Ladies and gentlemen, thank you for standing by, and welcome to the Hycroft Year-End 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Tracey Thom. Thank you. Please go ahead.

Thanks, April. Good day, everyone. Thank you for joining us today. We'll be discussing our year-end 2020 results and providing guidance for 2021, for which we filed our Form 10-K and issued a press release this morning. This press release can be found on our website, www.hycroftmining.com. And as a side note, please keep an eye out for a new presentation to be posted in the coming days on our website as well. Please read the press release and listen to this call in conjunction with reviewing the Form 10-K, which contains additional disclosures. Also, please note that some information provided during the call may include forward-looking statements that involve risks, uncertainties and assumptions. Even if the risks or uncertainties have been materialized or the assumptions proven correct, these results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical facts are statements that could be deemed forward looking. A discussion of some of the risks, uncertainties and assumptions are set forth in more detail in our press releases and SEC filings, including the most recently filed 10-K. We assume no obligation and do not intend to update any such forward-looking statements. I'll now turn the call over to Diane Garrett, President and CEO.

Thank you, Tracy. And I want to welcome everybody to Hycroft's Mining's 2020 year-end and 2021 outlook conference call. I'm Diane Garrett, President and CEO of Hycroft Mining. And with me today in Winnemucca, Nevada is Jack Henris, our COO; Stan Rideout, our CFO; Mike Eiselein, our General Manager; Tracey Thom, Investor Relations, as by telephone, we have Jeff Saber, Finance and Treasurer. I'm going to ask Stan Rideout, our CFO, to review the highlights of our 2020 financials, followed by Mike Eiselein who will report on the metallurgical update and Jack Henris, who will report on our operating plans. Given the new team that we've assembled and that we've only been with the company less than 6 months, I think it's important that our audience and our shareholders have the pleasure of hearing from each of the senior members on this particular call. We will then open the call up for questions. Before I begin my comments, I do want to address the delay in our earnings release from late February. That seemed to take people by surprise, and it was not obviously a desirable move to make. But the basis for that was our plan was to issue the earnings release in advance of our 10-K filing so that we could take advantage of some of the virtual investor conferences in early March. We are a new public company, reporting under the new SEC disclosure guidelines, and this is our first 10-K. Due to the work that needed to be completed, we decided not to let the investor marketing schedule drive our process. So it made more sense to wait and all the documents simultaneously because the amount of work that we had complete. As was reflected in our share price, when the market sees delays, they tend…

Thank you, Diane. Hycroft is operating at a pre-commercial scale in developing the oxidation leaching process up for extracting gold and silver. While the team at site is making a lot of progress with some inherited operational challenges as well as challenges with operating in the current COVID pandemic environment, Hycroft has not been able to generate positive net income or cash flows from operating activities. And that's attributable to the low production and sales volumes and then our current high relative operating cost profile. With the new operating team, though, we're seeing a positive trend for gold sales. For full year 2020, gold sales were 24,892 ounces, which contributed to $47 million of total revenue, and that compares with $14 million in 2019, granted 2019 was a partial year with sales starting in the third quarter. For the year ended December 31, 2020, net financing activities provided $189 million of cash, which more than offset the cash used in operations and investing activities. Our cash position at year-end was $56 million, which was an increase of approximately $50 million from the beginning of the year, and that leaves us $46 million available cash once you consider our $10 million minimum cash balance required by our debt covenants. For 2021, the line production and sales volumes are projected at 45,000 to 55,000 ounces of gold from 400,000 to 450,000 ounces of silver, which includes monetizing some inventory in the first half of 2021 that has been previously built up on our pad and a lower mining rate that aligns with our current processing capacity, which, as mentioned previously, is limited until we complete the capital expenditures to refurbish the North Merrill Pro plant and construct the second refinery, for which we have the equipment. Our capital and project spend is forecast at $14 million to $18 million, and that includes the $10 million for the variability program and then leveraging of the team's focus on operating safety. We're seeing improvements in controlling our spend and managing our cash. But despite these efforts, because of our current production volumes and at current metal prices, costs are expected to exceed those current metal prices. With that, I'll turn the conversation over to Mike and Jack to highlight our value opportunities.

