Hycroft Mining Holding Corp: Form 10-Q for the period ended Sep 30, 2024

The following discussion, which has been prepared based on information available to us as of November 5, 2024, provides information we believe is relevant to an assessment and understanding of our consolidated operating results and financial condition. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 (the “Financial Statements”) and the notes thereto (the “Notes”) included in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024, as well as our other reports filed with the Securities and Exchange Commission (“SEC”) from time to time, including, but not limited to, our Annual Report on Form 10-K for the year ended December 31, 2023. Terms not defined herein have the same meaning defined in the Financial Statements and the Notes.

Introduction to the Company

We are a U.S.-based gold and silver exploration and development company that owns the Hycroft Mine in Nevada. Our focus is on exploring the mine’s approximately 64,000 acres of claims and developing the project in a safe, environmentally responsible, and cost-effective way. Pre-commercial scale mining activities were started in the fourth quarter of 2019, subsequently halted in November 2021, and we completed processing the gold and silver ore previously placed on leach pads by December 2022. We do not anticipate significant revenue from gold and silver sales until we complete the necessary technical work and resume mining operations.

Health and Safety

We believe safety is a core value and support that belief through our philosophy of safe work performance. Our mandatory mine safety and health programs include employee engagement and ownership of safety performance, accountability, employee and contractor training, risk management, workplace inspection, emergency response, accident investigation, anti-harassment, and program auditing. This integrated approach is essential to ensure that our employees, contractors, and visitors operate safely.

We reported no lost time incidents during the nine months ended September 30, 2024 and continue to operate in excess of one million workhours without a lost time incident. The Hycroft Mine’s total recordable injury frequency rate (“TRIFR”) for the trailing 12 months, which includes other reportable incidents, is one of the metrics we use to assess safety performance, and it is well below industry averages and significantly below pre-2021 historical levels experienced at the Hycroft Mine. During the first nine months of 2024, we continued our critical focus on safety, including allocating personnel, resources, workforce time, and communications to operate safely. These actions contributed to maintaining our TRIFR of 0.00 at both September 30, 2024 and December 31, 2023. We will continue to evolve our safety efforts as needed to keep our workforce, contractors, and visitors safe.

Executive Summary

During the third quarter of 2024, the Company continued its exploration drill program, completed portions of the metallurgical and variability test work, and continued to analyze new drill assay data and information received in the period. The ongoing metallurgical and variability test work continues to follow up on the March 2023 Hycroft Property Initial Assessment Technical Report Summary Humboldt and Pershing Counties, Nevada (“2023 Hycroft TRS”) that was completed utilizing a conventional crushing, grinding, and flotation circuit that generates a concentrate to be fed to a pressure oxidation autoclave facility commonly used for refractory gold ores. The Company is also focused on strengthening its balance sheet primarily by reducing debt and raising cash through sales of non-core assets and equity. Beginning in the fourth quarter of 2023, the Company again began accessing its at-the-market public offering program (“ATM Program”) and on May 31, 2024, the Company replaced the ATM Program with a new $100.0 million at-the-market public offering program (the “New ATM Program”). Through these programs, the Company generated gross proceeds of $0.2 million and $10.6 million, before commissions and offering expenses, during the three and nine months ended September 30, 2024, respectively. On January 5, 2024, the Company voluntarily pre-paid $34.7 million of the first lien loan, along with $3.3 million for the additional interest balance, totaling $38.0 million on its senior secured debt with Sprott Resource Lending.

