Hycroft Mining Corp - FORM 10-Q - August 6, 2015

Attached files

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EX-95.1 - EXHIBIT 95.1 - Hycroft Mining Corpanv-20150630xexhibit951.htm
EX-32.2 - EXHIBIT 32.2 - Hycroft Mining Corpanv-20150630xexhibit322.htm
EX-32.1 - EXHIBIT 32.1 - Hycroft Mining Corpanv-20150630xexhibit321.htm
EX-31.2 - EXHIBIT 31.2 - Hycroft Mining Corpanv-20150630xexhibit312.htm
EX-31.1 - EXHIBIT 31.1 - Hycroft Mining Corpanv-20150630xexhibit311.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  
 
FORM 10-Q
 
 (Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-33119
  
 
 ALLIED NEVADA GOLD CORP.
(Exact name of registrant as specified in its charter)
  
 
DELAWARE
 
20-5597115
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer Identification No.)
 
 
 
9790 Gateway Drive, Suite 200
Reno, NV
 
89521
(Address of principal executive offices)
 
(Zip Code)
(775) 358-4455
(Registrant’s telephone no., including area code)
  
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
o
 
Accelerated filer
 
x
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
 
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
On August 5, 2015, there were 126,193,336 shares of the registrant’s common stock, par value $0.001 per share, outstanding.


ALLIED NEVADA GOLD CORP.
FORM 10-Q
For the Quarter Ended June 30, 2015
INDEX


PART I – FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
ALLIED NEVADA GOLD CORP.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(US dollars in thousands)
 
 
(Unaudited)
 
 
 
June 30,
2015
 
December 31,
2014
Assets:
 
 
 
Cash and cash equivalents
$
8,583

 
$
7,575

Accounts receivable
2,159

 
3,755

Inventories - Note 4
16,181

 
20,957

Ore on leachpads, current - Note 5
193,077

 
214,444

Prepaids and other - Note 6
6,193

 
7,758

Assets held for sale - Note 7
3,162

 
44,358

Current assets
229,355

 
298,847

Restricted cash - Note 9
55,647

 
48,147

Ore on leachpads, non-current - Note 5
82,748

 
91,904

Other assets, non-current - Note 6
962

 
10,708

Plant, equipment, and mine development, net - Note 10
268,899

 
443,289

Mineral properties, net - Note 8
13,742

 
48,312

Deferred tax assets, non-current
—

 
31

Total assets
$
651,353

 
$
941,238

Liabilities:
 
 
 
Accounts payable
$
24,914

 
$
35,608

Interest payable - Note 12
801

 
4,465

Other liabilities, current - Note 11
88,608

 
12,009

Debt, current - Note 12
122,249

 
540,263

Deferred tax liabilities, current
—

 
31

Current liabilities
236,572

 
592,376

Other liabilities, non-current - Note 11
1,244

 
51,370

Asset retirement obligation, non-current
20,440

 
19,934

Liabilities subject to compromise - Note 3
479,707

 
—

Total liabilities
737,963

 
663,680

Commitments and Contingencies - Note 22

 

Stockholders’ Equity (Deficit):
 
 
 
Common stock, $0.001 par value
 
 
 
Shares authorized: 200,000,000
 
 
 
Shares issued and outstanding: 126,193,336 at the end of both periods
126

 
126

Additional paid-in-capital
773,360

 
771,205

Accumulated deficit
(860,096
)
 
(493,773
)
Total stockholders’ equity (deficit)
(86,610
)
 
277,558

Total liabilities and stockholders’ equity (deficit)
$
651,353

 
$
941,238

The accompanying notes are an integral part of these statements.

1

ALLIED NEVADA GOLD CORP.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE INCOME (Unaudited)
(US dollars in thousands, except per share amounts)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenue - Note 13
$
39,984

 
$
83,123

 
$
95,229

 
$
168,648

Operating expenses:
 
 
 
 
 
 
 
Production costs
28,768

 
55,367

 
68,101

 
111,725

Depreciation and amortization
10,168

 
17,634

 
21,277

 
31,265

Write-down of production inventories - Note 5
50,663

 
—

 
87,683

 
—

Total cost of sales
89,599


73,001


177,061


142,990

Exploration, development, and land holding
530

 
665

 
1,149

 
1,394

Accretion
254

 
272

 
507

 
545

General and administrative
2,622

 
5,769

 
8,481

 
11,994

Write-down of long-lived assets - Note 10
179,575

 
—

 
179,575

 
—

Gain on dispositions or sales of mineral properties - Note 8
—

 
(19,480
)
 
—

 
(19,480
)
Loss on assets classified as held for sale and asset dispositions, net - Note 7
11,744

 
4,801

 
28,646

 
5,979

(Loss) income from operations
(244,340
)

18,095


(300,190
)

25,226

Other income (expense):
 
 
 
 
 
 
 
Interest income
8

 
2

 
16

 
15

Interest expense - Note 12
(4,368
)
 
(11,329
)
 
(13,241
)
 
(17,116
)
Other, net - Note 14
1,142

 
(52
)
 
50,057

 
(38
)
(Loss) income before reorganization items, net and income taxes
(247,558
)
 
6,716

 
(263,358
)
 
8,087

Reorganization items, net - Note 3
(10,291
)
 
—

 
(102,965
)
 
—

(Loss) income before income taxes
(257,849
)
 
6,716

 
(366,323
)
 
8,087

Income tax expense - Note 15
—

 
(2,340
)
 
—

 
(3,379
)
Net (loss) income
(257,849
)
 
4,376

 
(366,323
)
 
4,708

Other comprehensive (loss) income, net of tax
 
 
 
 
 
 
 
Change in fair value of effective portion of cash flow hedge instruments, net of tax - Note 20
—

 
(1,254
)
 
—

 
845

Settlements of cash flow hedges, net of tax - Note 20
—

 
8,253

 
—

 
(1,345
)
Reclassifications into earnings, net of tax - Note 20
—

 
(8,366
)
 
—

 
1,112

Other comprehensive (loss) income, net of tax
—

 
(1,367
)
 
—

 
612

Comprehensive (loss) income
$
(257,849
)
 
$
3,009

 
$
(366,323
)
 
$
5,320

(Loss) income per share:
 
 
 
 
 
 
 
Basic - Note 16
$
(2.03
)
 
$
0.04

 
$
(2.89
)
 
$
0.04

Diluted - Note 16
$
(2.03
)
 
$
0.04

 
$
(2.89
)
 
$
0.04

The accompanying notes are an integral part of these statements.

2

ALLIED NEVADA GOLD CORP.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(US dollars in thousands)
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
 
 
 
Net (loss) income
$
(257,849
)
 
$
4,376

 
$
(366,323
)
 
$
4,708

Adjustments to reconcile net (loss) income for the period to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
10,168

 
17,634

 
21,277

 
31,265

Write-down of production inventories - Note 5
11,279

 
—

 
20,074

 
—

Accretion
254

 
272

 
507

 
545

Stock-based compensation - Note 17
410

 
1,634

 
2,155

 
3,244

Loss on assets classified as held for sale and asset dispositions, net - Note 7
11,744

 
4,801

 
28,646

 
5,979

Foreign currency gain on notes - Note 14
—

 
—

 
(28,160
)
 
—

Change in fair value of swaps - Note 20
—

 
—

 
59,791

 
—

Change in fair value of warrants - Notes 3 and 18
—

 
—

 
(4,644
)
 
—

Write-down of long-lived assets - Note 10
179,575

 
—

 
179,575

 
—

Gain on dispositions or sales of mineral properties - Note 8
—

 
(19,480
)
 
—

 
(19,480
)
Write-off of debt issuance costs - Note 3
834

 
—

 
8,875

 
—

Deferred taxes
—

 
2,340

 
—

 
3,379

Other non-cash items
(753
)
 
—

 
(673
)
 
—

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
(1,257
)
 
1,776

 
1,596

 
5,148

Materials and supplies inventories
(78
)
 
1,957

 
2,667

 
2,859

Production-related inventories
11,037

 
(9,017
)
 
20,309

 
(25,080
)
Prepaids and other
451

 
2,424

 
1,566

 
5,320

Accounts payable
229

 
(6,334
)
 
1,207

 
(5,446
)
Interest payable
163

 
(8,153
)
 
5,295

 
435

Other liabilities
(3
)
 
(1,909
)
 
(3,682
)
 
(362
)
Assets held for sale
17,500

 
807

 
17,500

 
4,407

Net cash (used in) provided by operating activities
(16,296
)

(6,872
)

(32,442
)

16,921

Cash flows from investing activities:
 
 
 
 
 
 
 
Additions to plant, equipment, and mine development
(3,340
)
 
(24,190
)
 
(3,638
)
 
(67,614
)
Proceeds from mineral property sale - Note 8
—

 
20,000

 
—

 
20,000

Increase in restricted cash - Note 9
—

 
(10,000
)
 
—

 
(8,718
)
Proceeds from other investing activities
—

 
5

 
—

 
5

Net cash used in investing activities
(3,340
)

(14,185
)

(3,638
)

(56,327
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Repayments of principal on capital lease and term loan obligations
(10,927
)
 
(13,838
)
 
(20,912
)
 
(27,592
)
Proceeds from revolving credit agreement borrowings
—

 
—

 
25,500

 
—

Proceeds from debtor-in-possession credit agreement borrowings
15,000

 
—

 
50,000

 
—

Increase in restricted cash - Note 9
(17,500
)
 
—

 
(17,500
)
 
—

Payments of debt issuance costs
—

 
(680
)
 
—

 
(860
)
Net cash provided by (used in) financing activities
(13,427
)

(14,518
)

37,088


(28,452
)
Net increase (decrease) in cash and cash equivalents
(33,063
)

(35,575
)

1,008


(67,858
)
Cash and cash equivalents, beginning of period
41,646

 
49,187

 
7,575

 
81,470

Cash and cash equivalents, end of period
$
8,583


$
13,612


$
8,583


$
13,612


3

Supplemental cash flow disclosures:
 
 
 
 
 
 
 
Cash paid for interest
$
3,437

 
$
19,672

 
$
6,589

 
$
21,692

Significant non-cash financing and investing activities:
 
 
 
 
 
 
 
Reduction in outstanding revolving credit agreement borrowings through decrease in restricted cash - Note 9
—

 
—

 
10,000

 
—

Letters of credit issued under revolving credit agreement and redeemed by currency swap counterparties - Note 20
—

 
—

 
18,450

 
—

Increase in debtor-in-possession credit agreement borrowings from in-kind interest - Note 12
594

 
—

 
705

 
—

The accompanying notes are an integral part of these statements.

