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Cinema giant AMC Theatres said Tuesday it was buying a 22 percent stake in gold and silver mining company Hycroft Mining Holding Corp., including its 71,000-acre Hycroft Mine in northern Nevada, for $27. 9 million in cash.
Management described the unusual move by the cinema giant, which has made a name for itself as a meme stock, as an opportunistic one and the latest example for how AMC looks to create value by thinking outside the box (and outside the box office).
“The strength of Spider-Man: No Way Home and The Batman, as well as 2022’s promising industry box office, heighten AMC Entertainment’s conviction that we are on a glide path to recovery,” said Adam Aron, chairman and CEO of AMC Entertainment. “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. It, too, has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue. Its share price has been knocked low as a result. We are confident that our involvement can greatly help it to surmount its challenges — to its benefit, and to ours.”
Aron also acknowledged that the deal would surprise many investors. “To state the obvious, one would not normally think that a movie theater company’s core competency includes gold or silver mining. In recent years, however, AMC Entertainment has had enormous success and demonstrated expertise in guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets, as well as communicating with individual retail investors. It is all that experience and skill that we bring to the table to assist the talented mining professionals at Hycroft.”
Independent third-party studies confirm that the Hycroft Mine has “some 15 million ounces of gold deposits and some 600 million ounces of silver deposit,” the company highlighted.
Making an investment equal to AMC’s is Eric Sprott, a leading gold and silver investor. Their combined capital injection of $56 million will help Hycroft “considerably lengthen its financial runway amid liquidity challenges,” AMC noted. The exhibitor will get to appoint a representative to the Hycroft board of directors.
AMC and Sprott will each invest $27.9 million in cash in Hycroft in exchange for more than 23.4 million units, with each unit consisting of one common share of Hycroft and one common share purchase warrant, the companies detailed the financial terms of the deal. The warrants give them the right to acquire additional shares.
“Our investment to buy 22 percent of Hycroft Mining Holding Corp., and to receive an additional 23.4 million warrants in Hycroft at $1.07 per share is a truly terrific opportunity to potentially strengthen and enrich our company, and thereby create significant value for AMC Entertainment shareholders,” Aron said. “It is appealing that the investment requires the commitment of only a nominal amount of AMC cash.”
Aron also explained that “at our urging,” the maturity of $156 million in Hycroft debt has been “extended all the way until 2027, giving Hycroft ample time to start moving its mineral deposits up the value chain.” He added: “What’s more, as a result of AMC’s success in having raised capital in 2020 and 2021, we will be a valuable adviser to Hycroft in its efforts to secure additional equity investments to further increase its cash reserves.”
The AMC CEO argued that the latest move was part of his team’s strategy of going after opportunities, even in new areas. “As I have been saying repeatedly since last June, investors should think creatively and boldly about AMC‘s future, because within the company, we ourselves have been thinking creatively and boldly about our future. Of course, as the largest movie theater chain in the world, we are passionately committed to orchestrating a full recovery from COVID impacts on the cinema industry,” he said. “In 2021, our retail shareholders armed us with a $1.8 billion war chest to play on offense and grow our company. To that end, we have already started adding highly appealing and what we believe will be nicely profitable theaters to our global network, committed to increasing Imax and Dolby Cinema premium screens, which are so successful within our theaters, introduced NFT programs and accepted cryptocurrency to boost theater attendance.”
Concluded Aron: “Now, we are taking AMC’s demonstrated achievement in writing the playbook as to how to navigate through liquidity challenge and applying our lessons learned to another entity in Hycroft Mining.”
After the announcement of the investment, Aron also took to Twitter, saying about the deal: “AMC is playing on offense again with a bold diversification move.”
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