Recent Developments

2024 exploration drilling

In February 2024, the Company launched its 2024 exploration drill program (the “2024 Drill Program”), to build on the high-grade silver dominant trends announced in November 2023. The 2023 drilling revealed substantial high-grade silver mineralization that has continuity with historical drilling along trends not previously identified. The objective of the 2024 Drill

Program is to define the structural framework of these new trends and identify target areas that have not been drilled to establish continuity of the two high-grade silver trends. The 2024 Drill Program has again been expanded to approximately 8,500 meters of core drilling, of which approximately 6,600 meters of drilling were completed as of September 30, 2024. The current program continues to define the structural framework of the two new high-grade silver trends, targeting down-dip extensions, and further establishing continuity of the two trends. Additionally, the Company has extended the drilling program east of the current resource based on the Induced Polarity geophysical surveys completed in the second quarter of 2024 coupled with a robust mapping and sampling program to extend Hycroft mineralization to the east in a previously unexplored area within the current plan of operation. The currently pending assay results are expected in the fourth quarter of 2024, and assay results from drilling in the fourth quarter of 2024 are expected to extend into the first quarter of 2025.

Metallurgical and variability test work

During the nine months ended September 30, 2024, the Company advanced with metallurgical test and engineering work necessary for designing a sulfide milling operation. The Company has been testing composite samples from around the ore body that represents the various material characteristics in the sulfide ore. Crushing, grinding, and flotation work has identified significant improvements in gold and silver flotation recoveries compared to the current technical report that increase the economic benefits to the project. The Company’s test work for identifying the optimal inputs and operating parameters for roasting, pressure oxidation, leaching, sulfuric acid generation, and power co-generation work progressed during the quarter ended September 30, 2024, and this test work will continue into 2025. Process plant flow sheets, equipment selection, plant layout, and other designs continued to be developed. Due to the potential commercial applications for the significant quantity of sulfuric acid expected to be generated from roasting the sulfide concentrate, the Company engaged a third-party specialist to complete a focused sulfuric acid market study and to assist in identifying local and regional sulfuric acid markets with current and emerging consumers. The Company continues to conduct trade-off studies to assess whether roasting technology could offer superior economics compared to POX technology for the Hycroft Mine. Hycroft completed the future Tailing Storage Facility designs that will extend material storage capacity and will meet new and emerging safety and environmental regulations for these types of facilities.

2024 Outlook

The Company’s current plan is to operate safely and environmentally responsibly as it continues advancing exploration drilling, targeting high-grade opportunities, completing technical studies and data analyses, conducting trade-off studies and alternatives analyses to determine the optimal process flow sheet for processing sulfide ores and recovering gold and silver, maintaining the Hycroft Mine, and strengthening its balance sheet.

The 2024 Drill Program is designed to test the lateral and at depth extensions of the newly discovered high-grade silver dominant trends at Brimstone and Vortex. These new systems remain open in all directions and at depth, having the potential to expand and be developed as an underground mine. Additionally, geophysical surveys and structural geology reviews in the first half of 2024 have identified anomalous opportunities in and around the primary resource area indicative of high-grade mineralization. The anomalies have created a target area two kilometers north to south and extending one kilometer east of the current resource pit, which is mostly within the current plan of operation. The Company is in the process of refining drill targets for these areas.

The Company continues to evaluate various process alternatives to economically improve gold and silver recoveries while also developing potential additional, meaningful by-product revenue streams. The trade-off studies and alternative analyses include different grinding methods, various flotation cell configurations, sulfide conversion through pressure oxidation or roasting, and equipment selection for the respective process flow sheets. This additional work is expected to be completed in 2025 and as a result, the Company expects to provide updates on the anticipated timing of the process flow sheet and the associated technical report as new information becomes available.

Results of Operations

Projects, exploration, and development

During the three and nine months ended September 30, 2024, Projects, exploration, and development costs totaled $4.7 million and $14.6 million, respectively, compared to $7.2 million and $16.0 million, respectively, during the same periods of 2023. The decrease of $2.5 million and $1.4 million, respectively, during both the three and nine months ended September 30, 2024, is primarily attributed to expanded drilling activities in the prior year.

General and administrative

During the three and nine months ended September 30, 2024, General and administrative costs totaled $4.4 million and $11.2 million, respectively, compared to $2.8 million and $9.8 million, respectively, during the same periods of 2023. The increase of $1.6 million and $1.4 million, respectively, during both the three and nine months ended September 30, 2024, is primarily attributed to increased professional fees associated with strategic projects.

