Paramount Gold Nevada Corp. — Form 10-Q Summary
Period clarification: The supplied filing is for the quarter and nine months ended March 31, 2020, filed May 7, 2020. Although the request metadata says “2019 Q3,” the filing covers Paramount’s fiscal 2020 third quarter.
Business context and reporting period
Paramount is an exploration and development company focused on precious-metal properties in Nevada and Oregon. It reported no revenue from mining operations. Its principal projects are Sleeper in Nevada and Grassy Mountain in Oregon; neither had established proven or probable reserves, and exploration costs were expensed as incurred.
Financial performance and liquidity
| Metric | Three months ended March 31, 2020 | Nine months ended March 31, 2020 | Prior comparable period |
|---|---|---|---|
| Other income, not mining revenue | $391,492 | $728,910 | $212,746 and $396,536, respectively |
| Total expenses | $1,711,358 | $5,266,304 | $1,391,555 and $4,081,764, respectively |
| Net loss | $1,440,372 | $4,789,388 | $1,173,413 and $3,662,629, respectively |
| Loss per share | $0.05 | $0.17 | $0.04 and $0.14, respectively |
For the nine-month period, operating cash use was $4.25 million, investing cash use was $4,719, and financing provided $5.20 million, principally from convertible notes. Cash increased by $950,618 to $1.41 million.
At March 31, 2020, total assets were $49.94 million, including $47.06 million of mineral properties. Current assets were $2.19 million and current liabilities $724,323, implying working capital of approximately $1.46 million. Total liabilities were $6.18 million, including $5.24 million net carrying value of non-current convertible debt. Stockholders’ equity was $43.76 million. No operating margins are meaningful because the company had no mining revenue.
Material changes versus the prior comparable periods
- Nine-month net loss increased $1.13 million, or 31%; the quarterly net loss increased 23%.
- Nine-month exploration expense rose 65% to $3.34 million, mainly reflecting Grassy Mountain permitting and feasibility work and Sleeper reclamation activity. Grassy Mountain accounted for $2.57 million of nine-month exploration costs.
- Nine-month other income rose to $728,910, mostly reimbursement of reclamation costs ($723,279); this is not recurring mining revenue.
- Cash rose from $463,690 at June 30, 2019, following the convertible-note financing. Non-current convertible debt was absent at the prior year-end.
- Shares outstanding increased from 26.52 million to 27.78 million, including shares issued for feasibility-study services and accrued interest.
Outlook, risks, contingencies, and unusual items
- The company submitted a revised Grassy Mountain Plan of Operations to the federal BLM and a consolidated permit application to Oregon DOGAMI. The filing described additional information requested by permitting agencies; the modified application was expected to initiate a maximum 225-day evaluation process. A feasibility study was expected in mid-2020.
- Management said COVID-19-related spending reductions were expected for the remainder of fiscal 2020 and that planned expenditures would be funded from cash on hand and other capital resources. It also warned that COVID-19 could delay permitting and development and adversely affect operations and financial condition. Employees were working from home and travel was suspended.
- The company expects continued losses and has no operating cash flow. Management warned that inability to raise additional capital could significantly impair exploration and development activity.
- In September 2019, the company issued secured convertible notes with $5.478 million face value, 7.5% annual interest, a 2023 maturity and a $1.00 conversion price. Notes are secured by all company assets; the company must maintain at least $250,000 of working capital. Mandatory conversion may be triggered after the second anniversary if the share price exceeds $1.75 for 20 consecutive trading days.
- Ausenco received 1,096,791 shares valued at $976,144 for Grassy Mountain feasibility-study services; the shares were held in escrow pending delivery of the study. The company also issued 161,217 shares for accrued note interest.
- Recorded reclamation obligations were $313,340; the current undiscounted estimate for existing Sleeper disturbances was $3.98 million. The company reported reclamation bonds and a commutation account of $693,001, and insurance coverage up to $25 million if the bond is insufficient.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. It reported no material off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the reporting-period mismatch: this filing covers the quarter ended March 31, 2020, not 2019 Q3.
- Track Grassy Mountain feasibility-study delivery, BLM review and Oregon permitting milestones, including any delays or additional requirements.
- Assess cash runway and financing needs against exploration, reclamation, permitting, and debt-service obligations.
- Review the secured-note terms, working-capital covenant compliance, interest payments, and potential dilution from conversion, options, and warrants.
- Distinguish reclamation reimbursements from recurring revenue, and monitor whether reclamation costs and available bonds or insurance remain adequate.
- Evaluate COVID-19’s actual effects on project timelines, spending, workforce, and access to capital.