HYMC - NASDAQ

Ladies and gentlemen, thank you for standing by, and welcome to the Hycroft third quarter earnings call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Tracey Thom. Thank you. Please go ahead.

Thank you, Lindsay. Good morning, everyone, good afternoon, depending on where you are. Thank you for joining us. Today, we will be discussing our third quarter 2020 results for which we filed our Form 10-Q with the Securities and Exchange Commission and issued a press release this morning. The press release can be found on our website at www.hycroftmining.com. Please read the press release and listen to this call in conjunction with reviewing the Form 10-Q, which contains additional disclosures. Also, please note that some information provided during this call may include forward-looking statements that involve risks, uncertainties and assumptions. Even if the risks or uncertainties have been materialized or the assumptions prove incorrect, these results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward looking. A discussion of some of the risks, uncertainties and assumptions are set forth in more detail in our press releases and SEC filings, including the most recently filed Form 10-Q. We assume no obligation and do not intend to update such forward-looking statements. I'll now turn the call over to Diane Garrett, President and CEO.

Thank you very much, Tracey, and I'd like to welcome everybody to the Hycroft Mining third quarter conference call. I am Diane Garrett, President and CEO of Hycroft Mining as of September 8. With me today in Winnemucca, Nevada is Stan Rideout, who's our Executive Vice President and Chief Financial Officer; our recently appointed new Vice President and General Manager, Mike Eiselein; and Tracey Thom, who you just heard from, Vice President, Investor Relations and Corporate Communications; and on by telephone in our Denver office is Jeff Stieber, who's our Senior Vice President, Finance and Treasurer. Happy to see all of the many callers on our line this morning, so we welcome all of you, and thank you for being with us as we lay out the details of our third quarter and what our observations are and where we're moving forward with the project. This is my first address to all of you in the market as the new President and CEO of Hycroft, and I'm really excited about talking to you today. I know I've spoken a lot with many of you on the phone already and certainly welcome all the calls. I think a lot of people have my contact details and feel free to reach out any time. We're always available to our shareholders and certainly, interested parties. But today, I'm going to be communicating with you my views of the projects since coming on board, some of the changes that we've made, actions that we've taken and our plans going forward into 2021 and beyond. Following my opening comments, I'm going to then ask Stan Rideout to review the highlights of our third quarter financials, followed by Mike Eiselein, who will report on the operations update, and then we'll open the call up for questions from the audience. So first and foremost, let me just say that I'm very excited to be part of this project. It is a world-class asset. Our gold and silver mineral reserves and resources place Hycroft among the largest-scale mines in the world and a place of jurisdictional safety, which is becoming more and more important every day in our industry. Our current life of mine reserves are estimated at just over 1 billion tons, grading 0.011 ounces per ton gold and 0.425 ounces per ton silver, and that generates a current mine life of approximately 34 years, as you will have noted from our technical study. Our total resources, which are exclusive of the reserves, currently stand at around 393 million tons grading 0.009 ounces per ton gold and 0.277 ounces per ton silver. And in addition, there are numerous opportunities for increasing and expanding these resources and reserves. And while the focus primarily is on the continuing improvements of our proprietary 2-stage sulfide oxidation and heap leach process, we think there will be some attention spent on expanding our reserves and resources throughout our district as well. But our first focus is the continued start-up and subsequent ramp-up of our operations. In my first 2 months leading this team, I've spent a lot of time at the mine site, in fact, all of my time at the mine site. And for the foreseeable future, I anticipate continuing to reside in Winnemucca. I've been working from the ground up to fully understand our project, our processes, our strengths, our challenges and also the opportunities that we have before us with the Hycroft mine. In addition to strengthening the team, we've identified a number of areas for cost savings, such as being more operationally efficient, improving the reliability of the infrastructure and the equipment that we have on site, better management and oversight of our contractors, improving maintenance, which is resulting in less downtime, and that leads to more efficient productivity. And we're also looking at self performing some of those maintenance items where appropriate. So our attention to controlling costs has been a very big high priority for us, and that's going to be a primary focus of ours continuing as we go forward. There has been a lot of transition with Hycroft, as you have noted since the beginning of the year, including a number of management changes in addition to going public just 5 months ago. And since joining Hycroft, we focused on building a very strong and experienced team, and we've been fortunate to attract some very highly experienced individuals who have proven track records and their respective disciplines. And I'm also pleased to note that we have been receiving an overwhelming number of inbound calls from very seasoned technical mining individuals across all departments and they're wanting to be part of the Hycroft story. So this is really good news for us and a very big vote of confidence for the project and the efforts that we're taking and the direction that we're heading with the project. As we announced in October, Stan Rideout, who I worked with in the past, joined Hycroft as our Executive Vice President and Chief Financial Officer, and he's got a very diverse background in project financing. He spent over 20 years at Phelps Dodge and many years at Romarco Minerals and was responsible for leading and executing the project financing. We also promoted Mike Eiselein to Vice President and General Manager. Mike actually joined Hycroft in August of 2020. And he quickly made the necessary changes to the process structure and certainly to the crushing circuit where we were having some operating challenges as well as the sulfide oxidation and heap leach process. Mike's depth of knowledge and experience with these sulfide deposits and process improvements and optimization programs are perfectly suited for Hycroft right now at this time in our development. And I was very quickly switched on to his very strong leadership skills, and that's something that's very important to us as we move forward and very happy to have him in this role. The changes that we've made within the company, certainly from a management perspective and some of the others, and I'll be touching on those in just a few minutes, they just -- they help to better align the goals of the company with the execution of our plans. So Stan coming in and Mike coming in and a number of other additions that we've made to the process team are very important for us as we go forward in the development of this project. We are continuing to build new and improved culture at site, culture that involves ownership and excellence in our operating performance as well as a high priority and focus on safety, which is