Asset retirement obligation adjustment

During the three and nine months ended September 30, 2024, Asset retirement obligation adjustment totaled 2.3 million and 6.3 million, respectively, compared to nil during both the same periods of 2023. The increase of $2.3 million and $6.3 million, respectively, during both the three and nine months ended September 30, 2024, is attributed to a change in estimate to account for changes in: (i) the Standardized Reclamation Cost Estimator Unit Cost Data, (ii) updated reclamation regulations, (iii) a revised engineering design for impervious cover placement requiring additional volumes of cover material on the Crofoot Heap Leach Pad, and (iv) an adjusted timeline for initiating and completing this phase of reclamation work at the facility. See Note 13 – Asset Retirement Obligation to the Notes to the Financial Statements for additional information.

Mine site period costs

During the three and nine months ended September 30, 2024, Mine site period costs totaled $1.7 million and $6.8 million, respectively, compared to $2.7 million and $9.3 million, respectively, for the same periods of 2023. The decrease of $1.0 million and $2.5 million, respectively, during the three and nine months ended September 30, 2024, is primarily attributed to reduced year-over-year activities at the mine site, along with reduced expenses related to the net proceeds from the sale of carbon containing gold and silver that was initially intended for disposal.

Depreciation and amortization

During the three and nine months ended September 30, 2024, Depreciation and amortization totaled $0.5 million and $1.7 million, respectively, compared to $0.7 million and $2.2 million, respectively, for the same periods of 2023. The decrease of $0.2 million and $0.5 million, respectively, during the three and nine months ended September 30, 2024, is primarily attributed to certain assets nearing full depreciation and fewer significant capital additions in recent periods.

Accretion

During the three and nine months ended September 30, 2024, Accretion totaled $0.4 million and $0.9 million, respectively, compared to $0.2 million and $0.6 million, respectively, for the same periods of 2023. The increase of $0.2 million and $0.3 million, respectively, during the three and nine months ended September 30, 2024, is primarily attributed to the increased Asset retirement obligation. See Note 13 – Asset Retirement Obligation to the Notes to the Financial Statements for additional information.

Interest expense

During the three and nine months ended September 30, 2024, Interest expense totaled $3.3 million and $16.6 million, respectively, compared to $4.7 million and $13.7 million, respectively, for the same periods in 2023. The decrease of $1.4 million during the three months ended September 30, 2024, compared to the same period in 2023, is primarily attributed to the January 2024 voluntary prepayments the Company made on the first lien debt. The increase of $2.9 million for the nine months ended September 30, 2024, compared to the same period in 2023, is primarily attributed to the $6.9 million of accelerated amortization of original issue discount and issuance costs related to the voluntary prepayments, partially offset by the January 2024 voluntary prepayments the Company made on the first lien debt. See Note 11 – Debt, Net to the Notes to the Financial Statements for additional information.

Interest income

During the three and nine months ended September 30, 2024, Interest income totaled $1.0 million and $3.4 million, respectively, compared to $2.1 million and $6.2 million, respectively, for the same periods in 2023. The decrease of $1.1 million during the three months ended September 30, 2024, compared to the same period in 2023, is primarily attributed to a decrease in investment interest of $0.8 million, a decrease in interest earned on Assets held-for-sale of $0.2 million, and a decrease in interest earned on Restricted cash of $0.1 million. The decrease of $2.8 million during the nine months ended September 30, 2024, compared to the same period in 2023, is primarily attributed to a decrease in investment interest of $1.9 million, a decrease in interest earned on Assets held-for-sale of $0.6 million, and a decrease in interest earned on Restricted cash of $0.2 million.