4

ALLIED NEVADA GOLD CORP.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited)
(US dollars in thousands, except shares)
 
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated Deficit
 
Total
Stockholders’
Equity (Deficit)
 
Shares
 
Amount
 
Balance, January 1, 2015
126,193,336

 
$
126

 
$
771,205

 
$
(493,773
)
 
$
277,558

Stock-based compensation under RSU Plan
—

 
—

 
1,874

 
—

 
1,874

Stock-based compensation under DSU Plan
—

 
—

 
200

 
—

 
200

Stock-based compensation under PIP Plan
—

 
—

 
81

 
—

 
81

Net loss
—

 
—

 
—

 
(366,323
)
 
(366,323
)
Balance, June 30, 2015
126,193,336

 
$
126

 
$
773,360

 
$
(860,096
)
 
$
(86,610
)
The accompanying notes are an integral part of these statements.

5

ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of Allied Nevada Gold Corp. and its consolidated subsidiaries (the “Company”) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations of the SEC. Therefore, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited Consolidated Financial Statements and related footnotes of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of management, all adjustments and disclosures necessary to fairly present the interim financial information set forth herein have been included. These interim financial statements, with the exception of any recently adopted accounting pronouncements described in Note 2 - Accounting Pronouncements, follow the same Significant Accounting Policies disclosed in the Company’s most recent Annual Report on Form 10-K.
The results reported in these Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year or for future years.
References to “$” refers to United States currency and “CDN $” refers to Canadian currency.
Going Concern
The Condensed Consolidated Financial Statements of the Company have been prepared on a “going concern” basis, which means that the continuation of the Company is presumed even though events and conditions exist that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern because it is probable that the Company will be unable to meet its obligations as they become due within one year after the date that these financial statements were issued. On March 10, 2015, the Company filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) which, if successful, are expected to recapitalize the Company’s balance sheet by reducing its debt balances while concurrently providing additional liquidity (see Note 3 - Chapter 11 Bankruptcy Filing). The Company continues to operate and produce gold at its Hycroft Mine as a “debtor-in-possession” during the bankruptcy process. However, on July 8, 2015, the Company announced that it had suspended mining operations to maximize cash flow and minimize spending through the remainder of the chapter 11 process. The Company continues to process and produce gold and silver through the operation of the heap leach pads and Merrill-Crowe processing plants. Inventory on the heap leach pads at June 30, 2015 was 256,206 ounces (see Note 5 - Ore on Leach Pads).
The Company’s ability to continue as a going concern is contingent upon its ability to comply with the covenants contained in the DIP Credit Agreement (as discussed and defined in Note 3 - Chapter 11 Bankruptcy Filing), the Bankruptcy Court’s confirmation of the Company’s Reorganization Plan (as discussed and defined in Note 3 - Chapter 11 Bankruptcy Filing), and the Company’s ability to successfully implement the Reorganization Plan, among other factors. In addition, both while the Company operates as a “debtor-in-possession” and following the Court’s confirmation of the Company’s Reorganization Plan (if such confirmation happens at all), the Company needs to achieve its sales, production, cost, and other operating targets to continue as a going concern.
The Company is committed to an orderly resolution of its liquidity situation and financial restructuring that will permit it to continue its operations and attempt to preserve the value of its assets and its overall enterprise value. However, there can be no assurance that the Company will be successful in doing so, and the Company is dependent on a financial restructuring to continue as a going concern. At this time, the Company does not have an expected time-frame for, or an expectation with respect to, the restart of mining operations, if at all.
Other than as discussed in Note 3 - Chapter 11 Bankruptcy Filing, these financial statements do not include any adjustments related to the recoverability and classification of recorded assets or any other adjustments that might be necessary should the Company be unable to continue as a going concern or be unable to successfully recapitalize its balance sheet through the Chapter 11 Cases (as defined in Note 3 - Chapter 11 Bankruptcy Filing). Impairments of the Company’s long-lived assets are only recorded in accordance with the Company’s Significant Accounting Policies disclosed in its most recent Annual Report on Form 10-K. As such, recorded amounts in these financial statements (including without limitation, stockholders’ equity) have been prepared in accordance with GAAP on a historical-cost basis, as required, which do not reflect or approximate the current fair value of the Company’s assets or management’s assessment of the Company’s overall enterprise or equity value.
2. Accounting Pronouncements
Recently Adopted

6
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of a Component of an Entity.” ASU No. 2014-08 changes the criteria for reporting discontinued operations and requires new disclosures for discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2014, which for the Company meant the first quarter of the year ending December 31, 2015. Other than the additional presentation and disclosure requirements in Note 7 - Assets Held For Sale, the adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.
Recently Issued
In May 2014, the FASB and the International Accounting Standards Board issued new joint and converged guidance surrounding revenue recognition. ASU No. 2014-09, “Revenue from Contracts with Customers” will supersede nearly all existing revenue recognition guidance, including industry-specific guidance, and requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 does not permit early adoption and is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2016, which for the Company means the first quarter of the year ending December 31, 2017. ASU No. 2014-09 allows for either a “full retrospective” adoption, meaning the new standard is applied to all periods presented, or a “modified retrospective” adoption, meaning the new standard is applied only to the most current period presented and any cumulative effect of adoption is recognized as an adjustment to the opening balance of retained earnings. The Company has evaluated its current revenue recognition policies and past and present sales contracts and does not currently believe it will be materially impacted by the requirements of ASU No. 2014-09. Historically, the Company’s sole revenue-related performance obligation has been the delivery of metal to customers, either physically or by account transfer, and has been satisfied at the same point in time the Company’s customers obtain control of the delivered metal. As such, the Company currently anticipates adopting ASU No. 2014-09 using the “modified retrospective” approach and, other than the additional presentation and disclosure requirements, does not expect such adoption will have a material effect on the Company’s consolidated financial position, results of operations, or cash flows.
In April 2015, the FASB and the International Accounting Standards Board issued guidance related to debt issuance costs. This update simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. The update is effective in fiscal years, including interim periods, beginning after December 15, 2015, and early adoption is permitted. The Company is currently evaluating this guidance and the impact it will have on the Company’s consolidated financial position, results of operations, or cash flows.
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 303): Simplifying the Measurement of Inventory.” ASU 2015-11 changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. It applies to entities that measure inventory using a method other than last-in, first-out or the retail inventory method. The update is effective in fiscal years, including interim periods, beginning after December 15, 2016, and early adoption is permitted. The Company is currently evaluating this guidance and the impact it will have on the Company’s consolidated financial position, results of operations, or cash flows.

3. Chapter 11 Bankruptcy Filing
Commencement of Voluntary Bankruptcy
On March 10, 2015 (the “Petition Date”), the Company announced an agreement (the “Original Restructuring Support Agreement”) (discussed below) with (1) certain holders (the “Initial Consenting Noteholders”) collectively owning or controlling in excess of 67% of the aggregate outstanding principal amount of the CDN$400.0 million 8.75% senior unsecured notes due 2019 (the “Notes”), issued by the Company pursuant to that certain indenture dated as of May 25, 2012 (as amended, supplemented or otherwise modified from time to time, the “Indenture”), by and between the Company and Computershare Trust Company of Canada, as trustee, and (2) the Company’s secured bank lenders as defined in the Original Restructuring Support Agreement (the “Secured Lenders” and, together with the Initial Consenting Noteholders and any additional holders of Notes that become party thereto, the “Restructuring Support Parties”) to effectuate the Original Restructuring Transaction (as defined below) that would de-lever the Company’s balance sheet and enable the Company and certain of its domestic direct and indirect subsidiaries (together with the Company, the “Debtors”) to implement a financial restructuring.
In order to implement the Original Restructuring Transaction, on the Petition Date, the Debtors filed voluntary petitions for relief under the Bankruptcy Code in the Bankruptcy Court. The Debtors’ chapter 11 cases (the “Chapter 11 Cases”) are

7
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


being jointly administered under Case No. 15-10503. The Debtors continue to operate their business as “debtors in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. During the pendency of the Chapter 11 Cases, all transactions outside the ordinary course of business require the prior approval of the Bankruptcy Court.
To facilitate the administration of the cases and minimize disruption to the Debtors’ operations, on the Petition Date and thereafter, the Debtors filed certain “first day” and “second day” motions and applications with the Bankruptcy Court seeking certain relief. Specifically, the Debtors, among other things, sought authority to: (i) obtain secured postpetition financing (as discussed below); (ii) pay certain employee, insurance and tax obligations; (iii) pay claims of certain critical vendors, shippers, warehousemen, miscellaneous lien claimants and claimants who may assert claims arising under Bankruptcy Code section 503(b)(9); (iv) provide adequate assurance of payment to certain utility providers; and (v) maintain their cash management system. In addition, the Debtors sought (a) to establish procedures for the sale of certain de minimis assets; (b) approval to retain various professionals of the Debtors; (c) to establish procedures for the retention of ordinary course professionals and compensation of various other professionals; and (d) authority to enter into a stalking horse purchase agreement for the sale of the Debtors’ 75 exploration properties and related assets and approval of bidding procedures in connection therewith (as discussed below). The Bankruptcy Court has entered various orders granting the relief requested in the various motions and applications, as applicable, in connection with each of the foregoing.
Consequences of the Bankruptcy Filing
The commencement of the chapter 11 filing constituted an event of default with respect to each and all of the Company’s debt agreements described in Note 12 - Debt; however, the Company believes that the ability of the lenders to seek remedies to enforce their respective rights against the Company are stayed and creditor’s rights of enforcement against the Company are subject to the applicable provisions of the Bankruptcy Code. Additionally, certain Creditor Parties (as defined below) have agreed to support the Amended Restructuring Transaction (as defined below).
The United States Trustee for the District of Delaware (the “U.S. Trustee”) has appointed an official committee of unsecured creditors (the “Unsecured Creditors Committee”) and a committee of equity security holders (the “Equity Committee”). The Unsecured Creditors Committee and the Equity Committee, and their respective legal representatives, have a right to be heard on certain matters that come before the Bankruptcy Court affecting the Debtors. There can be no assurance that the Unsecured Creditors Committee and/or the Equity Committee will support the Debtors’ position on matters to be presented to the Bankruptcy Court in the future or with respect to the a plan of reorganization (as amended or modified from time to time, the “Reorganization Plan”).
Notice of Suspended Trading and Delisting from Stock Exchanges
On March 10, 2015, the Company received notice from the NYSE MKT LLC (the “NYSE MKT”) that the NYSE MKT had suspended the Company’s common stock from trading immediately and determined to commence proceedings to delist the Company’s common stock pursuant to Section 1003(c)(iii) of the NYSE MKT LLC Company Guide, which occurred on May 12, 2015. The NYSE MKT’s determination was based on the filings in the Chapter 11 Cases, which contemplate that the Company’s common stock will be extinguished pursuant to the Reorganization Plan. The last day that the Company’s common stock traded on the NYSE MKT was March 9, 2015.
On March 10, 2015, the Toronto Stock Exchange (“TSX”) suspended the Company’s common stock from trading immediately while the TSX reviewed the Company’s continued eligibility for listing under the TSX’s Expedited Review Process. The suspension and delisting were based on the filing of the Chapter 11 Cases, the Company’s financial condition and/or operating results, and whether the Company had adequate working capital and appropriate capital structure. The Company did not take any further action to appeal the TSX’s decision. On March 17, 2015, the TSX determined to delist the Company’s common stock at the close of business on April 16, 2015. The last day that the Company’s common stock traded on the TSX was March 9, 2015.
On March 10, 2015, the Company’s common stock began being traded in the over-the-counter market under the symbol “ANVGQ”.
Fresh Start Accounting
As required by accounting Standards Codification (“ASC”) 852 “Reorganizations,” if the Company meets the applicable criteria, the Company may be required to adopt fresh start accounting upon emergence from chapter 11 under the Bankruptcy Code.
Original Restructuring Support Agreement and Amended and Restated Restructuring Support Agreement

