Paramount Gold Nevada Corp. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2018; filed February 7, 2019. Paramount is an exploration and development company with the Sleeper project in Nevada and Grassy Mountain project in Oregon. It reported no revenue from mining operations.
Financial results and position
| Metric | Three months ended Dec. 31, 2018 | Six months ended Dec. 31, 2018 | Comparison |
|---|---|---|---|
| Other income | $79,269 | $183,790 | Prior-year six-month amount: $85,548 |
| Expenses | $1,522,324 | $2,690,205 | Prior-year six-month amount: $2,991,353 |
| Net loss | $1,430,323 | $2,489,216 | Prior-year losses: $1,818,890 and $2,901,609, respectively |
| Loss per share, basic and diluted | $0.06 | $0.10 | Prior year: $0.08 and $0.14, respectively |
| Operating cash used | Not separately presented | $2,908,494 | Prior-year six-month use: $3,509,056 |
Other income primarily consisted of reclamation-cost reimbursements ($178,270 for six months) and water-rights lease income. The company had no mining revenue, so operating margins are not meaningful. Exploration expense fell 33% year over year for the six months to $1.31 million; land-holding costs rose 10% to $308,918. Salaries and benefits, professional fees, and general and administrative costs increased, partly reflecting executive compensation and Grassy Mountain permitting work.
At December 31, cash was $300,181, current assets $832,387, and current liabilities $697,334. Total liabilities were $1,572,774, including reclamation obligations; the filing reports no borrowings or other debt. Total assets were $51.31 million, including $48.86 million of mineral-property acquisition costs. Stockholders’ equity was $49.74 million. Cash was nearly unchanged from June 30 despite $2.91 million of financing cash inflow, because operating activities used $2.91 million. The company’s accumulated deficit was $44.22 million.
Changes, financing, and projects
- Net loss improved year over year by 21% for the quarter and 14% for the six-month period. Lower exploration spending was a major contributor; salary, professional, and administrative costs increased.
- The company issued 2.4 million units at $1.25 each during the six months, for $3.0 million gross proceeds ($2.91 million reported net financing proceeds). Each unit included one common share and a warrant for one-half share. Shares outstanding rose to 25,474,954 at December 31.
- After period-end, 1,045,000 existing warrants were repriced to $0.93 and exercised, generating $971,850 gross proceeds. The filing reports 26,519,954 shares outstanding as of February 4, 2019.
- Grassy Mountain work included a magnetic and radiometric survey, mine-design and permitting activities, deep monitoring wells, and filing a Plan of Operations with the BLM. Fourteen baseline environmental reports had been accepted by state agencies.
- The company entered agreements concerning the Cryla claims adjacent to Grassy Mountain and the Frost project. The filing describes both properties as having no known mineral reserves.
Outlook, risks, and unusual items
Management expected to pursue a consolidated mining-permit application in Oregon, additional baseline studies, selective Grassy Mountain exploration, and proposals for a feasibility study. It estimated approximately $4 million for Grassy Mountain activities and $0.7 million for Sleeper activities for fiscal 2019. Its remaining-fiscal-year spending estimate separately allocates $2.8 million to Grassy Mountain, $0.2 million to Sleeper, and $1.0 million to corporate administration.
Management said the company does not generate operating cash flow and expects losses to continue. It planned to rely on cash on hand and other capital resources and warned that inability to obtain additional capital could significantly impair exploration and development. The company had only $300,181 in cash at quarter-end; the subsequent warrant exercise provided additional gross proceeds. Management stated that Sleeper reclamation expenses are reimbursed under an insurance program. The recorded reclamation obligation was $977,033, while the current undiscounted estimate for existing Sleeper disturbances was $3,835,050; an insurance policy provides up to $25 million of coverage if the bond is insufficient.
No material risk-factor changes from the June 30, 2018 Form 10-K were reported. The company stated that disclosure controls were effective and that there were no material changes in internal control over financial reporting. It reported no material off-balance-sheet arrangements. The filing notes uncertainty around obtaining financing and whether mineral properties contain economically recoverable reserves; it has not established proven and probable reserves.
Important facts for investors to verify
- Funding sufficiency and expected cash needs: quarter-end cash was low relative to the stated project and corporate budgets; confirm subsequent financing and current liquidity.
- Permitting milestones, baseline-study acceptance, feasibility-study timing, and project costs for Grassy Mountain.
- Reclamation estimates, insurance coverage terms, and the distinction between the $3.84 million undiscounted estimate and $0.98 million recorded obligation.
- Cryla agreement details: the filing gives differing acreage figures (580 in MD&A versus 589 in the note) and differing descriptions of royalty and buyout terms. Confirm the executed agreement.
- Warrant exercise and dilution, including the post-quarter repricing and resulting share count.