Paramount Gold Nevada Corp. — FY2017 Form 10-K
Reporting period: Fiscal year ended June 30, 2017. This annual filing also presents unaudited quarterly data; it is not a 2016 Q4 filing. Paramount is an exploration and development company with projects in Nevada and Oregon and had no producing mines.
Financial and operating highlights
| Metric | FY2017 | FY2016 |
|---|---|---|
| Revenue from mining operations | None | None |
| Other income | $280,671 | $166,720 |
| Net loss | $4,339,602 | $5,342,172 |
| Exploration expense | $5,373,699 | $695,221 |
| Cash and cash equivalents, June 30 | $1,911,170 | $5,874,258 |
| Net working capital, June 30 | $1,051,354 | Not stated here |
| Total assets, June 30 | $50,700,189 | $35,484,027 |
| Total liabilities, June 30 | $2,134,161 | $1,577,840 |
- Reported other income primarily comprised reclamation-cost reimbursements. The filing reports no mining revenue, so operating margins are not meaningful.
- Operating cash use was $6,516,457; investing cash use was $1,005,128; financing provided $3,558,497. Cash declined by $3,963,088 during the year.
- No interest-bearing debt is shown on the balance sheet. Liabilities were principally accounts payable and reclamation obligations; the latter totaled $1,261,034.
- Reported FY2017 net loss was reduced by a $3,215,418 deferred tax recovery associated with the Calico acquisition and tax attributes. The company reported no net deferred tax asset after its valuation allowance.
Material changes versus the prior year
- Paramount acquired Calico Resources in July 2016, adding the Grassy Mountain project in Oregon. It issued 7,171,163 shares valued at approximately $15.2 million; acquisition-related cash costs were about $1.0 million.
- Exploration expense increased by $4,678,478, mainly due to Grassy Mountain drilling and pre-feasibility work. The company completed a 30-hole drill program there in the fiscal fourth quarter.
- Cash fell substantially as exploration and operating activities consumed cash, partly offset by a February 2017 private placement that raised approximately $3.66 million gross. Shares outstanding rose from 8,518,791 to 17,779,954.
- Net loss narrowed by about 19%, despite higher exploration spending, reflecting in part the prior-year $2,482,045 mineral-property write-down not repeated in FY2017 and the FY2017 deferred tax recovery.
Outlook, risks and contingencies
- For FY2018, management budgeted approximately $5.0 million for Grassy Mountain, $700,000 for Sleeper, and $1.75 million for corporate administration. Management stated that additional capital would be needed to meet the anticipated cash budget; failure to raise it could significantly impair exploration and development plans.
- Management expected to complete a NI 43-101 pre-feasibility study for Grassy Mountain, submit a mine Plan of Operations to the BLM, and advance environmental review and Oregon permitting. These are plans, not assured milestones.
- The company has no proven or probable reserves and has not completed feasibility studies. It has no operating revenue and expects losses to continue. Project economics, permitting, metal prices, exploration results, title, reclamation costs and access to financing are significant uncertainties.
- Sleeper reclamation obligations had an undiscounted estimated cost of $3,835,050. A reclamation insurance policy provides coverage up to $25 million if the bond is insufficient; actual costs and bond adequacy remain uncertain.
- Grassy Mountain is subject to advance and production royalties, including a 10% net profits interest held by Seabridge on certain claims. Following a positive production decision and secured construction financing, Seabridge may require a $10 million Canadian-dollar purchase of that interest.
- The 2015 Sleeper preliminary economic assessment estimated $258.8 million in life-of-mine capital and average cash operating costs of $529 per equivalent gold ounce; the filing cautions that this preliminary analysis does not demonstrate economic or technical viability.
- Management reported effective disclosure controls and internal control over financial reporting. The auditor issued an unqualified opinion on the financial statements and did not audit internal control effectiveness.
Important facts for investors to verify
- Current cash runway, financing plans and the terms and potential dilution of future capital raises.
- Progress, cost assumptions and results of the Grassy Mountain pre-feasibility study, environmental review and permitting.
- Whether drilling and metallurgical work support mineable reserves and viable project economics; neither project had proven or probable reserves in this filing.
- Reclamation bond and insurance sufficiency, and the timing and actual cost of Sleeper reclamation obligations.
- Grassy Mountain royalty and purchase-option obligations, including the potential Seabridge payment and its funding requirements.
- The effect of the Calico-related deferred tax recovery and valuation allowance on reported loss, and the continuing availability and usability of tax-loss carryforwards.