Thank you, Stan. Good morning, everyone. Diane did a great job summarizing some of the things where we are today. But I'd like to give a little bit more context and color to some of the things we're seeing and working on in the background if I might. As most of you know, we've been working with Hays and John Marsden very closely to, I guess, get a better understanding and a deeper understanding of the AAL oxidation process. And the reason for that, we have a new technical team. We got a new operational team and we certainly want to understand how we got -- where we got to -- where we are today and really understand going forward, the principles driving the process so that we can operate it effectively, obviously. So similar things we decided to write-off when you look at the driving principles behind the oxidation kinetics, obviously, that's pretty important to understand. Confirming the chemistry like Diane discussed earlier, is pretty critical to making sure everybody is confident that what we say is going to happen -- going to happen out there with the chemistry. And then finally, really understanding the relationship in detail between the degree of oxidation and the amount of recovery we can expect based on that degree of oxidation. And not only for the test work, but for all the work types going forward, and we'll discuss that here a little bit in a minute. And what we really started to see as we build into those things is, we were fairly disappointed in the level of detail and really the thoroughness or lack thereof of some of this overall suite of test work that was done. So we were running into insufficient data from some of the previous test work.…

Thanks, Mike. Good morning, everyone. The first week I was on site, we started the mine optimization work. And where that began, I'd like to work from the ore body out. You need to start from the ore body. So we began with the block model review. And it's really about understanding, breaking it down right from the drilling and understanding the modeling. Pleased to report that the work that we did with third-party review of that block model, the block model validated quite nicely and reconciliation looks good. So no major issues there. But what's really exciting about doing that level of review is certain opportunities start to emerge. You start to see opportunities where, by and large, the block model is limited by data. We see that a depth block stop, where drilling stops. On the flanks and on the wingspan, we see the same kind of thing. It's a target-rich environment, and there's quite a bit of opportunity there as you look at the block model. Not only that, but in an adjacent to current mining areas and future mining areas, there is quite a few opportunities to convert inferred blocks to indicated blocks with minimal amount of work. So that's an exciting opportunity for us as well. So looking through that block model has presented many, many opportunities that I'm very excited about. So we've been focused. We've just recently changed the focus as we wrap up the review of the block model into doing both short-term and long-term mine planning. The purpose of that is really to optimize our plans and optimize our phases to create the most value for our shareholders. Keeping an eye on -- we want to be able to remain -- retain our optionality and flexibility as we continue to mine down through the ore body, which means we mine through oxides, transition material and then get into sulfides. Bottom line, very excited to be here, and I see a lot of opportunities. And we have a lot of work in front of us, but it's a lot of good work, and we got a great team. And we've been in the midst of doing some really good work, and we got a lot more good work to do.

Okay. Operator, with that, thank you, Jack. Thank you, Mike. Thank you, Stan. We can open the lines up for questions.

[Operator Instructions] Your first question is from the line of Vincent Anderson with Stifel.

I was hoping to get into a bit more detail around the update to the pre-oxidation process. So just first, was this new list of modifications in your press release in the context of just getting to that 65% recovery rate from the original technical report? Or did you make a decision in line with this to address these parameters against a higher bar in terms of the recovery rate you want to see out of it?

So it's kind of a -- it's a good question. I mean the detail there that we've been finding with the previous work and the confirmational work is that there are different factors that contribute to recovery. Some of those are physical and metallurgical or geo-metallurgical aspects or there are others or how the ores play stacked and the pad is operated. So there are enough gaps in that data in the previous test work that we felt that we needed to really step back and ensure that we understood what pieces were affecting, which part of the oxidation and recovery aspect. So we build back the fundamentals of the oxidation kinetics and start to look at -- and really understand how the chemistry drives the oxidation and recovery. And then start to see the issues that were developing with the ore types, and then looking concurrently at how this pad would be operated and the physical aspects of that. And really wanted to make sure that we that we could combine or recombine all of those and do the variable testing to ensure that we understood the performance of these ores and then how ultimately that would be operated on the pad. And that's why we have a fair amount of work yet in front of us to make sure we have clear understanding of those relationships and the impacts operationally going forward so.

Yes, Vincent. And I would just add to that. And by the way, excellent report that you put out today. That was very good. I would just add to that, that throughout the mine's life, you're always working to increase your recoveries every way you can. And so work that we were doing, unlike Mike said, look, the feasibility study was based on 7 samples. That's not a robust database to move forward on a commercial scale, much less a process that's not been done at that level. So it's more just confirming last work, what was known when you come into a project, you do a gap analysis, has everything been done, whether it's all the studies for permitting or environmental or technical. And so some of those gaps that we identified, we need to go back and fill in those gaps and just make sure that it's continuing to tell us what we are expecting to see.

Maybe less fair given what stage you're at right now, but to get into some of those I mean, what are you looking at aside from the physical configuration of the pads? What were some of the key differences between the ore that was tested previously and got to those mid-80% recovery rates even under suboptimal operating conditions? How did those compare to what you found subsequently? I mean, maybe I'm reading too much into it. It sounds like maybe differences in trace elements or iron content might be a leading concern here. But just what should we look out for as we move forward through your additional ore testing?

