I wasn’t a long term investor of Allied Nevada. I came in late to the party with hopes of a buyout when the stock had dropped. My investment was material to me but when I made it I was prepared to loose it.
I was however involved in multiple Due Diligence reviews of the project dating back to 2011-2014 and have some positive opinions of the project and what it can be with either a lot of capital or with the new technology that is being rumored.
I have done quite a bit of research on the project trying to determine the missteps by the board and management. It appears the company started up with a good plan to take an old producing mine and get it back into production and use the proceeds to conduct exploration on a large land package in Nevada. It appears they got lost when they started drilling the deeper sulfides at Hycroft. Unfortunately, it appears management and the Board got lost or greedy and ran the value of the company up to over $3M in market cap with little to no production. I believe the thought was someone would step in and buy the company and give them a golden handshake. The plan that was not executable, they had no permits, and they had insufficient capital to build a $2B mill to process the ore.
The issue seems to be that they made a decision to take on $500M in Senior debt when they could have raised more than this in equity. It appears that management and the Board made a mistake taking the debt and not fully understanding the capital needed to construct a 120M ton per year mill. When Gold started to fall they were stuck with a ton of debt and a mine that was out of ore that could be processed without a mill.
It appears that the Board of directors, Bob Buchan and CEO Scott Caldwell made some serious missteps in managing this company. I am assuming it was because they held a large portion of the company? Or was there other reasons for this? I remember looking at the project in 2012 and questioning the plan to pay for the mill with oxide ore that didn’t appear to be there. (20+ years of mining had depleted this reserve)
Now we have all of the permits, the mill capital has been removed and I am assuming as a straight heap leach the restart capital is much less. Albeit completely dependent upon new technology that has been developed.
All of this sounds good but my question is what is the catalyst to make them go public?? Just back calculating from my old notes from 2012 it appears the project could have a discounted NPV of around $2-3B. What would be the catalyst for them to take the company public? Also, is the current management capable of taking on this task? Seems like a big task to put this monster into production. There are still a couple of the management that were involved in the dept raising and market mismanagement.