Other income, net

During the three and nine months ended September 30, 2024, Other income, net totaled $2.4 million and $7.0 million, respectively, compared to $0.5 million and $0.7 million, respectively, for the same periods in 2023. The increase of $1.9 million during the three months ended September 30, 2024, compared to the same period in 2023, is primarily attributed to $2.2 million gain on sale of equipment, partially offset by $0.3 million unrealized loss on securities. The increase of $6.3 million during the nine months ended September 30, 2024, compared to the same period in 2023, is primarily attributed to $3.6 million gain on sale of patents and intellectual property, $2.0 million gain on sale of equipment, and $1.6 million gain on forfeiture of non-refundable deposit, partially offset by $0.8 million unrealized loss on securities. See Note 18 – Other Income (Expense) to the Notes to the Financial Statements for additional information.

Income taxes

The Company incurred nil net income tax expense or benefit for both the three and nine months ended September 30, 2024 and September 30, 2023. See Note 19 – Income Taxes to the Notes to the Financial Statements for additional information.

Liquidity and Capital Resources

General

The Company’s unrestricted cash position at September 30, 2024, was $55.8 million, as compared with $106.2 million at December 31, 2023. In addition to cash from sales of equipment, patents, and intellectual property totaling $7.1 million for the nine months ended September 30, 2024, the Company raised cash through its ATM Program as follows, and as discussed in Note 15 – Stockholders’ Equity in the Notes to the Financial Statements:

• On June 2, 2023, the Company filed a prospectus supplement reactivating the ATM Program. As of December 31, 2023, $360.3 million of common stock was available for issuance under the ATM Program. On March 19, 2024, the Company filed a prospectus supplement under the baby shelf rule (Instruction I.B.6. of Form S-3), limiting sales to one-third of its public float over any 12-month period while the public float remained below $75.0 million. This supplement revised the maximum shares available for sale through the ATM Program to $15.3 million. However, on April 11, 2024, the Company’s public float exceeded $75.0 million, and a new prospectus supplement filed on May 15, 2024, increased the available shares for sale under the ATM Program to an aggregate offering price of $100.0 million.
• On May 15, 2024, the Company filed a new $350.0 million prospectus subject to Instruction I.B.6 to Form S-3, referred to as a universal shelf registration statement, that included the $100.0 million New ATM Program. The universal shelf registration statement became effective on May 31, 2024, at 4:00 p.m. Eastern Daylight Time, replacing the prior universal shelf registration statement filed on June 30, 2021.
• During the three and nine months ended September 30, 2024, the Company sold 89,118 and 3,081,665 shares of common stock, respectively, for aggregate gross proceeds, before commissions and offering expenses of $0.2 million and $10.6 million, respectively.
• As of September 30, 2024, $99.8 million gross sales price of common stock was available for issuance under the New ATM Program.

As the Company ceased mining activities in 2021 and completed recovering gold and silver ounces previously placed on the leach pad in 2022, the Company does not expect to generate net positive cash for the foreseeable future. Accordingly, the Company will be dependent on its unrestricted cash and other sources of cash to repay debt and fund the business. Historically, the Company has been dependent on various forms of debt and equity financing to fund its business. While the Company has been successful in the past raising funds through equity and debt financings, no assurance can be given that additional financing will be available to it in amounts sufficient to meet the Company’s needs or on terms acceptable to the Company. If funds are unavailable, the Company may be required to materially change its business plan.

The Company’s future liquidity and capital resources management strategy entails a disciplined approach to monitor the timing and extent of any drilling, metallurgical and mineralogical studies while attempting to remain in a position that allows the Company to respond to changes in the business environment, such as a decrease in metal prices or lower than forecasted future cash flows, and changes in other factors beyond the Company’s control. The Company has undertaken efforts aimed at managing its liquidity and preserving its capital resources by, among other things: (i) monitoring metal prices and the impacts (near-term and future) they have on the business; (ii) ceasing open pit mining operations to reduce net cash outflows; (iii) reducing the size of the workforce to reflect the cessation of mining operations; (iv) controlling working capital and managing discretionary spending; (v) reviewing contractor usage and rental agreements for more economic options, including termination of certain agreements in accordance with their terms; (vi) decreasing Restricted cash balances that collateralize bonds, as available; (vii) planning the timing and amounts of capital expenditures and costs for drilling, metallurgical and technical studies costs at the Hycroft Mine; and (viii) deferring such items that are not expected to benefit our near term operating plans. The Company has undertaken and continues to undertake additional efforts including: (i) monetizing non-core equipment and excess supplies inventories; (ii) selling uninstalled mills that are not expected to be needed for a future milling operation; and (iii) working with existing debt holders to adjust debt service requirements.