always and will always continue to be our #1 priority. It did need a lot of attention when this team came in and we're making positive strides in this area, and we will never stop working to improve our safety performance because the well-being of all of our employees is very important to us. We will continue to realign and strengthen the leadership team to make sure we have the right people in the right positions and to ensure success for our shareholders as we develop this project. And to support those efforts, we have recently established a technical team, as you will have seen in our recent disclosure, and they consist of the key site and technical employees from the process department. Also, we brought on board John Marsden. He's the world-renowned metallurgical and processing consultant with specific expertise in gold and silver extraction, in fact, wrote the book, The Chemistry of Gold Extraction, so just about every metallurgist in the industry has his book on their shelf, so we're very happy to have him working on this with us. We've also engaged Hazen Research. They are a research and development laboratory so many of you in the industry are familiar with them, and Forte Dynamics, which is a multifaceted engineering and consulting firm in open pit and heap leach processes. And they have industry-leading expertise on heap leach stacking and modeling, and that's going to be very important to us as we move beyond these preproduction pads and get into commercial size production on the new leach pad that we're currently building. Now for the benefit of our existing shareholders and new shareholders and also for those who are just following with interest the Hycroft story, I want to take just a few minutes and recap what has transpired since the technical report was completed by M3 Engineering in the summer of 2019. I feel going back to the history is important so that we can understand where we are today and what our plans are going forward. And the company having been private until just 5 months ago, there's a lot of information that's transpired so I just thought I would connect the dots together and I would just walk you through a bit of that history briefly before moving on to what our plans are going forward. So sulfide oxidation chemistry is very well understood in the industry. It's utilized in many mines with respect to roasting and pressure oxidation plants that are currently operating throughout this region. But what makes it unique to our project is that we are performing sulfide oxidation under atmospheric heap leach conditions, and this is due to the low-grade nature of our ore. Capital and operating costs are much lower for heap leaching than they would be for, say, roasting and autoclaving. Hazen Research did a lot of work for Hycroft on the alkaline oxidation process when the predecessor company was looking at the AAO process or ambient alkaline oxidation. Following that work, M3 Engineering was engaged and they completed the technical report for the current 2-stage oxidation and heap leach technique. And that was completed, as I mentioned, in July of 2019 and is available on our website. From a chemistry standpoint, we know sulfides can be oxidized in an alkaline environment. Hycroft is pioneering the ability to do this, utilizing a heap leach process and also on a very large commercial scale. For our particular process, modeling the oxidation to gold recovery relationships and larger-scale operational environments is very, very important. And that work is ongoing as we continue to gather data from our current pre-commercial pads. Our process does require careful management of multiple factors, including alkalinity, pH, moisture, oxygen and iron levels and a whole host of other things. So subsequent to the technical report being filed during the second -- well, technical -- subsequent to the technical report being filed in the summer of 2019 and throughout the second half of 2019 and into the first couple of quarters of 2020, prior management conducted two 50,000-ton each pre-commercial pads of sulfide material and those results are referenced on our website. After stacking those first 2 sulfide commercial pads, the company then began stacking multiple 50,000-ton test pads of predominantly transition material. And the reason that the test pads that are undergoing various stages of oxidation and rinsing and leaching today are transition material is simply a function that we have a lot of transition in oxide material that has to be plowed through to gain access to sulfides. So since the original first 2 test pads which were sulfide material, we have predominantly been putting transition material onto the pre-commercial pads. As you will have noted from our first 2 quarters on the operating and financial results and also reflected in our current quarterly results that we've disclosed this morning, there's a number of factors that resulted in lower gold equivalent production and sales volumes and high operating costs, which is why we've not been able to generate positive net income to date. In the past, operationally, the challenges were many. So for example, the crushing facility needed major maintenance, and it wasn't able to consistently deliver the appropriate size crushed material to the pad. There was mismanagement of the process solutions control systems, which was a very significant item. We had an undersizing reagent distribution system that negatively impacted the quantities of soda ash that were delivered to the pads. And we also have some aging equipment on site, and it was requiring frequent unplanned repairs and subsequent downtime. So all of these factors that were going on in the first half of the year were contributing to write-downs of the inventory -- write-off of the inventory and certainly were impacting our production volumes as well as our revenues. Since that time, however, new members were added to the process team, and that's including Mike Eiselein and another process manager, we have [ Kenzie ], you may know, And they were brought in fairly early in the third quarter and many of these operational issues that the project was impacted by in the first 2 quarters of the year have been addressed. Mike is solely responsible for fixing our crushing circuit and did it in record time, so we certainly owe him for that and really appreciate all of his attention to that matter. And we're continuing to make additional improvements throughout the operation and on site. And because of the improvements that we've seen, because of the team that we have in place and because of the focus on increasing our productivity, we are very, very confident that the results that have been put out to date are not representative of our plans going forward. We are still, however, in the pre-production phase, and we do need to be moving larger volumes of material and we have plans to be ramping that up through 2021. We're actually working on a lot of those plans now. But we're very, very confident, very happy with the results that we've seen and the improvements that we've made from some of these operational problems and challenges that have plagued us in the first 2 quarters of the year. The company is continuing to mine through transitional and oxide material in order to expose the sulfide. You'll recall that the predominance of our reserves and resources are sulphidic in nature. But we will, throughout the life of the mine, encounter transition material and oxide material periodically, and we are, at this moment, continuing to mine through some of that. For the oxide material, we send that directly run of mine to the leach pad. For the transition material, we have been placing it on pre-commercial pads and many of you are well aware of that. These are our current pads that we