, the company is embracing the interest of retail investors and expanding its social media presence.

"This whole social media world is very new to me," Garrett said. "Now we have a following thanks to AMC ... that really don't understand our business."

Garrett hopes to change that by increasing visibility on platforms such as YouTube and Twitter to explain Hycroft's mining operations. Already, Garrett credits the new volume of trading in the company for improved capital access, including the March 25 equity offering.

Hycroft's share price rose following news of the deal, but heavy trading in the week leading up to the deal led to a substantial price hike ahead of the March 15 announcement. In all, the cash-strapped gold and silver miner's stock price skyrocketed nearly 685%, from 33 cents per share on March 7 to as high as $2.59 per share on March 29, before drifting lower. The SEC, the primary regulator of U.S. stock markets, declined to comment on the increased volume ahead of the announcement.

What it means for a cinema chain

AMC's Hycroft investment pales in comparison to its cash assets of $1.59 billion, but some analysts were skeptical. To survive the pandemic, AMC refinanced much of its debt at extremely high rates. Several analysts, including Wedbush Securities' Michael Pachter, spoke out against the Hycroft deal following the announcement, saying the theater operator would better serve its investment community by using capital to improve its balance sheet.

But even doubtful analysts are beginning to understand, if not embrace, Aron's rationale.

"At the end of the day, he works for his shareholders," Pachter said. "So, as stupid as I think the investment is, that's what his shareholders want."

AMC shares reached $16.96 at market close on April 25, a 17.1% increase since its Hycroft announcement.

The investment may suggest a pivot for AMC, where it moves away from a strategic focus on theater operations and increasingly expands into asset management, leading a new battalion of retail investors and a select group of trusted institutional investors to support certain struggling enterprises, Aron said during a CNBC interview.

Besides increasing AMC's own investor interest, Aron could use the chance to advance several other strategies, Pachter said. It could acquire more of Hycroft. It could also use its increased market clout following the deal to get shareholder approval to issue and sell more shares to help pay down its debt. It could even look to merge with other meme stock beneficiaries such as GameStop Corp. to create a new kind of model that blends strategic and financial operations.

Spending the new money

Flush with investor cash and a higher valuation, Hycroft is pivoting its focus from the two-stage sulfide heap oxidation and leach process that almost drove it to bankruptcy to a milling operation involving more conventional processing methods. That will generate a concentrate fed into an autoclave facility commonly used for refractory gold ores in the region, a November 2021 press release stated.

"The [increased] liquidity and a higher gold price may provide the company the impetus to return to the traditional method of extracting the refractory precious metal mineralization via a roaster or autoclave," said Joe Mazumdar, an analyst and owner of mining publication Exploration Insights. "But permitting a new autoclave or roaster in Nevada will not be a quick undertaking."

Already, the company has used the strength of its larger market capitalization to pay down some of its loans and push out maturity dates on its debts.

The company owns one of the largest precious metals deposits in North America, with an enormous amount of infrastructure on site, and wants to turn that into a large commercial operation, Garrett said. Hycroft is also looking to expand its exploration activities given that its large resource base comes from just 2% of its land position, Garrett said.

"I would encourage people to keep an eye on us," Garrett said. "With the recent equity raises we were able to accomplish, I think you're going to see some exciting things come as we transition this project to a larger scale commercial operation."

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