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AMC Entertainment (NYSE:AMC) shares are down nearly 80 percent so far this year as the Federal Reserve’s incessant hawkish stance on elevated inflation has taken a sizable toll across the entire spectrum of growth-focused equities. Against this relatively morose backdrop, AMC’s Hycroft Mining stake now has the potential to add a sizable tailwind to the downtrodden stock.
On the 15th of March 2022, AMC Entertainment announced the acquisition of a 22 percent stake in liquidity-challenged Hycroft Mining. AMC’s total investment of $27.9 million in Hycroft allowed the theater chain to acquire 23.408 million units, where each unit consisted of 1 Hycroft common share and 1 common share purchase warrant. Hycroft Mining also finalized a similar investment of $27.9 million from precious metals investor Eric Sprott, thereby bringing the entire quantum of investment to $55.8 million. Additionally, Hycroft also entered into an At Market Issuance Sales Agreement with B. Riley Securities, allowing the mining company the opportunity to sell $500 million worth of common shares via periodic offerings.
As per an initial assessment conducted in 2022, Hycroft Mining is likely to own over 15 million ounces of minable gold and 596.4 million ounces of minable silver spread over 72,000 acres in Nevada.
Hycroft reported the 2nd round of results from its new drilling exploration program. Indeed,there is MORE GOLD and MORE SILVER in them thar hills! So far, Hycroft has uncovered new and significantly higher grade deposits. Drill baby drill. #LetThemEatCrowhttps://t.co/eq0IujaPTR pic.twitter.com/7crAzGG0uu
— Adam Aron (@CEOAdam) November 2, 2022
This brings us to the crux of the matter. AMC’s Adam Aron has now tweeted the second round of results from Hycroft Mining’s 2022-2023 drilling exploration program, indicating the presence of significantly higher-grade deposits of gold and silver under Hycroft’s acreage.
As per Diane R. Garrett, the President and CEO of Hycroft Mining, the company sits on “one of the largest gold and silver deposits in the world” that is located in the “Tier-One mining jurisdiction of Nevada.”
Readers should note that AMC essentially purchased a call option on gold when it acquired a 22 percent stake in Hycroft Mining back in March. Of course, this decision by Adam Aron was roundly criticized by a number of financial analysts as this investment fell beyond AMC’s core competence and would not move the proverbial needle in the broader scheme of things, given that it equates to just around 0.9 percent of AMC’s market cap. However, should Hycroft Mining now manage to strike gold literally, it would substantially boost Adam Aron’s standing and profile while also allowing AMC to marginally benefit from a gold bull market that some analysts claim is just around the corner as the US appears increasingly vulnerable to an economic recession in 2023.