have in various stages of the oxidation, rinsing, and leaching stages. But what we've been observing through our continued sampling of these pads and also the column testing that we're doing in our labs on the same material is that there may not be any additional recovery benefit from oxidizing this material. And this is important for a couple of reasons. We are observing consistent gold and silver recoveries on transition materials, whether or not we are putting it under oxidation. And although our test work is ongoing and we haven't made a final determination about the transition material, we are believing now that the cost savings and the time savings of not crushing, of not rehandling the material at the crusher, of not applying soda ash and the time involved with oxidizing, rinsing and subsequent leaching will yield a net savings to the project. So in other words, if we put the transition material directly under leach, we're seeing similar type recoveries that we are on the oxidation pads. Now again, just caution you that a reminder that we're continuing to analyze this data. But at this time, we do believe the transition material can be sent directly run of mine to the leach pad. And we're going to have better clarity on that over the coming months. So while we continue to encounter transition in oxide material throughout the mine life, it's important to understand how each of these various materials behaves in our processing environment. And again, just a reminder that the future and the goal of Hycroft is sulphidic -- sulfide oxidation of the sulphidic material. So we will be in transition and oxide and we'll treat that accordingly and whatever we get the best results from. And then the sulfide oxidation, certainly, that work will be ongoing and we will be entering into some sulfide material this month, and I'm going to touch on that in just a few minutes here. From our announcement today, you will also have noted that our 4 million square foot leach pad for the commercial scale operations will now be commissioned towards the end of the first quarter of 2021. This was due primarily to aspects associated with the sulfide oxidation itself, including some recent design changes that we made on the solutions management infrastructure, which we think are more appropriate. We've also been made aware that there are some delays associated with the electrical and mechanical equipment packages. So we do, however, anticipate that this pad will be able to accommodate stacking oxide and run-of-mine material by year-end. It's just the external infrastructure that is important for the sulfide oxidation of the sulfide material is being -- will be delayed and not be fully commissioned until the end of the first quarter. So we do expect to be moving run-of-mine material to that pad and we can cordon off an area of that pad and hit it with direct leach until we -- until it's completed for sulfide material. And that timing works fine for us just because of the mine planning that we're working on right now and being able to expose and open the sulfide areas. So for the remainder of 2020, we expect to continue to mine primarily oxide and transition material. It's just a nature of the areas that we're in and we've got to plow through that in order to expose the sulfide material. And so we would anticipate placing that on either existing pre-commercial pads. And then once the new leach pad is completed, we can put it on the new leach pad at the end of the year while we're waiting for the additional components for the sulfide process. During this month, however, in November, we are beginning to access approximately 200,000 tons of sulfide material in each of the Central and Brimstone pits. And this sulfide material will be placed on several pre-commercial pads, anywhere from 2 to 4 pads, and that's just a function of real estate, so it's where we have location and space to accommodate that 200,000 tons. So it could be two 100,000-ton pads, it could be four 50,000-ton pads. And we don't want to delay getting into these sulfides and starting to treat them with our process. So since the new commercial pad will not be complete for sulfide oxidation purposes until the end of the first quarter, we're -- and we're in the sulfide material this month, we're going to go ahead and place this on these pre-commercial pads that we've designated space for on-site so we can get that process underway. We've made a lot of significant improvements in our process operations during the third quarter that put us in a much better position to be able to manage the sulfide material. And some of those items include the upgrading and improvement of the reagent island, adding an agitator mixing system to allow for better and higher soda ash concentration and solution, and that also helps us with increasing our application rate. We've made a lot of additions to the process team, and as I mentioned earlier also, the team of consultants that we've brought on. We have a lot of work to do and gearing us up for commercial scale production, so we've got some of the best and brightest minds around the table as we start planning forward. We've improved our leach pad operations, our data gathering and all of our reporting protocols. As I mentioned earlier, we're very focused on safety, and we're starting to move those in a much more positive direction. And we've reduced a lot of the downtime on our equipment maintenance and that effort will be ongoing. At the moment, and we will be doing this between now and the end of the year, we're currently working on our mine plan, our mine sequencing and our optimization work for 2021 and beyond, and that's going to be based on the results and our knowledge to date, certainly observing what we're observing with the transition material would be a key component of that, the ongoing test work on sulfide material, and again, the transition material. Taking into consideration the construction time frame of the new leach pad and the scheduling of mining of activities for accessing the large tonnage sulfides for the commercial scale. Noting that we do have a lot of transition and oxide material to plow through to gain access to those sulfides, and we're working on that plan right now and optimizing that for 2021 and beyond. The mine plan and this budgeting process, although it's underway at the moment, we do look forward to communicating all of that to the market in early 2021, and we will do that in the form of our mine planning and guidance and expectations for the year. So we will be forecasting what we anticipate to produce for 2021 and the years beyond. Our goal, as we look at this mine plan and we optimize it is to maximize our gold recovery while perfecting the sulfide oxidation process and also scaling up to commercial status. So a lot of work to do on that budgeting and planning and optimizing, and we look forward to sharing that with you very early in 2021. So before we address some key highlights for the quarter, I would like to thank all of our existing shareholders and our new shareholders for their overwhelming support during our recent very successful financing. We raised net proceeds of approximately $83 million, and we welcomed 13 new institutional shareholders to the registry. So for those of you who have worked with some of our members of management in the past, you know we work very hard for our shareholders, we take your investment very seriously, and we are going to make sure that we move this project forward in the right way. And we're all very, very excited to be part of it, and we look forward to communicating with you our new plans in 2021 for the years beyond. So at this point, I will turn it over to Stan Rideout, who will walk you through the details of the financial quarterly information.

