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Friday, August 06, 2021 1:41:49 PM

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The deposit is low grade (0.28 gpt) of which the leachability ranges from about 0.22 gpt for their "oxide" ore to 0.12 gpt in "transitional" ore and 0.06 gpt in "sulfide" ore. If you put this in dollar terms the gross revenue value from the ore (Au+Ag) is $18 for oxide, $10 for transitional and $5 for sulfide. That is almost nothing, and the project depends upon huge materials movements to make it economical. The original plan (which is where their "2 billion NPV" comes from) involves ramping to 3 million tons per month (36 MTPA). The mining cost at full production is supposed to be $3.60/t and the total cost (mining, processing, G&A) $8.50/t. In other words, they make a margin on oxide, sort of break even on transitional, and can't touch sulfide at all.

Now lets look at reserves (measured and indicated) - 8 million tons of oxide, 38 million tons of transitional, and 348 million tons of sulfide. Almost all sulfide. They have virtually no tonnage of profitable ore - only about a year's worth based upon full production numbers. Everything in this project is based upon doing something to raise the revenue potential of the sulfide ore to that of transitional or oxide ore.

Enter the "proprietary two stage leach". I understand the process and its objectives but that's not important here. Bottom line is that they are counting on the double leach process to raise the recoverable value of sulfide ore to about 65-70%, or raise its value from $5/t to $15/t so that it becomes profitable.

Now look at the attached article (March 24), and especially the following:

It is anticipated that mining in the first four months of 2021 will be performed using the existing Hycroft fleet and a rental fleet, moving approximately 1.5 Mt/mth of ore and waste. For the remainder of the year, Hycroft intends to mine some 500,000 t of oxide and transitional ore and waste per month with a more cost-effective mining fleet.

Diane R Garrett, President & Chief Executive Officer, reflected on the results: “2020 was an important year for Hycroft as the company continued to focus on the restart of the Hycroft Mine. Throughout the year, we advanced work on the proprietary two-stage sulphide heap oxidation and leach process and made several important findings that will need to be addressed prior to our implementing the novel technology on a commercial scale.

There are some "holy c**p" moments in there. Economics require 3 million tons a month of ore. They were operating at less than 1/2 capacity (1.5 Mt "ore plus waste", or <1.5 Mt ore) and they are cutting this by 2/3 (0.5 Mt per month). They are squeaking out a tiny bit of production by eking out and depleting their very tiny amount of oxide and transitional material.

Worse, what are "important findings that need to be addressed"? These are supposed to be addressed in the feasibility study, not by doing emergency studies on the side when you are supposed to be in production, and it is shocking that the CEO talks about having to do work "prior to implementation on a commercial scale" when if fact they are are already supposed to be running on a commercial scale. What they are saying is that the process does not work, and that virtually their entire ore body ore has disappeared since there is no economical ore without the sulfide.

Put bluntly, they are in deep c**p and are scrambling madly to find a paddle to get themselves out of s**t creek.

"The result of the work to date has identified several items that were not considered or included in the original plan and design but are critical to the success of this process."

What the heck? Items critical to the success of the project were not considered or included in the original plan and design? Then what kind of plan or design is it?? If you actually look at the list of deficiencies it is shocking, and identifying "future work" as being "critical to success" is exactly the same as saying that there is ZERO probability of success here and now with the existing operation, since these things "critical to success" are currently missing.

The communications are saying in no uncertain terms that the project is collapsing due to having been built on an incompetent feasibility study, and that the only hope of digging themselves out is by doing hail-Mary investigations on the side to try to find a magic solution before they run out of money and ore. If they had a clear path forward (and that's a big "if") then the development path itself is at least a couple of years in the making. A single leach experiment takes about 6 months or more, so it's not like they are going to fire out a huge amount of data next quarter. Their continued survival is a long shot. They need to shut down and stop bleeding out shareholder's money by running something that is not and will not be profitable. It would be a market slaughter, but the responsible thing to do would be to go back to being an advanced exploration project.

Technical Report: http://www.hycroftmining.com/wp-content/uploads/07-31-19-Hycroft-Summary-Technical-Report-SK1300_FINAL.pdf

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