8
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


The Original Restructuring Support Agreement and term sheet (the “Original Term Sheet”) attached thereto and incorporated therein, set forth, subject to certain conditions, the commitment to and obligations of, on the one hand, the Company, and on the other hand, the Restructuring Support Parties in connection with a restructuring of the Company’s debt and equity (including the Company’s common stock) (the “Original Restructuring Transaction”) pursuant to the Reorganization Plan.
Since the Petition Date, the Company has faced extraordinary challenges to its mining operations, including (i) employee attrition, (ii) a refusal by key vendors to contract with the Company on commercially reasonable terms, (iii) a materially slower than forecasted recovery rate of gold and silver ounces from its ore and (iv) continuing low gold prices.
Consequently, the Debtors could not comply with several of the covenants in the Original Restructuring Support Agreement, giving rise to the Restructuring Support Parties’ right to terminate the Original Restructuring Support Agreement. In order to preserve the Company’s ability to exit chapter 11 quickly and efficiently and to maximize recoveries for its creditors, the Company engaged in extensive negotiations with the Restructuring Support Parties regarding amendments to the Original Restructuring Support Agreement and Reorganization Plan necessitated by the change in the Company’s financial and operational circumstances. The Company and the Restructuring Support Parties successfully negotiated the terms of an amended and restated restructuring support agreement (the “Amended and Restated Restructuring Support Agreement”) with the Restructuring Support Parties, which was executed on July 23, 2015. The Amended and Restated Restructuring Support Agreement, the amended term sheet (the “Amended Term Sheet”) and the Amended Reorganization Plan (the “Amended Reorganization Plan “) attached thereto contemplate certain modifications to the Original Restructuring Transaction (the “Amended Restructuring Transaction”) pursuant to the Reorganization Plan.
The Amended and Restated Restructuring Support Agreement, the Amended Term Sheet and the Amended Reorganization Plan attached thereto contemplate that the Company will reorganize as a going concern. Specifically, the material terms of the Amended Reorganization Plan are expected to effect, among other things, and subject to certain conditions and as more particularly set forth in the Amended and Restated Restructuring Support Agreement, the Amended Term Sheet and Amended Reorganization Plan, upon the effective date of the Amended Reorganization Plan, a substantial reduction in the Company’s funded debt obligations by, among other things:
•
the issuance of a new first lien term loan credit facility in exchange for outstanding indebtedness and exposure under:
(1) the Third Amended and Restated Credit Agreement (the “Revolver”), which had approximately $75.4 million of borrowings, issued letters of credit and accrued interest as of the Petition Date (see Note 12 - Debt for additional information); and
(2) the close-out amount of the Company’s cross currency swap liability and diesel swaps liability owed to the Bank of Nova Scotia, which approximated $86.3 million as of March 11, 2015 (see Note 20 - Derivative Instruments for additional information);
•
the issuance of a new second lien convertible term loan credit facility by the Exit Facility Lenders (as defined below, see Note 12 - Debt for additional information);
•
the issuance of new common stock to holders of unsecured claims; and
•
the satisfaction of claims under the DIP Facility (as hereinafter defined) in cash.
If the Amended Restructuring Transaction is consummated as contemplated by the Amended Restructuring Support Agreement, the Amended Term Sheet and the Amended Reorganization Plan, the Company’s common stock and warrants to purchase shares of the common stock will be extinguished. Holders of the Company’s common stock and holders of the Company’s outstanding warrants to purchase shares of the common stock will receive no recovery on account of these holdings.
The Amended and Restated Restructuring Support Agreement may be terminated upon the occurrence of certain events, including the failure to meet certain milestones related to confirmation and consummation of the Amended Reorganization Plan, among other items, and certain breaches by the parties under the Amended and Restated Restructuring Support Agreement.
On July 23, 2015, the Debtors obtained an exit facility commitment letter (the “Exit Facility Commitment Letter”) from certain affiliates or related funds of six institutions (collectively, the “Exit Facility Lenders”) to secure the financing necessary for the consummation of the Amended Restructuring Transaction contemplated under the Amended and Restated Restructuring Support Agreement and the Amended Plan. Pursuant to the Exit Facility Commitment Letter, and subject to the terms and conditions thereof, the Exit Facility Lenders have agreed to the purchase of new second lien convertible debt in the reorganized Company in an amount such that the initial aggregate principal amount of the new second lien convertible debt will not exceed $80 million (see Note 12 - Debt for additional information).

9
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


On July 23, 2015, the Company filed with the Bankruptcy Court its Amended Disclosure Statement for the Debtors’ Amended Joint Chapter 11 Plan of Reorganization (the “Amended Disclosure Statement”) whereby it outlines the proposed settlement with each class of claims against and equity interests in the debtor. The proposed settlement is consistent with the Amended Reorganization Plan. On August 20, 2015, the Bankruptcy Court will hear a motion to approve the adequacy of information in the Disclosure Statement, establish deadlines and procedures for voting on the Amended Reorganization Plan, approve solicitation and balloting procedures, establish procedures for tabulation of the votes, establish deadlines and procedures for filing objections to the proposed assumption of executory contracts and unexpired leases and proposed cure amounts associated therewith and schedule a confirmation hearing.
Termination of Diesel and Cross Currency Swaps
The filing of the Chapter 11 Cases constituted an event of default under each of the diesel and cross currency swap agreements. On March 10, 2015, the Company received a notice of early termination from each of the counterparties to these swaps, which notices have the effect of terminating each such swap and causing the close-out amount under each such swap to become due and payable immediately. As discussed in the above Restructuring Support Agreement section, the close-out amount of the Company’s cross currency swap liability and diesel swaps liability owed to the Bank of Nova Scotia approximated $86.3 million as of March 11, 2015. The close-out amount of the Company’s cross currency swap owed to National Bank of Canada approximated $12.6 million which was offset by their rights against letters of credit and cash collateral, and accordingly, as of March 10, 2015 the Company owed National Bank of Canada approximately $0.4 million after realization of the collateral. The close-out amount of the Company’s cross currency swap owed to Société Générale approximated $10.4 million which was offset by their rights against letters of credit and cash collateral and, accordingly, as of March 11, 2015, the Company owed Société Générale approximately $0.5 million after realization of the collateral.
363 Asset Sales
On June 29, 2015, the Company completed the sale (the “Sale”) of certain of the Company’s exploration properties and related assets (excluding the Hycroft operation) (the “Acquired Assets”) to Clover Nevada LLC (“Clover Nevada”), a wholly-owned subsidiary of Waterton Precious Metals Fund II Cayman, LP, which was approved by the Bankruptcy Court on June 18, 2015.
The Acquired Assets consist of 75 mineral exploration properties and assets encompassing approximately 165,000 acres of land in the State of Nevada. The Acquired Assets include all of Allied Nevada’s patented and unpatented mining claims and rights associated with properties other than Hycroft, including any royalties or similar interests.
The Sale was completed pursuant to that certain Asset Purchase Agreement, dated as of April 27, 2015, by and among the Company and certain of its wholly-owned subsidiaries and Clover Nevada, for an aggregate purchase price of $17.5 million.
Short-Term Incentive Program
On May 11, 2015, the Debtors filed with the Bankruptcy Court a motion (the “KEIP Motion”) seeking authority to implement a short-term incentive program (the “KEIP”) for 95 non-insider employees who have a significant impact on the Debtors’ short-term operational performance. The maximum aggregate payout under the KEIP for the second and third quarters of 2015 is approximately $1.4 million. The KEIP Motion and supporting declarations to such motion include important information about the Company and the Company’s work force (including factors relating to its work force that caused the Debtors to seek implementation of the KEIP). The motion was approved by the Bankruptcy Court on May 28, 2015.
In connection with the Company’s announcement of the suspension of mining operations (see Note 1 - Basis of Presentation), on July 8, 2015, the Debtors filed with the Bankruptcy Court a motion (the “Amended KEIP Motion”) seeking authority to supersede the KEIP Motion and implement a revised short-term incentive program (the “Insider KEIP”) for the four officers of the Company, a key employee retention plan (the “KERP”) for 51 non-insider employees all of whom have a significant impact on the Debtors’ short-term operational performance and a tier-based severance program for all of its remaining employees. The maximum payments under the Insider KEIP and the KERP are $0.54 million and $0.68 million, respectively. The plans are designed to stabilize the workforce and to incentivize the employees to remain with the Debtors through the effectiveness of the Amended Reorganization Plan. The Amended KEIP Motion and supporting declarations to such motion include important information about the Company and the Company’s work force (including factors relating to its work force that caused the Debtors to seek implementation of the Insider KEIP and the KERP).
DIP Credit Agreement
On March 12, 2015, in connection with the Chapter 11 Cases, the Company entered into a Secured Multiple Draw Debtor-in-Possession Credit Agreement (as amended by that certain Waiver and Amendment No. 1, dated as of May 7, 2015, and as further amended, waived or otherwise modified from time to time prior to the date hereof, the “DIP Credit Agreement”), among

