Business Context and Reporting Period
Perpetua Resources Corp. 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 environmental restoration. The company operates in one segment and has not commenced commercial production; the filing reports no revenue.
This unaudited Form 10-Q covers the three and nine months ended September 30, 2022, with comparisons to the corresponding 2021 periods.
Key Financial Metrics
| Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 |
|---|---|---|---|---|
| Exploration expense | $4.6 million | $5.0 million | $13.5 million | $17.6 million |
| Operating loss | $5.9 million | $7.0 million | $18.6 million | $30.8 million |
| Net loss | $5.8 million | $6.5 million | $18.3 million | $25.5 million |
| Basic and diluted loss per share | $0.09 | $0.11 | $0.29 | $0.49 |
| Operating cash flow | Not separately provided | Not separately provided | $(18.1) million | $(20.4) million |
There was no revenue or gross margin because the company remains in the exploration and permitting stage. The principal expense categories were exploration, corporate salaries and benefits, environmental liability expense, professional fees, and share-based compensation.
- Cash and cash equivalents were $29.4 million at September 30, 2022, down from $47.9 million at December 31, 2021.
- Total current assets were $30.5 million; total assets were $106.3 million.
- Total liabilities were $10.7 million, including $7.9 million of environmental reclamation liabilities and approximately $95.6 million of shareholders’ equity.
- The company had no outstanding convertible notes at September 30, 2022. Lease liabilities totaled approximately $95,551, and the warrant derivative liability was $4.
- Investing cash outflows were $0.3 million for the first nine months; no financing cash flows were reported in 2022.
- Estimated 2022 expenditures were approximately $27.0 million, including $11.2 million for permitting, $10.1 million for corporate and administrative costs, $5.0 million for early restoration and field operations, and $0.8 million for engineering and design.
Material Changes Versus the Prior Comparable Period
- Third-quarter net loss decreased by $0.7 million, primarily because environmental liability expense declined by $0.9 million and exploration expense declined by $0.4 million. Higher corporate salaries and benefits and a smaller warrant-derivative gain partly offset the improvement.
- Nine-month net loss decreased by $7.2 million. The main drivers were lower environmental liability expense of $7.7 million, lower exploration expense of $4.1 million, lower foreign exchange losses, and lower corporate compensation costs.
- The 2021 period included a $5.7 million gain from the change in fair value of convertible note derivatives; no comparable gain occurred in 2022 because all convertible notes had been converted in 2021.
- Nine-month professional fees increased by $1.1 million, primarily due to legal costs associated with the transition to a U.S. domestic issuer and higher accounting costs related to the transition to U.S. GAAP.
- Environmental reclamation liabilities increased to $7.9 million at September 30, 2022. The company recorded $0.9 million of additional estimated costs and spent $2.9 million on early-action work during the first nine months.
- Share-based compensation declined to $2.2 million from $3.0 million for the first nine months, although the company granted substantial restricted and performance-based units during 2022.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The U.S. Forest Service released the Supplemental Draft Environmental Impact Statement on October 28, 2022 and identified the company’s Modified Mine Plan as the Preferred Alternative. The public comment period was scheduled to expire January 10, 2023, subject to extension. This is not a final approval or commitment to issue a Record of Decision.
- The company received two Department of Defense grants totaling $200,000 to evaluate whether Stibnite antimony can meet military specifications and to study alternative purification methods.
- Management states that available cash is expected to be exhausted by early fourth quarter 2023 unless additional financing is obtained or controllable spending is deferred. The company expects to require additional equity, debt, project financing, government funding, or other capital before the second half of 2023.
- An alternative spending plan could preserve liquidity into the first quarter of 2024, but would delay certain expenditures not related to the environmental settlement obligation or progress toward a final Record of Decision. Management states this plan alleviates substantial doubt regarding going-concern status.
- The company is subject to a CERCLA Administrative Settlement and Order on Consent requiring environmental cleanup at the Stibnite site. The estimated remaining liability was approximately $7.9 million at September 30, 2022 and may change with costs and work performed.
- Litigation with the Nez Perce Tribe concerning alleged Clean Water Act violations remains stayed while the parties pursue alternative dispute resolution. The stay was extended through January 31, 2023.
- Additional risks include permitting delays, the absence of proven reserves under SEC Regulation S-K 1300, project capital requirements, inflation, higher interest rates, commodity-price volatility, labor shortages, environmental liabilities, litigation, and the ability to obtain financing.
- The company estimated the project’s initial capital cost at approximately $1.263 billion, subject to material change. No production decision has been made.
Most Important Facts for Investors to Verify
- Whether the SDEIS process advances to a Final Environmental Impact Statement and final Record of Decision, and the timing and conditions of any approval.
- Available cash, actual spending, and whether financing is secured before the projected early fourth-quarter 2023 cash exhaustion date.
- Changes in the estimated $7.9 million environmental reclamation liability and the company’s required cleanup expenditures under the ASAOC.
- The status and potential financial impact of the Nez Perce Tribe litigation and related alternative dispute resolution.
- Updated project economics, capital requirements, reserve status, permitting assumptions, and the feasibility of developing the Stibnite Gold Project.
- Exposure to inflation, labor and contractor costs, gold and antimony prices, interest rates, and future equity dilution or debt terms.