Hycroft Mining Holding Corp. laid off 109 workers on Wednesday, Nov. 10, and mining operations have ceased.
The Denver-based company is continuing to process ore at the Hycroft Mine as long as finances hold out, said company CEO and President Diane Garrett.
“As a result of current and expected ongoing cost pressures for many of the reagents and consumables used at the Hycroft Mine, and the timeline for completing its updated technical studies in early 2022, effective immediately the Company is discontinuing pre-commercial scale mining at its run-of-mine (“ROM”) operation,” the company announced in a Nov. 10 press release. “The Company will continue producing gold and silver from ore on the leach pads as long as it is economic and will right-size the workforce to meet ongoing operational requirements.”
The 109 people laid off are out of a workforce of 209 at Hycroft Mine, located in the Sulfur Mining district 54 miles west of Winnemucca, according to a Nov. 10 report from the Elko Daily Free Press. In its Nov. 10 press release, the company announced that David Kirsch has resigned as Chairman of the Board and as a director of Hycroft. A day earlier, the Board appointed its independent lead director, Eugene Davis, to replace Kirsch. Additionally, the company announced that Jack Henris — who took over as Executive Vice President and CEO of Hycroft in January — announced his retirement effective the end of this year.
Company officials have had plans to construct a mill to process the site’s silver sulfide and gold ore, but financial hardships have prevented those plans from becoming reality. Without a mill, the challenges for effectively processing sulfide ore are too great, according to the company. “Despite the higher production and sales compared to the respective 2020 periods, Hycroft has consistently generated operating losses and used cash in operating activities as a result of operating a pre-commercial scale direct leaching ROM operation with high relative operating costs due to insufficient recoveries resulting from lower grades mined combined with escalating prices of consumables and reagents,” the press release stated. The site had obtained permits for mill construction under former owners, but those plans went awry when Allied Nevada went into bankruptcy in 2015. Since the site reopened in 2019 under a new name, it has been utilizing heap leach processing for its oxide ore body. However, sulfides are best processed using a mill. Officials say they are proceeding with feasibility studies to estimate the cost of a new mill and possibly an autoclave. “Ongoing and future technical work for the Hycroft Mine will be primarily focused on the pre-feasibility study and technical report for the Acid POX milling for processing sulfide ore and completing the variability and metallurgical test work,” the press release said. “We also plan to evaluate exploration opportunities targeting higher ore grades and expect to continue to advance the proprietary two-stage sulfide heap oxidation and leach process as time and resources permit.” When the operation was started up in 2019, mining oxide and transition ore allowed the company to pre-strip overburden with some revenue offset to gain access to commercial scale sulfide ore. With the change in focus from the two-stage heap oxidation and leach to a milling operation, there is ample time to align the remaining pre-stripping with the start-up of commercial scale sulfide operations. “The company believes that this action will conserve cash and focus the company’s time and resources on its technical studies for sulfide ore,” officials said. “The metallurgical and variability drill program is ongoing with drilling expected to be completed by the end of 2021 and metallurgical analysis and test work continuing through the first half of 2022.” Hycroft has the largest silver deposit in the U.S. and officials claim a mine life of 34 years if they can get a mill constructed. The site is rated among the top 20 largest primary gold deposits in the world and the second largest in the U.S., according to company documents. According to officials, production in the third quarter of 2021 of 14,831 ounces of gold and 91,437 ounces of silver represented a 240% and 295% increase in ounces produced, respectively, compared with the corresponding quarter in 2020.
As of the end of the third quarter, gold and silver production are approximately 91% and 75% of the mid-point of full year 2021 guidance. Additionally, sales in the third quarter of 2021 were 16,354 ounces of gold (average realized price of $1,781 per ounce) and 105,478 ounces of silver (average realized price of $24.15 per ounce). “We are proud of the safety culture we have established and our strong safety performance month after month this past year,” Garrett said. “We are very disappointed that the challenges and economics for our pre-commercial scale ROM operation necessitates that we cease mining. Until this point, the Company’s cash position was optimized through the ROM operation but, with increasing consumables costs, and the likely future timing of commercial scale sulfide operations, it is no longer prudent to continue the ROM operation while we move forward with our technical work.
"We believe we are taking the most prudent approach to de-risking the project, including critical steps to continue the important work necessary for the development of this substantial mineral endowment.”