10
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


the Company, as borrower, the direct and indirect subsidiaries of the Company party thereto from time to time, as guarantors, Wilmington Savings Funds Society, FSB, as administrative agent and collateral agent and the lenders from time to time party thereto.
The Company has obtained additional waivers from the majority DIP lenders, for certain defaults or anticipated defaults, in connection with, among other things, (1) the Company’s suspension of operation of the Hycroft Mine, (2) the non-payment of capital leases, (3) the failure to meet the milestones set forth in the DIP Credit Agreement so long as the Company is complying with the milestones set forth in the Amended and Restated Restructuring Support Agreement (subject to an extension of 30 days for each milestone), (4) the failure to comply with the “Total Ounces Gold Sold Covenant” and “Total Ounces Gold Equivalent Sold Covenant”, in each case, with respect to the 4 weeks periods ending through August 16, 2015, and (5) the failure to comply with the “Total Monthly Gold Produced Covenant” with respect to the monthly periods ended through July 31, 2015 (collectively, the “Current and Anticipated Waivers”). In addition, the majority DIP lenders have agreed to waive, but subject to the retraction, termination and/or withdrawal of such waiver upon notice by the majority DIP lenders, any prospective default, in connection with, among other things, the Company’s failure (x) to deliver any update to the approved budget solely as a result of the delayed approval by the majority DIP lenders of such update, and (y) to meet the “Total Ounces Gold Sold Covenant,” the “Total Ounces Gold Equivalent Sold Covenant” and “Total Monthly Gold Produced Covenant” with respect to the test periods beyond those covered by the Current and Anticipated Waivers.
Financial Reporting During Reorganization
Subsequent to the Petition Date, the Company’s financial statements continue to be prepared in accordance with GAAP, which requires that the financial statements distinguish transactions and events that are directly associated with the reorganization from those that are associated with the ongoing operations of the business.
Reorganization Items, Net
Expenses, gains, and losses directly associated with reorganization efforts and the Chapter 11 Cases are reported as Reorganization items, net. The following table provides a listing of reorganization items (in thousands):
 
Three months ended
Six months ended
 
June 30, 2015
June 30, 2015
Cross currency swap valuation adjustment - Note 20
$
—

$
82,175

Term loan obligation and Notes carrying value adjustment
834

8,875

Legal and professional fees
9,457

16,974

Diesel swaps valuation adjustment - Note 20
—

(415
)
Warrant liability valuation adjustment - Note 18
—

(4,644
)
 
$
10,291

$
102,965

The $82.2 million cross currency swap valuation adjustment and the $(0.4) million diesel swaps valuation adjustment represent the increase (decrease) in the mark-to-market close-out amounts owed to the swap counterparties as a result of the Chapter 11 Cases over the respective fair value of these financial instruments prior to the filing of the Chapter 11 Cases. The $0.8 million and the $8.1 million Term loan obligation and Notes carrying value adjustment represents the write-down of unamortized debt issuance costs which adjusted the net carrying value of the term loan obligations and Notes, respectively, to the currently estimated allowed claim amount. The $(4.6) million warrant liability adjustment represents a decrease in fair value to these financial instruments as it is not expected that the warrants will be exercisable as a result of the Chapter 11 Cases.
Liabilities Subject To Compromise
Liabilities subject to compromise, which were incurred prior to the filing of the Chapter 11 Cases and represent unsecured (or under-secured) liabilities, are distinguished from fully secured liabilities not expected to be compromised and from post-petition liabilities incurred after the filing of the Chapter 11 Cases. Where there is uncertainty about whether a secured claim will be paid under the Chapter 11 Cases or if a secured claim may be under-secured, the Company has classified the entire amount of the claim as a liability subject to compromise. Liabilities subject to compromise are reported at claim amounts expected to be allowed by the Bankruptcy Court, even though they may settle in the future for lesser amounts. These claims remain subject to future adjustments, which may result from: negotiations; actions of the Bankruptcy Court; disputed claims; rejection of contracts and unexpired leases; the determination as to the value of any collateral securing claims; proofs of claims; the identification of new claims; or other events. Liabilities subject to compromise are reduced for payments made under the approval of the Bankruptcy Court.

11
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


The determination of how liabilities will ultimately be treated or settled cannot be made until the Bankruptcy Court confirms the Amended Reorganization Plan and, accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time. The following table provides a listing of the estimated pre-petition liabilities included in Liabilities subject to compromise (in thousands):
 
 
 
June 30, 2015
Notes(1) - Note 12
 
 
$
316,640

Accounts payable
 
 
15,900

Capital lease and term loan obligations - Note 12
 
 
118,984

Term and Security Deposit Loan
 
 
17,974

Interest payable - Note 12
 
 
9,136

Cross currency swap derivative instrument - Note 20
 
 
891

Accrued compensation and benefits
 
 
182

 
 
 
$
479,707

(1) Amount represents the CDN $400.0 million face amount of the issuance translated to U.S. dollars using the exchange rate on the Petition Date.
Interest Expense
As discussed in Note 12 - Debt, effective as of the Petition Date, the Company ceased recording interest expense on certain outstanding pre-petition debt classified within Liabilities subject to compromise as interest owed after the Petition Date on such obligations is not expected to be paid during the Chapter 11 Cases and is not expected to be an allowed claim.
The Company paid interest (and principal) on its capital lease and term loan obligations from the Petition Date to June 28, 2015. Beginning on June 29, 2015, the Company ceased making principal and interest payments on most of its capital lease and term loan obligations (the “Delinquent Capital Leases”) and does not expect to make further payments during the Chapter 11 Cases on the Delinquent Capital Leases. As there is uncertainty surrounding the value that a third-party may attribute to the underlying security on these Delinquent Capital Leases, they have been classified as Liabilities subject to compromise.
Condensed Combined Financial Statements
The Company’s non-Debtor entities, which are not included in the Chapter 11 Cases, include Allied Nevada Delaware Holdings Inc. and Allied Nevada (Cayman) Corp., both of which have no operations, assets, liabilities, or cash flows. Accordingly, the Condensed Consolidated Financial Statements presented herein represent the financial position, results of operations, and cash flows of the Debtor entities.
4. Inventories
The following table provides the components of inventories and the estimated recoverable gold ounces therein (in thousands, except ounces): 
 
June 30, 2015
 
December 31, 2014
 
Amount
 
Gold ounces
 
Amount
 
Gold ounces
Materials and supplies
$
12,480

 
 
 
$
15,303

 
 
Merrill-Crowe in-process
2,617

 
2,078

 
3,723

 
3,228

Carbon column in-process
194

 
159

 
312

 
269

Doré finished goods
890

 
710

 
1,619

 
1,402

 
$
16,181

 
2,947

 
$
20,957

 
4,899

As of June 30, 2015 and December 31, 2014, production-related Inventories included $0.8 million and $1.3 million, respectively, of capitalized non-cash depreciation and amortization costs.

12
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


5. Ore On Leach Pads
The following table summarizes ore on leach pads and the estimated recoverable gold ounces therein (in thousands, except ounces):
 
June 30, 2015
 
December 31, 2014
 
Amount
 
Gold ounces
 
Amount
 
Gold ounces
Ore on leach pads, current
$
193,077

 
179,344

 
$
214,444

 
183,615

 
 
 
 
 
 
 
 
Ore on leach pads, non-current
$
82,748

 
76,862

 
$
91,904

 
78,692

As of June 30, 2015 and December 31, 2014, Ore on leach pads, current and non-current included $62.0 million and $73.7 million, respectively, of capitalized non-cash depreciation and amortization costs.
The period-end market value of the Company’s production-related inventories is determined in part by using period-end London Bullion Market Association (“LBMA”) prices per gold and silver ounce and is highly sensitive to these inputs. Due to lower period-end metal price levels and increases in per gold ounce production costs, the Company’s application of its lower of cost or market accounting policy resulted in write-downs of Ore on leach pads. Write-downs resulted solely from the Company’s application of its lower of cost or market accounting policy and were unrelated to any metallurgical balancing analytics or changes to recovery rates. The following table provides information about the Company’s write-downs (in thousands, except per ounce amounts):
 
Three months ended June 30,
 
Six months ended June 30,
Type of previously incurred cost
2015
 
2014
 
2015
 
2014
Cash production costs
$
39,384

 
$
—

 
$
67,609

 
$
—

Allocated depreciation and amortization
11,279

 
—

 
20,074

 
—

Write-down of production related inventories
$
50,663

 
$
—

 
$
87,683

 
$
—

 
 
 
 
 
 
 
 
Period-end LBMA metal prices used in write-down calculation
 
 
 
 
 
 
 
Price per gold ounce
$
1,171.00

 
$
1,315.00

 
$
1,171.00

 
$
1,315.00

Price per silver ounce
$
15.70

 
$
20.87

 
$
15.70

 
$
20.87

Further declines from June 30, 2015 metal price levels and/or future production costs per gold ounce greater than the June 30, 2015 carrying value per gold ounce included in Ore on leach pads could result in, or contribute to, additional future write-downs of production-related inventories.