Yes. I mean I think it's pretty simple. You're referring to some of the initial test pads. But what we found is those test pads were not representative of a lot of the material that's going to be mined. Some of it was from stockpiles and some of it was from transition. And there were also different crush sizes put on those pads. So there were a number of things like that, but to us does not say those test pads were super consistent or representative of what we're going to be looking at life of mine. So again, while there was good work done in the past, what we have to know is every geologic domain how is it going to behave? It was mentioned in the feasibility study, that there's different oxidation rates for different areas, but there are some areas that just were not tested. And we need to know that because you don't want to put material out on a big heap leach pad until you've done the work to know exactly what you're going to get out of it once you put it out there. Time is on or any scenario. I mean, you do this, whether you're using a conventional process or not. So that's what we're doing because we're just filling in the gaps of the work and making sure that we have tested every single geometallurgical domain. Anything you want to add to that, Mike?

And that -- because of the lack of that variability testing and some of the -- in the manner in which some of those test pads were operated, we want to make sure we understand the results, the conclusions from the different tested because there were things that are confusing to us as well. So we want to make sure that we fully understand how everything is going to behave. And there's just more work to do there.

It leads right into my last one, I'll give somebody else a chance. But you talked about completing this work this year. It does sound like there are quite a few more tests to do. Are you going to be able to test the pre oxidation process specifically on pads? Or will it go back to a lab setting?

Well, it's going to have to go back to the lab setting initially, just to make sure we understand the driving principles and get a really good handle of that variability testing. That's where the lab -- the variability testing on the ore types in the lab is the first step in the critical step before you can advance to that next commercial test pad. So just to be honest, we're not sure because there's a fair amount of drilling and sampling we have to do it and lab work. And our goal is to try and execute a commercial test pad as soon as we can, and we have enough data to operate it effectively because obviously, it's a high cost. We want to make sure we got all our ducks in a row before we stacked the side and try something. We want to have a successful test, obviously.

Sure. Since it's going back to a lab setting, have you already had discussions with the prior lab? Are you going with a new one? Are there any significant changes that you're going to make to the lab test procedure, that better kind of ensures that those results are more aligned with the true commercial scale operation?

Yes. So we've got a mix of both internal work and external work we'll be doing. And we're engaging some different labs to help. Obviously, it's quite a bit work. And yes, so we've got plans in place that we're already moving on to keep that stuff moving.

Yes. And I would add to that, Vincent, that the work that we've done in the past was all done internally at site. So we're using third-party labs, and we're using Hazen, which is one of the very best and of course, we have Don Marsen on our team who is look on the chemistry of gold extraction. So he's now the hope of metallurgy in our industry as we finally call him. So we're doing everything through Hazen. They're intimately familiar with this. They did all the work on the milling process at -- sorry, at Hycroft. So they're very, very good with what they do. And so we're utilizing them for this work. When we talk about going back to the lab, that's not really starting over. Every project starts with the lab because it's the best controlled environment you have, right? And then you can experiment with different things in the lab. You don't want to be experimenting on 50,000, 100,000 tons out in the field. So going back to the lab does not mean we're starting over, it's just the right first step before you go to the field. And again, we've seen a lot of the test work in the past that we have reviewed and been able to duplicate all of that work. So that's where it doesn't need to be redone. But we're just filling in the gaps on some of the other domains that has not been completed.

[Operator Instructions] Next question is from the line of Mick Daly with EBMR.

I've got a comment and a question, and I'll do the comment first. Diane and team. I think going forward, you should not report earnings at 7:30 in the morning and then have your conference call for 4.5, 5 hours later. Your West Coast company or Central companies you could do your report at 4:00 Eastern Time and then have the conference call afterwards because people are sitting around for 3 or 4 hours, and they're just looking at the headline Dow Jones news it says Hycroft CEO faces lower prices, increased competition, which is probably one of the reasons why your stock is down 20% today. So I know this is your first quarter, and you had a lot to do as a public company. But going forward, I think having a 4-hour window between the report and the conference call is a bad way to go.

And your question.

And the question is, there's been a lot in the news recently about rare earth minerals. Are there any rare minimals at your mine?

Just trace amounts, or is that now?

We're a gold company. Gold and silver.

We do have a question over the phone. We do have a question from the line of Mike Niehuser with Scarsdale Equities.