In addition, the Company will continue to evaluate alternatives to raise additional capital necessary to fund the future development of the Hycroft Mine and will continue to explore other strategic initiatives to enhance stockholder value.

Cash and liquidity

The Company has placed substantially all its unrestricted cash in operating and investing accounts with well-capitalized financial institutions, thereby ensuring balances remain readily available. The Company uses AAAm rated U.S. Government Money Market Funds for its unrestricted cash investments. Due to the nature of its operations and the composition of current assets, Cash and cash equivalents, Income tax receivable, Assets held-for-sale, Interest receivable, and Other receivables represent substantially all the liquid assets on hand.

The following table summarizes projected sources of future liquidity, as recorded within the Financial Statements (in thousands):

(1) On October 2, 2024, the Company received a $1.6 million payment from the Internal Revenue Service, of which $1.4 million was for prior period income tax refunds and $0.2 million was for interest. As a result of this payment, the Company’s Income tax receivable balance has been reduced to $0.1 million.

(2) In July 2024, the Company entered into an Equipment Purchase Agreement to sell one ball mill for $4.0 million, before commissions and expenses. The Company recorded a $2.8 million reduction to equipment not-in-use and recognized $0.7 million, net of commissions as Other income for the sale of the ball mill for the nine months ended September 30, 2024.

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

The following table summarizes sources and uses of cash for the following periods (in thousands):

28

Cash used in operating activities

During the nine months ended September 30, 2024, the Company used $27.8 million of cash in operating activities primarily attributable to a net loss of $48.2 million, the cash impact of which was $28.5 million. There was a $0.7 million deficit to working capital, including cash used for Other liabilities of $0.8 million. The largest non-cash items included in Net loss for the nine months ended September 30, 2024, were Non-cash interest expense of $15.2 million and non-cash Asset retirement obligation adjustments of $6.3 million.

During the nine months ended September 30, 2023, the Company used $31.9 million of cash in operating activities primarily attributable to a net loss of $43.5 million, the cash impact of which was $31.4 million. There was a $0.6 million deficit to working capital and other, including cash used for Accounts payable and accrued liabilities of $1.4 million and Other liabilities of $0.6 million, and an increase in Prepaids of $1.4 million, partially offset by $2.8 million cash received on the collection of Accounts receivable as the Company collected its remaining receivables related to gold and silver sales during 2022. The largest non-cash item included in net loss during the nine months ended September 30, 2023, was Non-cash interest expense of $9.1 million.

Cash provided by (used in) investing activities

For the nine months ended September 30, 2024, investing activities generated cash of $6.1 million, comprised of Proceeds from patent sale of $1.4 million and Proceeds from the sale of equipment of $5.7 million, partially offset by Additions to property, plant, and equipment of $1.0 million.

For the nine months ended September 30, 2023, investing activities used cash of $0.3 million primarily attributable to Additions to property, plant, and equipment of $0.9 million, partially offset by Proceeds from the sale of equipment of $0.6 million.

Cash used in financing activities

For the nine months ended September 30, 2024, financing activities used net cash of $27.8 million that was primarily related to Principal payments on debt including the $38.0 million voluntary first lien debt prepayment, partially offset by $10.3 million from the Proceeds from issuance of common stock, net of issuance costs.

For the nine months ended September 30, 2023, financing activities used cash of $1.7 million that was attributable to Principal payments on debt of $1.7 million and Principal payments on notes payable of $0.1 million.