13
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


6. Prepaids and Other Assets
The following table provides the components of prepaids and other assets (in thousands):
 
June 30, 2015
 
December 31, 2014
Prepaids and other
 
 
 
Prepaids
$
4,482

 
$
5,839

Nevada net proceeds taxes receivable
1,415

 
972

Deposits
205

 
252

Federal income taxes receivable
—

 
605

Other
91

 
90

 
$
6,193

 
$
7,758

Other assets, non-current
 
 
 
Debt issuance costs, net
$
666

 
$
10,352

Reclamation policy premium, net
296

 
356

 
$
962

 
$
10,708

As discussed in Note 3 - Chapter 11 Bankruptcy Filing, during the three and six months ended June 30, 2015, unamortized debt issuance costs of approximately $8.1 million were reclassified to the net carrying value of the Company’s Notes and subsequently charged to Reorganization items, net. Additionally, during the three months ended June 30, 2015, $0.8 million in unamortized issuance costs related to term loan obligations were written off as payments are no longer being made on these obligations.
7. Assets Held For Sale
The following table provides the components of assets held for sale (in thousands):
Description
 
June 30, 2015
 
December 31, 2014
 
Mine equipment
 
$
3,162

 
$
42,083

(1) 
Single family homes
 
—

 
2,275

 
 
 
$
3,162

 
$
44,358

 
(1) Unpaid debt on mine equipment held for sale totaled $28.2 million as of December 31, 2014. See Note 12 - Debt for additional detail.
Assets held for sale at June 30, 2015 was comprised of used assets, including $1.2 million for a mobile crusher, $0.9 million for haul trucks, $0.4 million for blasthole drills, $0.3 million for wheel loaders, $0.3 million for excavators and $0.06 million for other equipment. Assets held for sale at December 31, 2014 included $24.5 million for shovels, $6.7 million for used haul trucks, $4.8 million for new and used blasthole drills, $3.7 million for a mobile crusher, $2.3 million for single family homes, $1.6 million for a carbon strip plant and $0.7 million for other equipment. As the Company has ceased making principal and interest payments on most of its capital lease and terms obligations and the term and security deposit loan (as noted in Note 3 - Chapter 11 Bankruptcy Filing and Note 12 - Debt) and plans to return the related equipment to the lessors/lender those assets previously shown as held for sale ($10.2 million in mine equipment and $18.0 million for an electric rope shovel) are now included in Plant, equipment, and mine development, net - Mine equipment. During the three months ended June 30, 2015, the Company recorded a $11.7 million loss included in Loss on assets classified as held for sale and asset dispositions, net as a result of disposition of the single family homes, related settlement of temporary housing facility rental payments and the adjustment to the fair value of the remaining equipment classified as held for sale.
During the first three months of 2015, the Company recorded a loss of $16.9 million included in Loss on assets classified as held for sale and asset dispositions, net related to the $34.4 million of exploration properties and related assets that were sold to Clover Nevada for $17.5 million as discussed in Note 3 - Chapter 11 Bankruptcy Filing. The transaction was approved by the Bankruptcy Court on June 18, 2015 and the sale was completed June 29, 2015. The result of the transaction was to reduce Assets held for sale by the carrying value of $17.5 million and increase restricted cash by the same amount, pursuant to the June 18, 2015 Court Order requiring that the proceeds be placed in a segregated interest-bearing bank account maintained by the Debtors, pending agreement amongst the Restructuring Support Parties on the distribution of the funds.
8. Mineral Properties, Net

14
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


Sale of Mineral Properties
On April 22, 2014, the Company entered into a Purchase and Sale Agreement and sold a 75% controlling interest in the Hasbrouck, Three Hills, and Esmeralda County exploration properties (the “Properties”) to West Kirkland Mining, Inc. (“WKM”) for $20.0 million. The carrying value of the Properties sold to WKM was $0.5 million, resulting in the recognition of a $19.5 million Gain on dispositions or sales of mineral properties during the three months ended June 30, 2014.

9. Restricted Cash
The following table provides the components of restricted cash (in thousands):
Obligation collateralized
June 30, 2015
 
December 31, 2014
Asset retirement obligation surety bonds
$
38,147

 
$
38,147

Revolving credit agreement - Note 12
—

 
10,000

Security deposit from sale of properties
17,500

 
—

 
$
55,647

 
$
48,147

As a result of the Chapter 11 Cases discussed in Note 3 - Chapter 11 Bankruptcy Filing, during the six months ended June 30, 2015, the lenders to the Company’s Revolver redeemed the $10.0 million in restricted deposits which reduced the outstanding borrowings under the Revolver by the same amount. See Note 12 - Debt for additional detail on the Revolver. During the three and six months ended June 30, 2015, security deposits increased by the $17.5 million proceeds from the sale of exploration properties and related assets, which is discussed in Note 7 - Assets Held For Sale and Note 3 - Chapter 11 Bankruptcy Filing.
10. Plant, Equipment, and Mine Development, Net
The following table provides the components of plant, equipment, and mine development, net (in thousands):
 
Depreciable life or method
 
June 30, 2015
 
December 31, 2014
Mine equipment
5 - 7 years
 
$
218,601

 
$
280,833

Mine development
Units-of-production
 
97,450

 
96,964

Leach pads
Units-of-production
 
81,446

 
81,446

Process equipment
Units-of-production
 
19,948

 
79,551

Buildings and leasehold improvements
10 years
 
16,577

 
26,175

Furniture, fixtures, and office equipment
2 - 3 years
 
4,289

 
4,417

Vehicles
3 - 5 years
 
2,420

 
2,943

Construction in progress and other(1)
 
 
53,928

 
79,938

 
 
 
494,659

 
652,267

Less: accumulated depreciation and amortization
 
 
(225,760
)
 
(208,978
)
 
 
 
$
268,899

 
$
443,289

(1) Construction in progress at June 30, 2015 consisted primarily of mill components.
As a result of declining metal prices and the Company’s decision to suspend mining operations, discussed in Note 1 - Basis of Presentation, all long-lived assets have been further reviewed for impairment as of June 30, 2015. In the absence of future cash flows from new ore placed on the leach pads, this analysis has resulted in a $179.6 million write-down to plant and equipment assets which are now carried at fair value.
Mine development and leach pad construction costs were deemed a separate asset group for which the fair value was determined to exceed the carrying value based on the in situ value per gold-equivalent ounce reserve. As a result, an impairment was not recorded for this asset group.

15
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


11. Other Liabilities
The following table summarizes the components of other liabilities, current and non-current (in thousands):
 
June 30, 2015
 
December 31, 2014
Other liabilities, current
 
 
 
Derivative instruments - Note 20
$
86,307

 
$
8,628

Accrued compensation
2,185

 
3,253

Other
116

 
128

 
$
88,608

 
$
12,009

Other liabilities, non-current
 
 
 
Accounts payable
$
1,188

 
$
5,188

Deferred royalty income
—

 
1,109

Derivative instruments - Note 20
—

 
45,017

Other
56

 
56

 
$
1,244

 
$
51,370

12. Debt
Secured Multiple Draw Debtor in Possession Credit Agreement
In connection with the Chapter 11 Cases, on March 12, 2015, the Company entered into a Secured Multiple Draw Debtor in Possession Credit Agreement (the “DIP Credit Agreement”), among the Company, as borrower, the direct and indirect subsidiaries of the Company party thereto from time to time, as guarantors, Wilmington Savings Funds Society, FSB, as administrative agent, and collateral agent and the lenders from time to time party thereto. On April 17, 2015, the Bankruptcy Court entered an order (the “Final DIP Order”) authorizing the Debtors to borrow in an aggregate principal amount of up to $78.0 million (the “DIP Facility”) under the DIP Credit Agreement. As of June 30, 2015, $50.7 million was outstanding, which was funded pursuant to the Bankruptcy Court’s order on March 12, 2015 granting interim approval of the DIP Facility and subsequent order on April 17, 2015, granting final approval of the DIP Facility. The Company will pay interest on the principal outstanding balance under the DIP Facility on a monthly basis at a rate of 12.0% per annum, 6.0% to be paid in cash and 6.0% to be paid in kind. Upon occurrence of certain triggering events set forth in the Original Term Sheet, all interest under the DIP Facility will be paid in cash. Such triggering events occur if: (1) the loans under the DIP Facility are repaid in their entirety in cash or (2) the loans under the DIP Facility are repaid, or are required to be repaid, prior to the scheduled maturity date under the DIP Facility (including by voluntary prepayment, mandatory prepayment, upon acceleration or otherwise).
The obligations under the DIP Credit Agreement are guaranteed by the Company’s subsidiaries and secured by a continuing security interest in all of Company’s property and assets (subject only to a carve-out, the liens existing on the Petition Date and adequate protection liens) in accordance with section 364(c)(2) of the Bankruptcy Code, including (i) a perfected first-priority security interest in the collateral that is not otherwise encumbered as of the Petition Date (subordinate only to adequate protection liens granted in respect of the secured bank debt), (ii) a perfected junior security interest in all collateral that are subject to valid and perfected liens in existence as of the Petition Date or to valid liens in existence as of the Petition Date and perfected subsequent to the Petition Date as permitted by subsection 546(b) of the Bankruptcy Code, and (iii) a perfected first-priority senior, priming, security interest in the collateral junior only to a carve-out, the permitted liens, the liens securing the secured bank debt and the adequate protection liens granted in respect of the secured bank debt. Except to the extent set forth in the DIP Credit Agreement and any Bankruptcy Court orders entered or to be entered in connection therewith, the liens securing the Company’s secured bank debt shall be senior in priority to the liens securing the Company’s obligations under the DIP Credit Agreement.
The Company anticipates using the proceeds of the DIP Facility primarily for (1) purposes permitted by orders of the Bankruptcy Court, including ongoing debtor-in-possession working capital purposes, (2) the payment of fees, costs and expenses, and (3) other general corporate purposes, in each case, only to the extent permitted under applicable law, under or as permitted by the DIP Credit Agreement, the orders of the Bankruptcy Court, and in accordance with the approved budget.
The DIP Credit Agreement contains certain customary and industry/Company-specific representations, covenants, indemnifications and events of default. Events of default include, but are not limited to, payment defaults, covenant defaults and certain bankruptcy-related defaults. The financial and non-financial covenants include, but are not limited to, the covenant testing the Reserve Tail (as defined in the DIP Credit Agreement), the prohibited variance covenant testing the “Total Operating Disbursements”, “Total Ounces of Gold Sold”, “Total Ounces of Gold Equivalent Sold” and “Total Monthly Ounces of Gold Produced” line items on the approved budget, and the covenant on the Hycroft Demonstration Plant (as defined in the DIP