Thank you, Diane. I'm also excited to be a part of this team and a part of this great project. Like Diane, I'm spending a lot of my time and efforts at site, and I'm planning to maintain my presence at site for the foreseeable future. As explained by Diane, Hycroft has continued to work at a pre-commercial scale in developing the oxidation and leaching process. That, combined with the extensive operational challenges, has resulted in low gold equivalent production and sales volumes and high operating cost, which is why Hycroft has not been able to generate positive income or positive cash flow before financing activities. For the third quarter and 9 months ended September, Hycroft reported a net loss of $29.1 million or $0.58 a share and a net loss of $113.5 million or $4.92 per share, respectively. For the 9 months ended September 30, net cash used in operations was $85.2 million, and net cash used in investing activities was $19.2 million, of which $15.4 million was for the leach pad. The good news was net financing activities provided $106.6 million of cash. At September 30, we had unrestricted cash of $11.5 million, and shortly after quarter end, we closed the public offering for net proceeds of approximately $83 million. We're keenly focused on our cash position and managing cash, and as Mike will highlight in a moment, we believe there are opportunities to generate, through operations, cash while developing the oxidation and leaching process. As Diane said, unfortunately, we're early in our planning process for next year so we're not in a position to provide guidance or ranges of guidance for expected performance. What I can share is that we're intent on putting together a thoughtful and disciplined plan for successfully transitioning to commercial scale. We're planning to stack and leach ore and some transition -- stock and leach oxide ore and some transition ore on sections of the new leach pad without the costs such as crushing, soda ash and rehandling as we advance the process. We've identified opportunities to produce gold equivalent ounces, reduce cost and improve operating performance that provide very attractive cash benefits. And I expect the team will continue to be creative and resourceful with more opportunities as we get deeper into the planning process. Mike?