Future capital and cash requirements

The following table provides the Company’s gross contractual cash obligations as of September 30, 2024, which are grouped in the same manner as they are classified in the Unaudited Condensed Consolidated Statement of Cash Flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information. The Company believes that the following provides the most meaningful presentation of near-term obligations expected to be satisfied using current and available sources of liquidity (in thousands):

(1) The Company is required to pay a perpetual royalty equal to 1.5% of the net smelter returns from the Hycroft Mine (“Sprott Royalty Agreement”), payable monthly that also includes an additional amount for withholding taxes payable by the royalty holder. Amounts presented above incorporate mineral resource estimates as reported in the 2023 Hycroft TRS.

(2) Mining operations are subject to extensive environmental regulations in the jurisdictions in which they are conducted, and we are required, upon cessation of operations, to reclaim and remediate the lands that our operations have disturbed. The estimated undiscounted inflated cash outflows of these remediation and reclamation obligations are reflected here. In the above presentation, no offset has been applied for the $58.7 million of our reclamation bonds or for the $27.2 million of cash collateral for those bonds included in Restricted Cash.

(3) Interest payments consist of monthly payments under the Amended and Restated Credit Agreement (“Sprott Credit Agreement”) (as amended by the March 30, 2022 amended agreement (the “Second A&R Agreement”) at the minimum interest rate of 7.5%, monthly interest payments for other debt, and paid in kind interest associated with the subordinated debt paid at maturity.

(4) The Company is required to pay a 4% net profit royalty (Crofoot Royalty), including advance royalty payments of $0.1 million in any year where mining occurs on the Crofoot claims and an additional $0.1 million if tons mined from the Crofoot claim blocks exceed 5.0 million tons. Amounts shown represent the current estimates of cash payment timing using consensus pricing for gold and silver. See Note 23 – Commitments and Contingencies in the Notes to the Financial Statements for additional information.

(5) Repayments of principal on debt consists of amounts due under the Sprott Credit Agreement (as amended by the Second A&R Agreement), the amendment to the 10% Senior Secured Notes and Note Exchange Agreement (“Subordinated Notes”), and notes payable for equipment purchases. The repayment of the Subordinated Notes principal includes interest that is paid in-kind, which adds to the outstanding debt principal. See Note 11 – Debt, Net in the Notes to the Financial Statements for additional information.

Debt covenants

The Company’s debt agreements contain representations and warranties, events of default, restrictions and limitations, reporting requirements, and covenants that are customary for agreements of these types.

The Sprott Credit Agreement (as amended by the Second A&R Agreement and the Second Amendment to the Second A&R Agreement) contains covenants that, among other things, restrict or limit the ability of the Company to enter into encumbrances (other than Permitted Encumbrances), incur indebtedness (other than Permitted Indebtedness), dispose of its assets (other than Permitted Disposals), pay dividends, and purchase or redeem shares, as such terms are defined in the Sprott Credit Agreement (as amended by the Second A&R Agreement and the Second Amendment to the Second A&R Agreement). The Sprott Credit Agreement (as amended by the Second A&R Agreement and the Second Amendment to the Second A&R Agreement) requires the Company to ensure that, at all times, both its Working Capital and Unrestricted Cash are at least $15.0 million, as such terms are defined in the Sprott Credit Agreement (as amended by the Second A&R Agreement and the Second Amendment to the Second A&R Agreement), and that at least every six months the Company demonstrates its ability to repay and meet all present and future obligations as they become due with a financial model that uses consensus gold prices discounted by 5.0%. The Subordinated Notes include customary events of default, including those relating to a failure to pay principal or interest, a breach of a covenant, representation or warranty, a cross-default to other indebtedness, and non- compliance with security documents. As of September 30, 2024, the Company was in compliance with all covenants under its debt agreements.

On March 9, 2023, the Company entered into a letter agreement (the “Waiver and Amendment”), by and between the Company, Sprott Private Resource Lending II (Collector), LP (the “Lender”), and Sprott Private Resource Lending II (Co) Inc. (“SPRL II” and together with the Lender, the “Sprott Parties”). Pursuant to the terms of the Sprott Credit Agreement, the Company agreed that while any indebtedness is outstanding under the Sprott Credit Agreement or while the credit facility under the Sprott Credit Agreement remains available to the Company, the Company and guarantors under the Sprott Credit Agreement would not undertake certain corporate actions without the Lender’s prior written consent.