16
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


Credit Agreement). The Reserve Tail covenant requires the Company to maintain a minimum Reserve Tail of at least 600,000 ounces of gold equivalent on the end of each quarter falling after the closing of the DIP Credit Agreement. The Total Operating Disbursements covenant requires the Company to make disbursements in accordance with a budget approved by the lenders under the DIP Facility (generally subject to a 10% permitted variance over budget). The Total Ounces of Gold Sold, Total Ounces of Gold Equivalent Sold and Total Monthly Ounces of Gold Produced covenants require the Company to sell or produce minimum amounts of gold or equivalent ounces (generally subject to a 10% permitted variance under budget). The Hycroft Demonstration Plant covenant requires the Company to construct and operate a temporary demonstration plant related to the sulfide mill expansion project at the Company’s Hycroft Mine.
As discussed in Note 3 - Chapter 11 Bankruptcy Filing, the Company was not able to comply with several of the covenants in the DIP Credit Agreement. However, the Company has obtained waivers from the majority DIP lenders, for certain defaults or anticipated defaults, in connection with the Current and Anticipated Waivers (the “Retractable Waivers”). In addition, the majority DIP lenders have agreed to waive, but subject to the retraction, termination and/or withdrawal of such waiver upon notice by the majority DIP lenders, any prospective default, in connection with, among other things, the Company’s failure (x) to deliver any update to the approved budget solely as a result of the delayed approval by the majority DIP lenders of such update and (y) to meet the “Total Ounces Gold Sold Covenant,” the “Total Ounces Gold Equivalent Sold Covenant” and “Total Monthly Gold Produced Covenant” with respect to the test periods beyond those covered by the Current and Anticipated Waivers.
If the Company is unable to comply with, or obtain a waiver from the majority DIP lenders of, any of the other covenants contained in the DIP Credit Agreement, or the majority DIP lenders retract any of the Retractable Waivers, there could be a default under the terms of such agreement, which could result in an acceleration of repayment and prevent the Company from borrowing additional funds under the DIP Credit Agreement. The Company is dependent on a financial restructuring to have any possibility to continue as a going concern. If the Company is unable to maintain compliance with the covenants (or obtain waivers for non-compliance) contained in the DIP Credit Agreement the Company’s ability to successfully recapitalize its balance sheet and emerge from bankruptcy significantly decreases and may not be possible.
The Initial Consenting Noteholders, and/or certain affiliates, and/or related funds or vehicles of the Initial Consenting Noteholders have agreed to provide a backstop to the commitments in respect of the DIP Facility to the extent there is a shortfall (in such capacity, collectively, the “Backstop DIP Lenders”) in exchange for the put option payments described below and in the Original Term Sheet. Each of the Backstop DIP Lenders shall receive its pro rata portion of a non-refundable backstop put option payment of $2.34 million (3.0% of the $78.0 million commitment under the DIP Facility) payable in the form of the new second lien convertible term loan credit facility described above or, subject to the conditions set forth in the Original Term Sheet, in cash.
In addition, the Company paid to the lenders under the DIP Facility a non-refundable upfront cash put option payment on a pro rata basis in the aggregate amount of $0.78 million (1.0% of the $78.0 million commitment under the DIP Facility) upon the initial funding of the DIP Facility on March 12, 2015. The Company shall also pay to lenders under the DIP Facility a non-refundable upfront put option payment payable in the aggregate amount of $3.12 million (4.0% of the $78.0 million commitment under the DIP Facility) in the form of the new second lien convertible term loans or, subject to certain conditions set forth in the Original Term Sheet, in cash.
The maturity date of the DIP Credit Agreement is March 12, 2016, one year from the March 12, 2015, execution of the DIP Credit Agreement. The DIP Credit Agreement and DIP Facility shall terminate upon the earlier to occur of (a) the date of acceleration of the term loans under the DIP Credit Agreement and the termination of the commitment available under the DIP Facility upon an event of default, (b) the date of consummation of any sale of all or substantially all of the assets of the Company pursuant to Bankruptcy Code section 363, (c) the effective date of the Amended Reorganization Plan and (d) March 12, 2016.
As outlined in the Amended Disclosure Statement the DIP Facility, pursuant to the Amended and Restated Restructuring Support Agreement, is to be satisfied in cash upon the effective date of the Amended Reorganization Plan.
On July 23, 2015, the Debtors obtained an Exit Facility Commitment Letter from the Exit Facility Lenders to secure the financing necessary for the consummation of the Amended Restructuring Transaction contemplated under the Amended and Restated Restructuring Support Agreement and the Amended Reorganization Plan. Pursuant to the Exit Facility Commitment Letter, and subject to the terms and conditions thereof, the Exit Facility Lenders have agreed to the purchase of new second lien convertible debt (the “New Second Lien Convertible Notes”) in the reorganized Company in an amount such that the initial principal amount of the New Second Lien Convertible Notes will not exceed $80 million.
In consideration for the Company’s right to call the commitments of the Exit Facility Lenders to purchase the New Second Lien Convertible Notes, the Company shall be required to make a non-refundable put option payment to the Exit Facility Lenders equal to $5 million (the “Exit Facility Put Option Payment”). The Debtors shall satisfy their obligation to pay

17
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


the Exit Facility Put Option Payment on the effective date of the Amended Reorganization Plan through the issuance of New Second Lien Convertible Notes.
The New Second Lien Convertible Notes will mature on the date that is 5 years after the effective date of the Amended Reorganization Plan and bear interest at a rate of 15% per annum, payable in kind on a quarterly basis.
The New Second Lien Convertible Notes (including all principal (including all interest that has been added to the principal of the New Second Lien Convertible Notes) and all accrued and unpaid interest) shall be convertible at an initial conversion price that is equal to the equity value of a share of new common stock as of the effective date of the Amended Reorganization Plan, as determined by the Company and the Exit Facility Lenders, subject to anti-dilution protection.
At any time and from time to time, each holder of New Second Lien Convertible Notes shall have the right to convert all or any portion of the New Second Lien Convertible Notes (including all principal (including all interest that has been added to the principal of the New Second Lien Convertible Notes) and all accrued and unpaid interest) at such holder’s option into a number of shares of new common stock equal to the amount of New Second Lien Convertible Notes being converted by such holder (including all principal (including all interest that has been added to the principal of the New Second Lien Convertible Notes) and all accrued and unpaid interest being converted), divided by the conversion price then in effect.
If (a) any Debtor enters into an agreement (including, without limitation, any agreement in principle, letter of intent, memorandum of understanding or definitive agreement) with respect to any alternative transaction, (b) the Bankruptcy Court approves or authorizes any alternative transaction with respect to any of the Debtors or (c) any Debtor consummates any alternative transaction, in any such case described in clause (a), clause (b) or clause (c) of this paragraph, at any time (x) prior to the termination of the Exit Facility Commitment Letter in accordance with the terms thereof or (y) within twelve (12) months following the termination of the Exit Facility Commitment Letter, then the Debtors will pay to the Exit Facility Lenders liquidated damages in cash in the aggregate amount of $3 million.
The Exit Facility Commitment Letter may be terminated upon the occurrence of certain events and certain breaches by the parties under the Exit Facility Commitment Letter.
Debt Covenants
In addition to those which are contained in the DIP Credit Agreement (discussed above), the Company’s debt agreements entered into prior to the Petition Date (collectively the “Pre-Petition Debt Agreements”) contain representations and warranties, events of default, and covenants that are customary for agreements of such types. The Company’s Pre-Petition Debt Agreements contain cross-default and cross-acceleration clauses, which mean that an event of default or covenant violation under any of the Company’s debt agreements may result in the acceleration of substantially all of its outstanding debt. The commencement of the Chapter 11 Cases discussed in Note 3 - Chapter 11 Bankruptcy Filing constituted an event of default under the Company’s Pre-Petition Debt Agreements and, accordingly, as of June 30, 2015 and December 31, 2014, the Company has classified its debt balances within Debt, current and Liabilities subject to compromise.
Debt Balances
The following table summarizes the components of debt (in thousands):
Description
 
Stated Maturity
 
 
June 30, 2015
 
December 31, 2014
 
Debt, current:
 
 
 
 
 
 
 
 
Capital lease and term loan obligations
 
2015 to December 2020
 
 
$
6,593

 
$
146,489

(1) 
Revolving Credit Agreement
 
April 2016
 
 
64,950

 
31,000

 
DIP Credit Agreement
 
Variable - See terms above
 
 
50,706

 
—

 
8.75% Senior Notes (2)
 
June 2019
 
 
—

 
344,800

 
Term and Security Deposit loan
 
2015 to March 2022
 
 
—

 
17,974

(3) 
 
 
 
 
 
$
122,249

 
$
540,263

 
Liabilities subject to compromise:
 
 
 
 
 
 
 
 
8.75% Senior Notes (2)
 
June 2019
 
 
$
316,640

 
$
—

 
Capital lease and term loan obligations
 
2015 to March 2022
 
 
118,984

 
—

 
Term and Security Deposit Loan
 
2015 to March 2022
 
 
17,974

(3) 
—

 
 
 
 
 
 
$
453,598

 
$
—

 
(1)  Includes borrowings of $10.2 million as of December 31, 2014 for mine equipment included in Assets held for sale.
(2)   Prior to the event of default, effective interest rate of 8.375% after cross currency swap. See Note 20 - Derivative Instruments for additional detail.
(3)  Entire borrowing is attributable to the third rope shovel.

18
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


Debt, Current
Revolving Credit Agreement
In May 2014, the Company entered into the Revolver which amended and restated the December 2013 Second Amended and Restated Credit Agreement (the “Previous Revolver”). The Revolver was collateralized by substantially all of the Company’s assets and, as such, this balance is excluded from Liabilities subject to compromise. Prior amounts available to the Company under the Revolver were determined by a Borrowing Base (as defined in the Revolver) that made up to $75.0 million available to the Company depending upon 80% of the net realizable value of the gold and silver in the Company’s ore on leach pads, in-process, and finished goods inventories less estimated remaining processing and selling costs. As of June 30, 2015, the Revolver balance was $65.0 million, which resulted from the full $75.0 million of capacity being drawn or committed through letters of credit as of the Petition Date and subsequently reduced by the $10.0 million in restricted cash collateral held (and realized) by the lenders to the Revolver (as discussed in Note 9 - Restricted Cash).
Borrowings under the Revolver bear interest per annum at either LIBOR plus 4.5% or at an Alternate Base Rate, as defined in the Revolver, plus 3.5%. Financial letters of credit and non-financial letters of credit bear interest per annum at 4.50% and 2.70%, respectively.
In December 2013, when the Company entered into the Previous Revolver, which amended and restated the October 2012 Amended and Restated Credit Agreement (the “2012 Revolver”), two lenders under the 2012 Revolver exited the credit facility. These two lenders were holders of a portion of the Notes cross currency swap which, in December 2013, ceased being collateralized by the security they held as lenders to the 2012 Revolver. As a result, the Company was required to fully collateralize any mark-to-market liability position for 22% of the cross currency swap, which was the portion held by these two lenders, with cash, letters of credit, or a combination of the two. As of the Petition Date, the Company had remitted $3.6 million of cash and issued $18.5 million of financial letters of credit to collateralize the mark-to-market liability position of 22% of the cross currency swap which was realized by counterparties as discussed in Note 3 - Chapter 11 Bankruptcy Filing and Note 20 - Derivative Instruments.
Debt Subject to Compromise
Capital Lease and Term Loan Obligations
The Company’s capital lease and term loan obligations are for the purchase of mining equipment, bear interest at rates between 4% - 7% per annum, and primarily carry 60 - 84-month terms.
As discussed in Note 3 - Chapter 11 Bankruptcy Filing, the Company ceased paying principal and interest on the Delinquent Capital Leases after June 28, 2015 and does not expect to make further payments during the Chapter 11 Cases on these obligations. As there is uncertainty surrounding the value that a third-party may attribute to the underlying security on these Delinquent Capital Leases, they have been classified as Liabilities subject to compromise. The Company continues to make payments on a few of the capital lease obligations, including three dozers, two graders, and an excavator (the “Current Lease Obligations”) and intends to continue to do so. The Current Lease Obligations are classified as Debt - current. The following is a summary of the stated scheduled future minimum payments under both the Delinquent Capital Leases and the Current Lease Obligations as of June 30, 2015 (in thousands):
 
