Dividends and AMC to buy major stake in mining company

Every company in the world , once they are successful are offered the ability to buy into other companies. Smaller companies tend to say no, larger companies are buying and selling companies as they no longer fit their core holdings. Many people have worked for an organization and then the parent decides to sell and they have to find new work, it is part of the corporate process.

When companies buy and sell companies for strategic purposes, one of the reasons is they say their skill set can help grow the company, execution is what investors have to examine.

In an article by Niall McGee of the Globe, AMC Entertainment – the company which runs movie theatres is buying a stake in struggling Nevada mining venture called Hycroft Mining Holding Corp. The amount of money is $27 million which is not a great deal for the company but what do they know about mining?

The high cost, low production and heavily indebted Hycroft says it will pay off some its debts with the money.

Adam Aron, Chairman and CEO of AMC, says that he sees Hycroft with a lot of debt and a year ago, AMC was in the same position and now AMC has the experience and skill to help Hycroft realize its potential.

The Hycroft mine has 15 million ounces of gold and 600 million ounces of silver, but it is not in the proven and probable category, it could be there. The mine is refining small amounts of gold and silver (open pit mining) which is high in cost and money losing. At the end of last year, Hycroft was holding $12.3 million in cash and $159 million in debt. The name before Hycroft was Allied Nevada Gold Corp was went into bankruptcy and was reorganized.

Linking to dividend paying stocks, there are a great many opportunities for profitable companies to buy a division in the name of diversification. Not all will work out but companies with money often want to spend it, some will work out wonderfully. If your company buys a division and you do not think it will work out for a number of reasons, it is best to look at alternatives.

There are more questions than answers, till the next time – to raising questions.

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