Thanks, Stan. I am excited to let everybody know some of the exciting things we have going at the site. As Diane mentioned, we've built a strong core group of individuals with some of the most experienced and knowledgeable operations, maintenance and support folks in northern Nevada. And like she indicated, what's really cool is we're -- we continue to get a lot of inquiries from some of the best and brightest out there wanting to be potentially a part of this. Everybody kind of feels that this could be a game changer for the industry and it's attracting a fair amount of interest. So that's a good thing we can build upon and we'll continue to build upon with our operating crews and support crews going forward. As mentioned previously as well, we want to transition this operation from -- towards a world-class producer and away from kind of this pre-production test operation mindset. Consequently, the message I'm sending to the groups is that we need to start thinking like a producer. And because of that, we're going to start affecting some significant change in the kind of a continuous improvement mindset in several key areas to get us to that ultimate goal. And this will allow us, I think, to implement some of the changes that we want to make pretty quickly. So primarily, on the safety and health front, even prior to my arrival, there was a great deal of effort and resources being applied to the -- changing the safety culture at Hycroft, and really, that needs to continue. As a result, we've seen a significant decline in our total reportable incident frequency rate down to 2.48, significantly down over 40% from previous quarters. The good news is we had 0 lost-time incidents or medical reportable incidents in Q3. However, regrettably, we did have to absorb a lost-time incident in October when one of our pad crew got a particle of soda ash in his eyes, became irritated ,and turned into a lost time. So we clearly have our work cut out in front of us and we don't have any challenge more important than continuing to drive the safety culture at Hycroft. So consequently, we've been -- we have a fully-staffed safety department now, and the challenge that I laid before that group is to really become creative in how we engage our leadership and our employees on moving that safety culture forward. Most of us have come from advanced safety cultures in the mining industry already, so we have a great opportunity to take the best that we've learned and the best elements of these programs and implement them here at Hycroft. And really, my goal is to make Hycroft the leader for safety and health in the region against some of the bigger competitors we have over the hill. So that will be our mission and continue to be our mission going forward. On the COVID front, it's obviously concerning and continues to be a concern with the industry and the nation as we see upticks in exposure and infection rates across the country and worldwide. So we've redoubled our efforts on COVID controls. We've implemented some rapid testing and returns of those testings to ratify quickly as exposure events may occur within our group. To this day, we haven't been significantly impacted by that. Out of abundance of caution, we had some short quarantines of a couple of operations crews when it became evident that exposure occurred. And with our rapid testing and return protocols, we're able to get people quickly back to work as they turned up negative to exposure. So that's all important for both operationally and the safety and the peace of mind for our employees and their families. So we continue that towards a great deal of business. So on the mining, on the execution group front, we see -- continue to see lots of improvements in both mining and processing. As Diane indicated, our crushing facility has seen tremendous improvements in uptime and reliability. We've got a core group of proactive maintenance individuals and operations individuals there that really help drive that. And we're going to continue to implement. I kind of operate from a reliability-centered maintenance approach in both maintenance and operations, so we're going to continue to reinforce those principles in our operation and really expand the reliability efforts to the mine as well. We've recruited some local reliability talent and it's tough to pay off in spades. So also, we continue to emphasize and look at the oxidation leads performance across the board, specifically in relation to our transition ores. We're kind of working on a path forward for really the most economical cash flow positive approach on treating routing these transition and oxide ores as we kind of build a gap or bridge the gap to the bulk of our sulfides, that sulfide resources we have. We have a tremendous amount of these transition ores we have to work through to get there. But I think as those plans develop, we can -- I think we'll look forward to sharing those with you in future calls. But right now, we're seeing some pretty positive results and really working up some solid plans on routing. And I think you'll see kind of a more traditional heap leach operation out of Hycroft as we kind of bridge the gap to the bulk of the sulfide. So meanwhile, we -- like I said, we continue to sample and test, really looking at ways to optimize the process and really see what the best fit is across the board for the domains that we have in front of us and just making sure that we're well positioned and well -- and these principles are well understood as we scale up to commercial production. So with that, I'll turn it back over to Diane for closing comments.