On May 24, 2023, the Company’s stockholders approved a proposed amendment of the Company’s second amended and restated certificate of incorporation (the “Certificate of Incorporation”) to effectuate a reverse stock split of the Company’s outstanding shares of Class A common stock, par value $0.0001 per share, at a ratio of no less than 1-for-10 and no more than 1-for-25, with such ratio to be determined at the sole discretion of the Board (the “Reverse Stock Split”). Pursuant to the terms of the Waiver and Amendment, Lender agreed to waive certain provisions of the Sprott Credit Agreement so that the Company may effectuate the proposed Reverse Stock Split of the Company’s common stock, including amendment of the Certificate of Incorporation necessary to effectuate the Reverse Stock Split. The Company notified the Nasdaq Stock Market LLC on October 26, 2023, that the Board of Directors approved filing the amendment to the Certificate of Incorporation in order that the Reverse Stock Split would be effective on November 14, 2023, at a ratio of 1-for-10. Except as set forth in the Waiver and Amendment, the Sprott Credit Agreement remains in full force and effect.

On January 5, 2024, the Company voluntarily pre-paid $34.7 million of the first lien loan, along with $3.3 million for the additional interest balance, totaling $38.0 million with a remaining outstanding balance of $15.0 million. As a result of this payment, the applicable margin was reduced by 100 basis points through the final payment.

Off-balance sheet arrangements

As of September 30, 2024, the Company’s off-balance sheet arrangements consisted of a net profit royalty arrangement and a net smelter royalty arrangement. See Note 23 – Commitments and Contingencies in the Notes to the Financial Statements for additional information.

Critical Accounting Estimates

This Management’s Discussion and Analysis is based on the Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these statements requires the Company to make assumptions, estimates, and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. For information on the most critical accounting estimates used to prepare the Financial Statements, see the Critical Accounting Estimates section included in Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Cautionary Statement Regarding Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the SEC, all as may be amended from time to time. All statements, other than statements of historical fact, included herein or incorporated by reference, that address activities, events, or developments that we expect or anticipate will or may occur in the future, are forward-looking statements, including but not limited to such things as:

The words “estimate”, “plan”, “anticipate”, “expect”, “intend”, “believe”, “project”, “target”, “budget”, “may”, “can”, “will”, “would”, “could”, “should”, “seeks”, or “scheduled to”, or other similar words, or negatives of these terms or other variations of these terms or comparable language or any discussion of strategy or intentions identify forward-looking statements. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefit of the “safe harbor” provisions of such laws. These statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance or achievements to be materially different from any results, performance, or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on current expectations.

Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results, performance or achievements may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results, performance, or achievements are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results, performance or achievements may not be indicative of results, performance or achievements in subsequent periods.

Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

See Risk Factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, as the same may be updated from time to time, and other SEC filings, for more information about these and other risks.

As the Company qualifies as a smaller reporting company under Item 10(f) of Regulation S-K, quantitative and qualitative disclosures about market risk are not required, and such are omitted from this filing.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published Financial Statements. Internal control over financial reporting is promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers and effectuated by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements for external purposes in accordance with GAAP. Internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2024, as required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide such reasonable assurance that information required to be disclosed by us, including our consolidated subsidiaries, in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure and is recorded, processed, summarized, and reported within the time periods specified in SEC’s rules and forms.

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must consider the benefits of controls relative to their costs. Inherent limitations within a control system include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. While the design of any system of controls is to provide reasonable assurance of the effectiveness of disclosure controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be prevented or detected.

Changes in Internal Control Over Financial Reporting

There were no significant changes in our internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As the Company qualifies as a smaller reporting company under Item 10(f) of Regulation S-K, risk factors are not required to be included in a Quarterly Report and, therefore, are omitted from this filing.