The curious investment of the AMC cinema chain in a mine of gold and silver

(BFM Bourse) – In early 2021, the AMC cinema chain had benefited, along with other companies in difficulty such as GameStop, from an unprecedented mobilization of individual investors united through the Reddit forum.

Having fully benefited from the mobilization of small shareholders ready to support companies snubbed by the financial establishment, like GameStop, the AMC cinema chain intends to take advantage of the funds raised thanks to the spectacular rebound in its share price. stock market to diversify. After the popcorn, the firm set its sights on a financially fragile precious metals mining company, Hycroft.

AMC boss Adam Aron himself admitted the incongruity of such a transaction. “Obviously no one would normally think that the competence of a cinema business extends to gold or silver mining,” he said in a statement.

But the small carriers brought to AMC last year a “war chest of 1.8 billion dollars”, which it would be foolish to let lie dormant. Many small shareholders have indeed bought shares in the company which, in the wake of the GameStop video game chain, had become at the start of 2021 one of the symbols of the rebellion against the powerful of Wall Street.

The group took advantage of this unexpected popularity by issuing new shares en masse. Part of the money thus recovered was used to expand its network of cinemas, equip them with larger IMAX screens and improved equipment, but also to launch an inevitable NFT project or invest in the popcorn, typical delicacy of US cinemas.

“Go on the attack”

But his boss also intends to “go on the attack and grow the company”, in areas not necessarily expected. The group thus acquired 22% of the capital of Hycroft Mining, a gold and silver mine located in the State of Nevada which would contain 15 million ounces of gold and 600 million ounces of silver. AMC also acquired stock warrants to further increase Hycroft’s capital, disbursing a total of $27.9 million.

AMC partnered with precious metals industry veteran Eric Sprott, who contributed the same amount.

However, both AMC and Hycroft are also linked to investor Jason Mudrick. One of its listed special purpose acquisition companies (or “Spac”), Mudrick Capital Acquisition Corporation, had merged in June 2020 with Hycroft and still owned 40% of the mining company’s shares at the end of 2021.

Mudrick Capital Management had also loaned $100 million to AMC at the end of 2020, when the cinema chain was suffering from a serious liquidity crisis, then bought $230.5 million worth of AMC shares in June 2021. on which he had quickly pocketed his capital gain, according to the wall street journal.

The contribution of AMC and Eric Sprott represents in any case a welcome help for Hycroft, which had lost 41 million dollars in the first nine months of 2021 before suspending, in November, the operations of mining. The price then gradually fell below the 1 dollar mark, against around 10 dollars at the time of its IPO in June 2020.

Hycroft is, according to Adam Aron, “exactly like AMC a year ago”. “The company ‘has rock-solid assets, but for various reasons faced a severe and immediate liquidity problem’ which caused its share price to plummet. With its experience, AMC can help it overcome this difficult period, he assures.

(With AFP)

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