Okay. Thanks, Mike. So I think as everybody can tell, this came while some of us are relatively new. We're very, very engaged and up to speed on this project and the processes, and we've been working diligently around the clock on everything to make sure we have the right plan going forward based on all the work that we're doing. We're all very excited. I think you can see in our communications with you, our enthusiasm, it's not only being part of a project like Hycroft, which is truly world-class status when you just look at it in terms of its mineral endowment but also the opportunity to be at the forefront of demonstrating a process. It truly is going to be a game changer for the industry going forward. So we're all very excited about it. We're happy to be here. We thank you so much for your investment in the company and your confidence in this team. We will deliver for our shareholders and our history of all of us, even in various companies, we take our work very seriously, and we stop at nothing to deliver success in a safe environment and the right environment for our shareholders. So with that, I will turn it back over to the operator and we can open it up to Q&A if anybody has any questions.

[Operator Instructions] Our first question comes from the line of Vincent Anderson with Stifel.

I was hoping you could just maybe quickly walk us through the remaining hurdles on Pad 1A in terms of how much that is left to do with the technical design versus just getting the equipment delivered. And do you have a relatively firm delivery date for that equipment?

So the technical design had a lot to do with the piping arrangements, integration of the different ponds for different cycles of the oxidation process. It appeared that we need to do some refinement of that. I think we're probably about 80% through that. And it hasn't really impacted us too much other than we want to make sure we're not overspending on the piping arrangements when it's not necessary, so it's actually a cost saving project as well. The equipment deliveries, we're kind of seeing. I think a lot of that might be a COVID impact, we're seeing supply chain interruptions across the board. So our electrical -- our eHouse and drive systems for the pumps and then the pumps themselves have been delayed, and we're working pretty hard with the suppliers right now, pushing them back on that. And we're going to be still looking at that end of Q1, delivery install window. We're fighting that one pretty hard. So at this point, we don't think it will push any further but we're obviously concerned [indiscernible].

All right. And then so you sacked a lot more gold on pad this quarter, nice job there. But your production guidance for 4Q, if I interpret it correctly, is it indicating a lot of sequential improvement in gold production? You've also drawn down your post leach inventories, particularly in the carbon column. Is this guidance based on expected recovery rates on the older pads or just timing or am I missing something?

We have a lot of static on your line so I think what you were asking is about forecast for the fourth quarter, would we be expecting something similar to the third quarter?

Is this any better?

No, but try it again.

Okay. Sorry. You guys sound great. But no. So versus the amount of gold you put on pads this quarter, the production guidance for the fourth quarter doesn't seem to be as much of a sequential improvement. So just walk me through, is it the expected recovery rate on the older pads that you're still using? Is it just a timing factor? What am I looking at there?

Yes, it's a timing factor in getting those ounces off the pads, yes.

We're -- part of this was optimizing. As we saw the performance of the transition ores and not really super responsive to the oxidation process, we cut some of those off early and put them directly to leach. That might be the case going forward. But as always, we're -- it just depends on the timing of materials coming out of pit, sequencing those and what we can get under [indiscernible].

Okay, all right. That's helpful. And then for the sulfide ore you're planning to put on pre-commercial pads, the 200,000 tons, are you able to stack these on the first 2 pre-oxidation kind of test pads? Were you really were able manage the process to some fairly favorable results? And then just kind of as an aside, do you have any pads left where you're still piloting the pre-oxidation technology on an outdoor leach?

