Dakota Gold Corp. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; filed November 13, 2023. Dakota Gold is an exploration-stage gold company focused on mineral properties in South Dakota’s Homestake District. It has generated no revenue and has not established mineral resources or reserves under SEC S-K 1300.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Exploration expense | $6.94 million | $4.68 million | $21.38 million | $9.67 million |
| General and administrative expense | $1.92 million | $2.40 million | $7.23 million | $12.13 million |
| Operating loss | $(8.86) million | $(7.07) million | $(28.61) million | $(21.79) million |
| Net loss | $(8.54) million | $(6.58) million | $(27.63) million | $(14.58) million |
| Basic and diluted loss per share | $(0.11) | $(0.09) | $(0.36) | $(0.16) |
Margins: Not meaningful because the company has no revenue. Net loss for the nine-month comparison is affected by a substantially smaller deferred tax benefit in 2023 ($0.87 million versus $7.06 million in 2022); 2022 also included $3.45 million of net loss attributable to non-controlling interests.
- Cash and liquidity: Cash and cash equivalents were $12.76 million at September 30, down from $23.91 million at December 31, 2022. Working capital was approximately $11.22 million; total current liabilities were $2.20 million.
- Cash flow, nine months: Operating activities used $25.21 million, investing activities used $1.22 million, and financing activities provided $15.27 million. Cash decreased by $11.16 million.
- Debt and liabilities: No conventional borrowings are reported. Lease liabilities totaled $0.26 million; total liabilities were $2.79 million. The filing reports no defaults on senior securities.
- Assets and equity: Mineral rights and properties were carried at $79.15 million; total assets were $94.97 million and stockholders’ equity was $92.18 million.
Material changes and operating developments
- Nine-month exploration expense rose 121% year over year, primarily because four drill rigs operated throughout 2023’s nine-month period; drilling was ramped up during 2022. Q3 exploration expense increased 48% year over year.
- Nine-month G&A fell to $7.23 million from $12.13 million, primarily due to lower stock-based compensation and support costs, including costs associated with the 2022 DTRC merger. Q3 G&A also declined year over year.
- The company completed 105,256 feet of core drilling during the first nine months of 2023, at Maitland, Richmond Hill, and Cambrian Unconformity. Management reported Unionville and JB Gold Zone results at Maitland and completed Richmond Hill infill and validation drilling, with assays and modeling underway for resource estimation.
- Shares outstanding increased from 73.34 million at December 31, 2022 to 79.07 million at September 30, 2023. As of November 13, 2023, 86.74 million shares were outstanding.
Outlook, financing, and risks
Management expected approximately $35 million of fiscal 2023 expenditures at the stated drilling pace, including approximately $26 million spent through September 30. Planned work included Maitland infill drilling, Richmond Hill metallurgical testing and modeling toward an S-K 1300 resource estimate, and continued regional exploration. These are plans, not assurances; the company had not established mineral resources or reserves at any property.
Management said cash, working capital, anticipated ATM access, and the ability to scale back exploration supported more than 12 months of funding from the filing date. Subsequent to quarter-end, the company raised $2.55 million gross through its ATM and completed a $17 million registered direct equity investment from Orion on October 20, 2023. Orion also acquired a 1% net smelter return royalty on certain properties for up to $1 million and received a matching right for certain future financings. The company remains dependent on capital markets and may need substantial additional financing to advance projects or develop a mine.
Key risks include exploration and permitting uncertainty, lack of defined resources or reserves, no production history or operating revenue, financing needs, commodity-price and cost changes, title and surface-right issues, environmental and regulatory requirements, and the possibility that exploration will not identify commercially viable deposits. The filing reports no material changes to previously disclosed risk factors, no legal proceedings, and effective disclosure controls as of September 30, 2023.
Important facts for investors to verify
- Whether Richmond Hill work supports an S-K 1300 resource estimate, and the timing and results of assays, metallurgical testing, and modeling.
- Exploration results and permitting progress at Maitland and other Homestake District targets; no resource or reserve has been established.
- Cash runway and future capital requirements against actual exploration spending, including whether the stated fiscal 2023 expenditure plan was achieved.
- ATM issuance, post-quarter financing, share-count dilution, and the terms and potential effects of Orion’s royalty and financing matching right.
- The drivers of the large year-over-year changes in exploration expense, tax benefits, and net loss when assessing period comparability.