Perpetua Resources Corp. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
Perpetua Resources is a British Columbia corporation focused on mineral exploration and development in the United States. Its principal asset is the Stibnite Gold Project in Idaho, intended to support domestic gold and antimony production and restoration of an abandoned mine site. The company has no commercial production or operating revenue and operates in one segment: mineral exploration.
This unaudited report covers the three months ended March 31, 2023, compared with the same period in 2022. The company had 63,139,533 common shares outstanding at March 31, 2023 and 63,165,367 shares outstanding as of May 5, 2023.
Financial Condition and Results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Operating loss | $8.0 million | $6.3 million |
| Net loss | $4.6 million | $6.2 million |
| Net loss per basic and diluted share | $0.07 | $0.10 |
| Net cash used in operating activities | $4.1 million | $6.7 million |
| Cash and cash equivalents at period end | $18.6 million | $41.2 million |
- There was no commercial revenue. Grant income of $3.3 million, primarily from Department of Defense awards, was recorded as other income.
- Exploration expense increased 25% to $5.7 million, driven mainly by higher permitting, consulting and labor, and engineering costs.
- Environmental liability expense was $1.1 million, compared with none in the prior-year quarter.
- Interest income increased to $162,463 from $31,442 due primarily to higher interest rates.
- Total assets were $96.5 million, including $72.5 million of mineral properties and interests and a $3.0 million environmental reclamation bond.
- Total liabilities were $14.3 million, including $11.6 million of environmental reclamation liabilities. Current environmental liabilities were $10.7 million.
- The company had no conventional debt reported, but it had lease liabilities and significant environmental obligations. Shareholders’ equity was $82.1 million.
- The company reported no investing cash outflows and $40,672 of financing cash inflows from option exercises.
Material Changes Versus the Prior Comparable Period
- Net loss decreased by $1.6 million, primarily because of $3.3 million of grant income, partially offset by $1.1 million increases in both exploration expense and environmental liability expense.
- Cash declined by $4.1 million during the quarter, compared with a $6.7 million decline in Q1 2022. Cash at March 31, 2023 was approximately 55% lower than at March 31, 2022.
- Environmental reclamation liabilities increased to $11.6 million from $9.4 million at March 31, 2022. The increase reflected higher estimated restoration costs attributable to scope changes, inflation, fuel costs and contractor pricing.
- Share-based compensation increased to $840,827 from $676,249. The company issued or awarded additional restricted, performance and deferred share units during the quarter.
- Grant income included $3.2 million related to the Department of Defense Technology Investment Agreement and approximately $75,000 related to antimony trisulfide study grants. No grant income was recognized in Q1 2022.
Guidance, Outlook, Risks and Unusual Items
- Management is advancing the Stibnite Gold Project through the National Environmental Policy Act process. The U.S. Forest Service schedule contemplated a Final Environmental Impact Statement and draft Record of Decision by the end of 2023 and a final Record of Decision in early 2024, although the filing states that these milestones are not commitments and may be delayed.
- The company received a Technology Investment Agreement award of up to $24.8 million under the Defense Production Act. Until definitization, available funding was capped at $18.6 million. The funding is restricted to specified permitting, environmental, engineering and construction-readiness costs and cannot fund all ASAOC obligations or certain corporate expenses.
- Management expects approximately $12.0 million of additional TIA-related grant income over the nine months following March 31, 2023, subject to the applicable funding and reimbursement conditions.
- Estimated 2023 expenditures are approximately $36.3 million, including $11.4 million for permitting, $8.8 million for general corporate purposes, $3.5 million for engineering and design, and $12.6 million for early restoration and field operations. Approximately $16.3 million is expected to be funded through DPA reimbursements.
- The latest liquidity forecast indicated that available cash resources for expenses not eligible for DPA reimbursement could be exhausted in the first quarter of 2024. Management stated that additional financing is required to meet ongoing obligations and continue critical permitting efforts.
- The filing includes substantial doubt about the company’s ability to continue as a going concern for at least one year after issuance of the financial statements. Management is pursuing equity, debt, project-specific debt, government funding and other financing alternatives.
- On May 12, 2023, after the quarter ended, the company entered into a $20.0 million at-the-market equity offering. There is no assurance that shares will be sold, or that they will be sold at acceptable prices. The offering could dilute existing shareholders.
- The company selected Iron Woman Construction and Environmental Services for certain ASAOC environmental improvements. Contract terms, scope changes, inflation and fuel estimates increased projected restoration costs.
- The company remains subject to litigation with the Nez Perce Tribe concerning alleged Clean Water Act violations related to historical mining activities. The litigation was stayed through June 30, 2023 to facilitate mediation.
- The Project remains in the exploration and permitting stage. As of March 31, 2023, the company had not established that the deposits could be economically and legally extracted or produced under SEC Regulation S-K 1300.
- Other material risks include permitting and litigation outcomes, access to financing, inflation, gold and antimony prices, construction and operating cost estimates, environmental liabilities, labor availability, cybersecurity and potential delays in government approvals.
Most Important Facts for Investors to Verify
- Whether the DPA Technology Investment Agreement was definitized and whether the company can access the full $24.8 million award.
- Actual cash usage, reimbursement timing and remaining unrestricted liquidity relative to the projected first-quarter 2024 cash exhaustion date.
- The updated cost and schedule for ASAOC environmental restoration obligations, including the effect of inflation and contractor pricing.
- Progress toward the Final Environmental Impact Statement, draft Record of Decision and final Record of Decision for the Stibnite Gold Project.
- Terms, pricing and share issuance under the $20.0 million at-the-market equity program and the resulting dilution.
- The status and potential financial impact of the Nez Perce Tribe litigation and related environmental obligations.
- Whether the Project ultimately achieves economic and legal extractability under SEC Regulation S-K 1300 and obtains the permits required for development.