Paramount Gold Nevada Corp. — Form 10-Q Summary
Period clarification: The filing covers the three and nine months ended March 31, 2019, with comparisons to the same periods in 2018. This differs from the request metadata’s “2018 Q3.” The report was signed May 10, 2019.
Business context and reporting period
Paramount is an exploration and development company focused on precious-metal properties in Nevada and Oregon. Its principal projects are Grassy Mountain in Oregon and Sleeper in Nevada. It reported no revenue from mining operations; the income statement’s “other income” primarily reflects reclamation-cost reimbursements.
Financial performance and position
| Metric | Three months ended March 31, 2019 | Nine months ended March 31, 2019 | Comparable 2018 period |
|---|---|---|---|
| Other income / total revenue | $212,746 | $396,536 | $22,260 / $107,807 |
| Total expenses | $1,391,555 | $4,081,764 | $1,687,771 / $4,679,125 |
| Net loss | $1,173,413 | $3,662,629 | $1,658,748 / $4,560,357 |
| Loss per share, basic and diluted | $0.04 | $0.14 | $0.07 / $0.22 |
- At March 31, 2019, cash and cash equivalents were $361,977, current assets $774,307, and current liabilities $757,714. Cash was $297,389 at June 30, 2018.
- Nine-month operating cash use was $3,807,568. Financing provided $3,872,156, including $2,911,286 net proceeds from a unit offering and $960,870 from warrant exercises. Cash increased by $64,588 over the period.
- Total assets were $51.0 million, including $48.9 million of capitalized mineral-property acquisition costs. Total liabilities were $1.46 million, including an $805,663 reclamation obligation. The filing reports no conventional borrowings.
- No operating margin is meaningful because the company had no mining revenue. Exploration expenses were $2,019,837 for nine months; all exploration costs are expensed until economic and legal feasibility is established.
Material changes versus prior comparable periods
- Nine-month net loss narrowed by $897,728, or 20%; quarterly net loss narrowed by $485,335. Management attributed the improvement principally to lower exploration spending and higher reclamation reimbursements.
- Nine-month exploration expense fell 33% to $2.02 million, while land-holding costs rose 10% to $439,468, partly due to newly leased Oregon claims.
- Nine-month salaries and benefits increased 36% to $702,013, mainly reflecting the Executive Chairman’s compensation; professional fees rose 71% to $97,428, including one-time Grassy Mountain permitting legal and advisory costs.
- Shares outstanding rose from 23,074,954 at June 30, 2018 to 26,519,954 at March 31, 2019. The increase included 2.4 million shares issued in a financing and 1.045 million shares issued on warrant exercise.
Outlook, commentary, risks, and unusual items
- Management planned to advance Grassy Mountain permitting, complete additional baseline work and selective exploration, and seek proposals for a feasibility study. It reported 17 baseline environmental reports accepted by Oregon agencies and said additional acceptances and analysis were needed before submitting a consolidated mining permit.
- The stated spending outlook is not fully consistent across the filing: one section estimates approximately $4 million for Grassy Mountain and $0.7 million for Sleeper for fiscal 2019; another estimates remaining fiscal-year spending of $0.7 million for Grassy Mountain, $0.2 million for Sleeper, and $0.5 million for corporate administration. The filing does not reconcile these amounts.
- After quarter-end, Paramount sold Franco-Nevada a 2% net smelter return royalty on Sleeper for $2 million cash. This is a subsequent event, not included in March 31 cash.
- The company says it expects continuing losses and relies on cash on hand and access to capital or royalty sales. It warns that inability to obtain additional financing could significantly impair exploration and development. It has not established proven and probable reserves or commercial feasibility.
- The Sleeper reclamation obligation was $805,663; the current undiscounted estimate of reclamation costs was $3,835,050. The filing describes insurance coverage of up to $25 million for reclamation shortfalls and reports $1,407,781 in the commutation account and reclamation bonds.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. It reported no material changes to the risk factors in its 2018 Form 10-K.
Important facts for investors to verify
- Cash runway and funding needs, including the timing and availability of the subsequent $2 million royalty proceeds.
- The reconciled fiscal-year project-spending outlook and the funding required to advance Grassy Mountain permitting and feasibility work.
- Permitting milestones, remaining baseline-study requirements, and the status and cost of the proposed mining-permit application.
- Economic implications of the Sleeper 2% royalty and adequacy of reclamation funding, insurance, and bond arrangements.
- Potential dilution from outstanding warrants and options, and the terms of any future capital raises or royalty transactions.