This is Mike Niehuser from Scarsdale. A question. It seems that since -- in the recent time, you mentioned a forced oxidation injection process. Could you describe what that looks like? I'm not familiar with a heap leach or -- in the pre-oxidation phase, how physically that would occur? Whether it's a capital-intensive process or if it has to be laid out, or kind of like the opposite of a -- where the cyanide comes down from above, maybe the oxygen comes in from a below? And could share that process and what the pitfalls are of that? Like if there's channeling or those kind of things?

Yes. So the forced air injection, like Diane mentioned, the copper industry has been using that for quite a while. Oxygen is critical. The drive in that oxidation process to completion. And really what it amounts to on a heap leach is weighing on a network of piping of the lift and plumbing all that into large volume, low-pressure blowers and blowing air, forcing air up through the heap as you're trying to percolate solution down through it. So and again, coupled with agglomeration, we had a fine crush. And if you agglomerates and provide permeability and pass or the solution in the air to migrate through that lift, then yes, you could have channeling issues. So both of those are fairly critical and need to be marked out pretty well. As far as capital goes, the blowers are -- it's fairly low capital. It does add a bit operating expense because you have all the additional piping and lay out of that, but a little OpEx from the power. But generally, it's not too capital intensive.

Okay. Well, that's a very good answer compared on me bundling the question. And with regards to variability, I know that this is a really large project with several identified potential pits. And within those pits, each ore body has the oxide, the transitional and then the sulfide. And what I'm hearing is that even within those very large pits, the numerous pits, they have variability within those oxidized and transitional areas. And so I'm picturing that this is an immense task if you were to understand everything that you have. And I'm wondering if really what you're trying to do now is develop systems to where you understand the critical elements with each area that's to be mined and how it's going to be mixed and placed on the pad so that you can maximize the recovery and be able to build a recovery process ahead of that. So really, I'm thinking this is more than just testing as much as developing systems and a catcher's mitt to maximize recoveries. Is that close?

Yes. I think that's fair. I think that characterize quite accurately. We are trying to understand the variability as well as a different geologic and geometallurgical domains to understand how they're going to behave differently with different options that we can bring to bear. And we're just scratching the surface and beginning that work. So it's exciting, the opportunity. But again, a lot of work to be done there.

But isn't variability natural with every geologic body?

Yes. Yes, it is.

So it really shouldn't come as a surprise. It just seems like the issue here is that you're so big. And like you pointed out, there was so few tests done earlier on that you're still earlier in perfecting the process, but you're onto what you think is going to work eventually?

Yes, that's correct. There's just some gaps in the previous work that we're trying to fill it.

So we should be looking forward to the end of this year and the early part of next year to see the true potential of the project. Close?

Yes, absolutely. Yes. Correct.

And we have a follow-up from the line of Vincent Anderson with Stifel.

So I mean just going back through the -- going back, I apologize for the dogs in the background. But going back through the original slide deck, you had a pretty exhaustive and detailed capital spending plan. Is there any early numbers that you can throw around for us for 2021, maybe into 2022? It sounds like some things might get reprioritized here.

Yes. I mean, I think it depends on what we've come out with at the end of the work. I mean, the capital that was included before, the rail so that we could stockpile sufficient quantities of soda ash on site. That's still on the table. That's something we'd look at system, we are doing work right now on whether we would do it on pay stack or we would do a short-haul dump and convey or do we truck it. So those are ongoing things for us at site. I don't think a lot of those capital items have changed. I mean, certainly, some of the designs into the leach pads. The only thing would be if we end up determining that we can provide our stakeholders a lot more value out of this project by implementing a small mill, then that would be something as well. But our plan is to tackle the drilling for the geometallurgical work, get the -- the hangs on work, the lab work down on that minerology and variability test work, ideally be able to have that in a time frame that we can get that test pad back out and apply all the good things that we have learned and identified today are reflected in that. I think it's the North Merrill Crowe plant refurbished because that's what's prohibiting us right now and being able to mine it at higher rates. So we will be focusing on that. And that we also are going to need a better half lead, as we talked about in our third quarter, the projects somewhat capital I mean, the fleet that we have is aging. So that means we spend a lot of time and downtime in maintenance and it's old equipment. So we can't even…

Perfect. And then just to get everybody's money is worth on the 1-hour call, smoothing out the next 3 to 4 quarters, you've addressed the operating constraint on North Merrill Crowe, maybe some planned downtime for the refurbishment. How should we think about the pace kind of through the next call it, yes, 3 to 6 quarters in terms of gold production?