So the only thing we have under kind of the oxidation -- well, we're just wrapping up the last cell in its transition ore [indiscernible] We do have space available on these myriad of different cells on the old Brimstone leach pad that we can segregate, integrate these sulfide ores and independently operate them and get good data on and that's our intent, we'll move either the run of mine or crushed transition offsite ore around those so that we can [indiscernible]

All right. And if I could sneak in one more. What is your visibility on the cyanide soluble content of the transition ore you're still working through? And then just kind of given the near-term delay in Pad 1A, how much flexibility do you have right now to prioritize maybe some of the higher cyanide-soluble gold to support production over the next 2 quarters?

That is our goal, absolutely. I mean, that's our intent, that's what kind of drove us to a little bit different for operational approach. Again, we want to kind of transition away from the pre-commercial test operational mentality to a gold producer and maximizing ounces they make, and the ounces recovered. And that's our intent currently going forward.

Our next question comes from Terence Ortslan with TSO.

Just a quick question, actually. My associate just noticed to me that there was -- maybe you can explain, there were 12.9 million shares of the insider purchases. Is that because of the changes in management of the board or was that genuine purchase?

We're not -- on an insider report. ,I mean, we do have existing shareholders who participated in the financing. But we've been in blackout and so there's not been any insider purchases, and there won't be until 48 hours after today with our quarterly financials.

Actually, I'm sorry, this is the report that insider purchased 12.9 million shares equivalent to $89 million.

Yes. Let us look into that. I'm not familiar with that disclosure that you're referring to so let us look into that and we'll get back to you. We've got your name and contact details.

Our next question comes from Grant Miller with Eastbridge.

This is Dan Haimovic. First, want to commend you for the team that you've built on in such a quick couple of months since taking over, so congrats to Diane and the rest of the team. I had a couple of questions. The first question I wanted to ask was on kind of qualifying days and seeing how the -- seeing how the different pads right now are doing. And if you guys are successfully getting qualifying days throughout the last couple of months.

Yes. So thanks, Dan, and good to hear from you and appreciate the comments on building of the team. We are seeing good qualifying days, but what we're finding on this transition material that even though we have qualifying days where all of the factors in the buckets that we measure in terms of alkalinity, pH and all of those things that go into a qualifying day, we're finding that irrespective of that, that the material is leaching with very similar recoveries if we just send it directly to leach. So we are continuing to see those qualifying days.

And can I ask, what percentage are you getting when you're saying on the transitional material?

So we actually started out at 8% alkalinity or soda ash to the oxide pads and we ran it up as high as 15%, which was not ever achieved at the site, just testing different conditions and results. And like I said, we're just wrapping up our last cell, Cell 5 that was under oxidation, and we actually pushed up some of these soda ash alkalinity levels and we're sampling now. And we'll have some test results available in the near future that perhaps we can look back on. But like Diane said, for the most part, we've not seen even the higher alkalinity application rates move the needle on these transition ores much, if any. So that obviously drove our decision to go in more right to leach with these and saving that OpEx with soda.

And then can I ask on, Diane, you mentioned that you think you've got about 200,000 tons of straight sulfide for November. Will those be put on to clean pads and really run through the full process?

Absolutely. So there are -- as Mike mentioned in response to an earlier question just a few minutes ago, there are some existing pads that we can put liner down on and put more material on top, and there are some clean areas where we can start fresh. So we will be running through the entire process of sulfide oxidation just like we will when we get into commercial scale operations and like we were doing on test Pads 1 and 2 with all the knowledge that we've gained from all the test work. So yes, it will be the sulfide oxidation process for those sulfides. If we had the leach pad already built, they would be going on to the leach pad, but we don't ,so we're going to put -- we don't want to hold off mining them because that's good information, and we want to start getting underway on that and we want to get into those sulfides. So given the timing of the completion of the pad, we're going to put them on these other location areas. And so that 200,000 tons will be mined throughout November and December of this year and placed on those pads. So while we'll be testing them and getting periodic -- well, we test these things and pull in data from these pads every 48 hours. And if they go according to a normal type process of the time line for oxidation and rinsing and leaching, then we'd probably have those ultimate recovery numbers out in May, June time frame of 2021.