 
 
Minimum Lease Payments
 
Fiscal Year
 
 
Current Lease Obligations
 
Delinquent Capital Leases
 
2015
 
 
$
2,334

 
$
31,724

 
2016
 
 
3,453

 
40,404

 
2017
 
 
1,147

 
31,844

 
2018
 
 
—

 
11,898

 
2019
 
 
—

 
8,578

 
Thereafter
 
 
—

 
6,673

 
Less: interest
 
 
(341
)
 
(12,137
)
 
Net minimum capital lease payments
 
 
6,593

 
118,984

 
Senior Notes
In May 2012, the Company issued CDN $400.0 million of uncollateralized Notes which pay interest semi-annually at the rate of 8.75% per annum. Concurrent with the issuance of the Notes, the Company entered into a cross currency swap agreement based upon a notional amount of $400.4 million (the gross proceeds to the Company from the issuance) which fixed

19
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


the interest rate at 8.375% prior to the event of default and early termination of the cross currency swap described in Note 20 - Derivative Instruments. The Notes balance was $316.6 million based upon the U.S. dollar to Canadian dollar exchange rate on the Petition Date, decreasing from the December 31, 2014 balance of $344.8 million which resulted in a $28.2 million gain (included in Other, net) during the six months ended June 30, 2015. The Notes, which are unsecured, are guaranteed by most of the Company’s currently wholly-owned subsidiaries, including Hycroft Resources & Development Inc., which owns the Hycroft Mine and produces gold and silver, and are included within Liabilities subject to compromise.
Term and Security Deposit Loan Agreement
In March 2013, the Company entered into a Term and Security Deposit Loan Agreement (the “Loan Agreement”) related to the purchase of three electric rope shovels. Under the Loan Agreement, the Company was made available up to $60.0 million ($20.0 million for each shovel) for scheduled advance security deposit payments pursuant to purchase agreements for the electric rope shovels and up to $90.0 million ($30.0 million for each shovel) in term loan financing to fund the purchase of the electric rope shovels once commissioned at the Hycroft Mine. Under the Loan Agreement, as electric rope shovels were commissioned, amounts previously advanced to the Company for security deposits, together with the remaining purchase price of each electric rope shovel, were converted to term loan obligations. During 2013, the Company commissioned two (of the three) electric rope shovels and, as such, amounts borrowed for these two shovels are included in capital lease and term loan obligations. Advances for security deposits under the Loan Agreement bear an interest rate determined by an applicable rate plus the three month LIBOR, which approximated 4.7% at June 30, 2015, although the Company ceased recording interest on this obligation on the Petition Date, as noted below. The two executed term loan obligations for the commissioned shovels carry seven year terms and bear interest at a fixed rate of approximately 5.7%.
The $18.0 million of outstanding principal for the Loan Agreement relates to advances for the purchase of the third electric rope shovel (which is included in Plant, Equipment, and Mine Development, Net). Although borrowings under the Loan Agreement are secured by the third electric rope shovel, the Company (1) believes the value attributable by a third-party to the third electric rope shovel may be less than the outstanding principal and accrued interest of $1.6 million (which indicates this liability is under-secured) and (2) expects to compromise on this agreement during the bankruptcy process and, accordingly, this obligation is included within Liabilities subject to compromise.
Interest Expense and Interest Payable
Effective as of the Petition Date, the Company ceased recording interest expense on certain outstanding pre-petition debt classified within Liabilities subject to compromise as interest owed after the Petition Date on such obligations is not expected to be paid during the Chapter 11 Cases and is not expected to be an allowed claim. During each of the three and six months ended June 30, 2015, contractual interest expense which would have been accrued absent the Chapter 11 Cases, but has not been recorded in these Condensed Consolidated Financial Statements, totaled approximately $8.4 million and $10.5 million for the Notes and $0.3 million and $0.4 million for the Loan Agreement (for the third electric rope shovel), respectively. The following table summarizes the components of recorded interest expense (in thousands):
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
8.75% Senior Notes(1)
 
$
—

 
$
8,360

 
$
4,667

 
$
16,629

Capital lease and term loan obligations
 
1,644

 
2,275

 
3,290

 
3,819

DIP Credit Agreement interest and issuance costs
 
1,190

 
—

 
2,242

 
—

Revolver interest and standby fees
 
728

 
313

 
1,425

 
516

Amortization of debt issuance costs
 
226

 
675

 
815

 
1,308

Term and Security Deposit loan
 
—

 
224

 
177

 
445

Other interest expense
 
580

 
123

 
625

 
282

Capitalized interest
 
—

 
(641
)
 
—

 
(5,883
)
 
 
$
4,368

 
$
11,329

 
$
13,241

 
$
17,116

(1) Prior to the event of default, effective interest rate of 8.375% after cross currency swap. See Note 20 - Derivative Instruments for additional detail.

20
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


The following table summarizes the components of interest payable (in thousands):
Description
 
 
June 30, 2015
Interest payable:
 
 
 
Revolving Credit Agreement
 
 
$
801

 
 
 
 
Liabilities subject to compromise:
 
 
 
8.75% Senior Notes 
 
 
$
7,515

Term and Security Deposit loan
 
 
1,621

 
 
 
$
9,136

13. Revenue
The table below is a summary of the Company’s gold and silver revenue (in thousands, except ounces sold):
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
 
Amount
 
Ounces sold
 
Amount
 
Ounces sold
 
Amount
 
Ounces sold
 
Amount
 
Ounces sold
Gold revenue
$
36,437

 
30,714

 
$
73,713

 
57,050

 
$
87,263

 
72,557

 
$
150,946

 
116,520

Silver revenue
3,547

 
218,169

 
9,410

 
474,832

 
7,966

 
484,050

 
17,702

 
881,066

 
$
39,984

 
 
 
$
83,123

 
 
 
$
95,229

 
 
 
$
168,648

 
 
14. Other, Net
The table below is a summary of the Company’s other income and expense (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Foreign currency transaction gain (loss) on Notes - Note 12
$
—

 
$
(12,800
)
 
$
28,160

 
1,400

Reclassification of gain (loss) into earnings from Accumulated other comprehensive income for cross currency swap - Note 20
—

 
12,800

 
—

 
(1,400
)
Change in fair value of cross currency swap through the Petition Date - Note 20
—

 
—

 
21,969

 
—

Loss on diesel swap settlements
—

 
—

 
(1,137
)
 
—

Other
1,142

(1)
(52
)
 
1,065

(1)
(38
)
 
$
1,142

 
$
(52
)
 
$
50,057

 
$
(38
)
(1) Includes deferred revenue from advanced minimum royalties, which was recognized as income upon sale of properties.
15. Income Taxes
For the six months ended June 30, 2015, the Company recorded income tax benefit of nil which was the result of applying an estimated annual effective tax rate of approximately 0.0% to $257.8 million Loss before income taxes. The estimated annual effective tax rate varied from the United States statutory rate of 35% primarily as a result of an expected increase to the Company’s full valuation allowance related to current year results.
For the six months ended June 30, 2014, the Company recorded income tax expense of approximately $3.4 million which included $2.8 million of income tax expense from income taxed at the estimated annual effective rate of approximately 33.9% and $0.6 million of additional income tax expense for discrete items related to stock-based compensation that were recognized as incurred.
Historically, the Company has not been subject to state or foreign income taxes as all of the Company’s operations and properties are located within Nevada, which does not impose a state income tax.  As necessary, the Company provides a reserve against the benefits of uncertain tax positions taken in its tax filings that are not more likely than not to be sustained upon examination. Based on the weight of available evidence, the Company does not believe it has taken any uncertain tax positions that require the establishment of a reserve. The Company has not recorded any interest or penalties related to income tax liabilities as of June 30, 2015.