So we issued our targeted gold production. Here's something key to keep in mind. In the second quarter and the third and the fourth, we're going to be mining at a reduced tonnage rate. The reality is we're not sacrificing any production ounces by doing that. When we were at the higher tonnage rate, there was a build out of gold inventory on the path because the plant was constrained to be able to treat that. So what we're doing right now is we're drawing down inventory that have been built up from the pads. And we're doing a reduced mining rate, which is more cost effective. But we're going to be yielding the same number of production ounces that we would have. So this will give us time to do those refurbishments and address the refinery. That our production targets for this year are still in the 45,000 to 65,000 ounces of gold and 400 to 450 pounds ounces of silver. We're the work that Jack is doing, we're looking at how we can move some of the grade we've identified forward and make that a better plan and optimize it that way. So trust us. We are looking at every opportunity to generate the best cash flow we can and work our way to a cash flow breakeven, if not ideally, positive cash flow. When we get the new haul fleet and we're able -- and we get the refurbishments fund to the plant, then we'll be able to really realize the better cash flow from operations with more tons moved in mine. We did just bring in a 994 loader. So loading capacity with a bit of a bottleneck before, but now we've sized that properly. So that's, I believe, my on-site now and it's paying us so much and we do have plans to bring in another next year, at the end of the year with a higher ramp-up phase.

Okay. Perfect. That's exactly what I was getting at with the reduced mining capacity versus the actual gold output. So perfect.

Sure. So if we're paying by the hour, we've got 4 minutes left, if you want to add another question or 2 in

If I ask anything else, I might start sounding even more informed. So I'm going to go and leave it there.

[Indiscernible] But I do think we have another waiting on the line.

Our final question is from the line of Mike Niehuser with Scarsdale Equity.

Yes. Can you just quickly detail some of the cost savings you've been able to institute since you've come to the company?

Sure. A lot of it is dealt with getting rid of contractors that are very high cost. Candidly, a big cost savings not crushing and going straight to leach that we weren't yielding more gold for the extra cost. We've been rightsizing our workforce, and that's more on the adding of our own people and not having to use those contractors. We're looking at the little things as well, but those are kind of the really big buckets. And then candidly, we've renegotiated a few contracts. Some of those will roll in, in the second quarter where we're able to get better pricing. And then we're bringing in the 994 loader, and that will be much more cost-effective than the shovels we've been operating. A lot of work has been done by Mike's team with maintenance planning and that downtime, so getting the efficiencies. There's a lot of detailed work. And some of these aren't huge numbers, but they start adding up and a lot of the benefit we'll see starting second, third, fourth quarter.

So -- and real quick, can you give us an idea of whether you're going to be able to get to breakeven cash flow without raising equity? And I'm sorry for going so long. That's it.

Our plan that we put together kept us on the right side of our debt covenant, the $10 million minimum cash balance. So -- and we're continuing to work for opportunities to enhance that opportunity. And we've made adjustments on consumption of reagents. And just a lot of the process controls that Mike and the team have put in, we're able to to chip away at these things. So our goal and our plan and our guidance is that we're going to stay on the right side of the $10 million and then depending on what Jack is able to come up with his team on the mining plan, our goal is to get to positive and breakeven cash -- first breakeven and then positive cash flows.

Yes. I think if you look at the burn rate in the past and it was excessive with the work that we've done over the last 5 months, and we're starting to see the results of that come to fruition. Mike, the earn rate that was going on in the past, the monies that we raised last fall essentially would be gone by April of this year. The fact that we can not only fund all of these development opportunities and make our cash last throughout this year and stay in compliant of our $10 million threshold under our debt covenants should really resonate that we have done a remarkable job at reducing spend, better performance, better operating performance and really shoring up the financial state of the company. And that's been our goal. And certainly, our goal is to move to cash flow breakeven and positive as quickly as we can. So we're in good shape for this year. Okay. Well, I'd just like to wrap up to say that in behalf of the whole Hycroft team, we really appreciate all the continued support from our shareholders and our stakeholders as we work to develop and unlock the value of this asset. Again, it's a world-class mineral endowment, and we're all thrilled about the opportunity to work on it. We think we've got some great ideas. And as I mentioned before, we selected a team that is absolutely super qualified in their experience to address what we need to do here. So I hope you could agree the enthusiasm by all of the teams for what we're doing and what we think the future holds for the company. And we appreciate your support. We are always available. Unfortunately, in the COVID-19 world, we can't get out and see everybody face-to-face, which is what we really want to do. But we are going to be doing very aggressive marketing, one-on-one. We've had over 100 people on this call, and I think that's just really great that people are dialing in and listening. We want you to watch our story. We want you to watch our news flow. We're going to do good things with Hycroft. So I appreciate all the support. Reach out to us any time. We'll be in touch with you. And hopefully, one of these days soon, we'll all be able to see each other face-to-face.

This concludes the Hycroft year-end 2020 earnings call. Thank you for your participation. You may now disconnect.