Okay. And then just one last question regarding the new pad. So as you put material on the new pad, if you put it on the beginning of -- end of Q4, beginning of Q1, how much will the process be delayed as they run through their full process to actually understand what the results are going to be because of the delay in developing the outside circuitry of the pad?

Okay. So just to be clear, when you talk about the new pads, are you talking about the pre-commercial pad or the new leach pad?

No, I'm talking about the commercial pad. I'm talking about the new commercial leach pad that will be delayed and delivered at the end of Q1.

Right. So the new commercial pad at the end of Q1 is for putting sulfide material onto that pad. So it's -- the delays for that extra quarter, that extra 90 days, if you will, has to do with external components related to the sulfide oxidation process. So that pad, until we get to the end of Q1, which is what we're currently expecting based on the information we're getting from suppliers is we will not be able to treat sulfide material on the commercial pad until after the end of the first quarter. However, we will be encountering and continuing to encounter oxide and transition material. And with the new pad being effectively completed from a traditional heap leaching standpoint without the plumbing associated with sulfide oxidation, we are going to go ahead and put material onto that pad of oxide and transition in an area of that pad where we can just directly heap leach it. In other words, there's no sense to put it on these pre-commercial pads. We've got that pad ready to go for that type of material and that's the plan. So I guess your question was, what do we expect in terms of delay? The pad originally was supposed to be completed by the end of this year. So we would have already been into the sulfide material beginning this month anyway, and we have been contemplating putting it on these pre-commercial pads. But it's not -- we're talking probably 90 days delay from a sulfide oxidation processing standpoint on that pad. Does that help answer your question?

Yes.

[Operator Instructions] Our next question comes from [ Andrew Lester with Harold Capital ].

Diane, great to have you here and your team. I just want to sort of understand things better. I don't want to be at all unfair. You've come in and there have been sort of a lot of issues to tackle and address all at once. And I'm certain that the prior management team didn't, let's say, fully have their arms around all the issues. They confronted, of course. Have you been here long enough or have you had sufficient time to evaluate the situation to make sure that there are no additional operational or personnel type of issues that need to be addressed so that there isn't some other problem that might surface within a quarter or so?

That's a great question and thank you for answering that. So before I -- my first day of September 8, I was under NDA with Hycroft for, I don't know, 6, 8 weeks prior to that, so I was aware and in the loop on a lot of things going on at site. So I did have the benefit of that time frame to wrap my arms around many of the operational issues and challenges. I certainly consulted with a key group of people who are experts in this field on some of these things. So when I came in, it wasn't completely fresh. I will say that putting my feet on the ground, day 1, there were no surprises in a negative way. I was eyes wide open coming in. I was aware of the operational challenges and some of the things that needed to be fixed and, quite frankly, sort of some self-inflicted wounds that we have since addressed and remedied. I think you will continue to see some bench strength and adding to the teams. That's one of the things in my history of running companies that is very, very important. It's all about the people at the end of the day and we want the best and brightest, and that money comes back to our shareholders multifold because it helps you mitigate any potential start-up risk and you get a team in there that brainstorms everything together. And we're bringing in people with a lot of experience in these types of systems and this type of project, if you will. So I'm very, very confident that the recent addition of some of the people plus some others that we have in the queue that we have the knowledge and understanding of this process and being able to take this project forward on a commercial basis and on a very successful basis. So with that, as far as I...

If I could just ask a follow-up to that as well. If I understood some of the more technical answers, you gave some of the early -- you answered to some of the other questioners. Am I to -- if I understand correctly, as of Q2 2021, you will be at a normalized production rate, is that correct?

We're working on that budget and that planning right now, so we're optimizing it based on the mine plan of the transitional material, the oxide material, accessing the sulfide material. That is going to come -- we certainly are in the process of ramping up our throughput and the tons that we mine, absolutely. That's something that we're going to be doing. We're going to be increasing a lot of the run-of-mine material and oxides. So you are going to see a ramp-up in tonnage. But as far as the specifics of that mine plan, we are working on our budgets right now, and that's going to be unfolded and presented to the market very soon after the New Year.

There are no further questions in queue at this time. I'll now turn the call over to Diane Garrett for closing comments.

All right. Well, I just want to thank everybody for taking the time and being on this call. And it was great to address you and please reach out to us any time if you have any questions. And on behalf of the entire Hycroft team, I just want to thank you for your continued support for this project and thank you for the questions you've asked, and everybody, have a safe day and a good day and look forward to speaking to you in the near future.