21
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


16. (Loss) Income Per Share
The following table sets forth the computation of basic and diluted (loss) income per share (in thousands, except per share amounts):
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
Net (loss) income available to common stockholders:
$
(257,849
)
 
$
4,376

 
$
(366,323
)
 
$
4,708

Weighted average common shares:
 
 
 
 
 
 
 
Basic
127,168

 
104,765

 
126,939

 
104,665

Effect of shares granted under the:
 
 
 
 
 
 
 
Restricted Share Unit Plan
—

 
1,480

 
—

 
1,661

Deferred Phantom Unit Plan
—

 
248

 
—

 
248

Deferred Share Unit Plan
—

 
299

 
—

 
217

2007 Stock Option Plan
—

 
—

 
—

 
—

Performance and Incentive Pay Plan
—

 
236

 
—

 
118

Diluted
127,168

 
107,028

 
126,939

 
106,909

(Loss) income per share:
 
 
 
 
 
 
 
Basic
$
(2.03
)
 
$
0.04

 
$
(2.89
)
 
$
0.04

Diluted
$
(2.03
)
 
$
0.04

 
$
(2.89
)
 
$
0.04

During the three and six months ended June 30, 2015, the Company’s basic average common shares and diluted average common shares were the same because the effect of potential shares of common stock was anti-dilutive due to the Company’s net loss. Had the Company generated net income, during the three and six months ended June 30, 2015, the effects from 10,875,000 warrants, 863,552 restricted share units, 380,560 deferred share units, and 248,136 deferred phantom units would have been included in the diluted average common shares calculation.
17. Stock-Based Compensation
As of June 30, 2015, the Company was permitted to grant awards under the Deferred Phantom Unit Plan, the Deferred Share Unit Plan, and the Performance and Incentive Pay Plan. The Company is no longer permitted to grant awards under the Restricted Share Unit Plan or the 2007 Stock Option Plan.
The following tables summarize the Company’s stock-based compensation cost and unrecognized stock-based compensation cost by plan (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
Stock-based compensation cost by plan
2015
 
2014
 
2015
 
2014
Restricted Share Unit
$
370

 
$
1,369

 
$
1,874

 
$
2,717

Performance and Incentive Pay
40

 
65

 
81

 
65

Deferred Share Unit
—

 
200

 
200

 
462

 
$
410

 
$
1,634

 
$
2,155

 
$
3,244

 
June 30,
Unrecognized stock-based compensation cost by plan
2015
 
2014
Restricted Share Unit
$
4,389

 
$
10,675

Performance and Incentive Pay
448

 
1,084

Deferred Share Unit
—

 
600

 
$
4,837

 
$
12,359

The following table summarizes activity of the Company’s stock-based compensation plans:

22
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


 
Six months ended June 30, 2015
 
Restricted
Share Unit
 
Performance and Incentive Pay
 
Deferred
Share Unit
 
2007 Stock
Option
 
Deferred
Phantom Unit
Outstanding on January 1,
2,021,081

 
302,871

 
380,560

 
500,000

 
248,136

Canceled/forfeited
(293,203
)
 
(130,596
)
 
—

 
—

 
—

Outstanding, end of period
1,727,878

 
172,275

 
380,560

 
500,000

 
248,136

Vested and unissued/exercisable, end of period
949,657

 
86,944

 
380,560

 
500,000

 
248,136


18. Warrants
In December 2014, the Company completed a public offering which included the sale of 10,875,000 warrants to purchase shares of common stock. The warrants contain a “down-round” provision, which means that any new issuances of common stock (or securities convertible into common stock) at a price, exercise price, or conversion price below the then current exercise price of the warrants ($1.10 per share at June 30, 2015) will result in the exercise price of the warrants being reduced to match the price, exercise price or conversion price of such new issuance of common stock (or securities convertible into common stock). The down-round provision precludes the warrants from being considered indexed to the Company’s own stock; thus, the warrants do not qualify for a scope exception from derivative accounting. Accordingly, the Company’s outstanding warrants are accounted for as derivative instruments and recorded as assets or liabilities at fair value with periodic changes in fair value included in Other, net.
As a result of the Company’s filing of the Chapter 11 Cases (discussed in Note 3 - Chapter 11 Bankruptcy Filing), it is not expected that the warrants will be exercisable which resulted in their value being reduced to zero. The following table summarizes activity of the Company’s warrant liability and warrants (in thousands, except warrants):
 
 
Six months ended June 30, 2015
 
 
Amount
 
Warrants
Balance, beginning of year
 
$
4,644

 
10,875,000

Change in fair value included in Reorganization items, net - Note 3
 
(4,644
)
 
—

Balance, end of year
 
$
—

 
10,875,000

Refer to Note 19 - Fair Value Measurements for additional information on the Company’s warrants.
19. Fair Value Measurements
Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis;
Level 2 – Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Certain financial instruments, including cash and equivalents, accounts receivable, prepaids and other, accounts payable, and other liabilities, are carried at cost, which approximates fair value due to the short-term nature of these instruments. There were no changes to the Company’s valuation techniques during the three and six months ended June 30, 2015.

23
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities measured at fair value on a recurring basis (in thousands).
Assets
June 30, 2015
 
December 31, 2014
 
Input Hierarchy
Level
Assets held for sale:
 
 
 
 
 
Mine equipment - Note 7
$
3,162

 
$
42,083

 
Level 2
Single family homes - Note 7
—

 
2,275

 
Level 2
 
$
3,162

 
$
44,358

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
Cross currency swap - Note 20
$
—

 
$
43,389

 
Level 2
Diesel swaps - Note 20
—

 
4,644

 
Level 2
Warrant liability - Notes 18 and 20
—

 
5,612

 
Level 2
 
$
—

 
$
53,645

 
 
Assets Held For Sale
The Company’s mine equipment and single family homes are valued using a market approach for each asset held for sale. Inputs include quoted market prices for identical or similar assets in markets that are not active and, as such, mine equipment and single family homes held for sale are classified within Level 2 of the fair value hierarchy. Periodic changes in fair value (less costs to sell) to assets held for sale are included in Loss on assets classified as held for sale and asset dispositions, net.
Derivative Instruments
As discussed in Note 20 - Derivative Instruments, the Company’s cross currency swap and diesel swaps are no longer carried at fair value and are included in Other liabilities, current and Liabilities subject to compromise at the remaining close-out amounts due. As discussed in Note 18 - Warrants, as a result of the Company’s filing of the Chapter 11 Cases (discussed in Note 3 - Chapter 11 Bankruptcy Filing), it is not expected that the warrants will be exercisable which resulted in their value being reduced to zero. Prior to the filing of the Chapter 11 Cases, as of December 31, 2014, the fair value of the Company’s warrant liability was determined using a Monte Carlo simulation-based valuation model, which incorporated the down-round provision.  
20. Derivative Instruments
The Company had previously entered into diesel swaps to fix a portion of its diesel consumption and a cross currency swap concurrent with the issuance of the Notes. The notional value of the cross currency swap was $400.4 million and the interest rate was fixed at 8.375% prior to the event of default (compared to the underlying hedged transaction of CDN $400.0 million of debt at 8.75%).
Derivative Instruments Carrying Values and Fair Values
The following table is a summary of the carrying values (as of June 30, 2015) and fair values (as of December 31, 2014) of the Company’s derivative instruments and the location in which they are recorded (in thousands):
 
 
June 30, 2015
 
December 31, 2014
 
 
Other liabilities,
current
 
Liabilities subject to compromise
 
Total
 
Other liabilities,
current
 
Other liabilities,
non-current
 
Total
Cross currency swap
 
$
80,624

 
$
891

 
$
81,515

 
$
3,016

 
$
40,373

 
$
43,389

Diesel swaps
 
5,683

 
—

 
5,683

 
5,612

 
—

 
5,612

Warrant liability - Note 18
 
—

 
—

 
—

 
—

 
4,644

 
4,644

 
 
$
86,307

 
$
891

 
$
87,198

 
$
8,628

 
$
45,017

 
$
53,645


24
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


The filing of the Chapter 11 Cases discussed in Note 3 - Chapter 11 Bankruptcy Filing constituted an event of default under each of the diesel and cross currency swap agreements. The amounts shown as of June 30, 2015 represent the remaining close-out amounts due for these pre-petition financial instruments determined as of the Petition Date as such financial instruments will no longer be adjusted to fair value at the end of each reporting period. The $86.3 million included in Other liabilities, current is owed to a secured counterparty whereas the $0.9 million included in Liabilities subject to compromise is the remaining amount owed to unsecured counterparties following their redemption of $18.5 million of letters of credit and $3.6 million of cash held by them which collateralized a portion of the Company’s cross currency swap liability position (as further discussed in Note 12 - Debt).
The roll forward below provides additional detail for the Company’s cross currency swap and diesel swap liabilities, including the location in which changes in fair value and losses were recorded to (in thousands):
 
Six months ended June 30, 2015
 
Cross Currency
Swap
 
Diesel Swap
Agreements
 
Total
Balance, beginning of period
$
43,389

 
$
5,612

 
$
49,001

Change in fair value through the Petition Date included in Other, net
(21,969
)
 
—

 
(21,969
)
Change in fair value resulting from the filing of the Chapter 11 Cases included in Reorganization items, net
82,175

 
(415
)
 
81,760

Unpaid losses on diesel swap settlements included in Other, net
—

 
486

 
486

Collateral redeemed by unsecured counterparties
(22,080
)
 
—

 
(22,080
)
Balance, end of period
$
81,515

 
$
5,683

 
$
87,198

During the six months ended June 30, 2015, the $22.0 million gain from the change in fair value of the cross currency swap resulted from an increase in the credit default swap input used to value this financial instrument (which more than offset the decrease in the CDN$:US$ exchange rate).
Derivative Instruments No Longer Designated as Cash Flow Hedges
Due to the Chapter 11 Cases discussed in Note 3 - Chapter 11 Bankruptcy Filing, as of December 31, 2014, the Company determined it was improbable that the hedged forecasted transactions underlying its existing diesel swaps and cross currency swap would occur and discontinued hedge accounting for its derivative instruments previously designated as cash flow hedges. Accordingly, as of December 31, 2014, no amounts remained deferred in Accumulated other comprehensive income (loss).
The following table sets forth changes in Accumulated other comprehensive income (loss) and the impacts that the previously designated cash flow hedges had on the Company’s earnings during the six months ended June 30, 2014 (in thousands):
 
Six months ended June 30, 2014
 
Cross Currency
Swap
 
Diesel Swap
Agreements
 
Tax
Effects
 
Total
Balance, beginning of period
$
1,920

 
$
653

 
$
(899
)
 
$
1,674

Change in fair value of effective portion of unsettled cash flow hedge instruments
1,300

 
—

 
(455
)
 
845

Settlements of cash flow hedges
(2,070
)
 
—

 
725

 
(1,345
)
Reclassifications into earnings when underlying hedged transactions impacted earnings:
 
 
 
 
 
 
 
Reclassified to Interest expense
670

 
—

 
(235
)
 
435

Reclassified to Other, net
1,400

 
—

 
(490
)
 
910

Reclassified to Production costs
—

 
(359
)
 
126

 
(233
)
Balance, end of period
$
3,220

 
$
294

 
$
(1,228
)
 
$
2,286


25
ALLIED NEVADA GOLD CORP.
(Debtor-In-Possession)
Notes to Condensed Consolidated Financial Statements (Unaudited)


21. Segment Information
The Company is engaged in the operation of the Hycroft Mine and the evaluation, exploration, and advancement of gold exploration and development projects in Nevada. Segments are defined as components of the Company for which separate financial information is available that is evaluated regularly by the executive decision-making group in assessing performance, establishing operating plans and budgets, and deciding how to allocate resources. Segment information as of and for the three and six months ended June 30, 2015 and 2014 is as follows (in thousands):