Dakota Gold Corp. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The company explores and develops mineral properties in South Dakota’s Homestake District; it has no operating revenue and remains in the exploration stage.
Financial results and liquidity
| Metric | Q2 2023 | Six months 2023 |
|---|---|---|
| Revenue | None | None |
| Exploration expense | $7.60 million | $14.44 million |
| General and administrative expense | $2.58 million | $5.32 million |
| Net loss | $9.82 million | $19.09 million |
| Operating cash used | Not separately stated | $17.04 million |
- Cash and cash equivalents were $15.44 million at June 30, 2023, down from $23.91 million at December 31, 2022. Working capital was approximately $13.68 million.
- Total assets were $97.07 million, including $78.84 million of mineral rights and properties. Total liabilities were $3.32 million; the filing reports no borrowings. No operating margin is meaningful because the company has no revenue.
- Investing activities used $0.58 million and financing activities provided $9.14 million in the first six months. Financing included approximately $9.38 million net proceeds from the at-the-market (ATM) share program.
Changes versus the prior comparable period
- Q2 operating loss widened to $10.18 million from $7.08 million; net loss increased to $9.82 million from $5.81 million. For the first six months, operating loss rose to $19.75 million from $14.72 million, and net loss to $19.09 million from $8.00 million.
- Exploration expense increased as drilling activity expanded to four rigs from an average of one in the comparable periods. G&A fell, partly because 2022 included acquisition-related stock compensation and costs tied to the DTRC merger and NYSE American listing.
- The six-month 2022 comparison included a $6.52 million deferred tax benefit and a $3.45 million net loss attributable to non-controlling interests; neither item was present in the same way in 2023. The 2023 six-month deferred tax benefit was $0.59 million.
- Operating cash use increased to $17.04 million from $8.97 million. Investing cash use declined to $0.58 million from $2.79 million, chiefly because strategic property acquisitions had largely been completed by June 2022.
Outlook, developments and risks
- Management anticipates approximately $30 million of fiscal 2023 expenditures, including exploration and G&A, and reported approximately $18 million spent during the first six months. It expects to need additional capital; if it cannot raise funds, it plans to scale back exploration to preserve more than 12 months of funding.
- Management says cash, working capital, anticipated ATM use and the ability to reduce exploration spending alleviate doubt about continuing as a going concern. After quarter-end, the company raised approximately $5.37 million gross through the ATM.
- The company completed 105,256 feet of core drilling on three projects in the first half. It reported the JB Gold Zone discovery at Maitland and announced an infill and validation program at Richmond Hill, including preliminary metallurgical testing and a revised geologic model. Management plans to work toward a mineral resource estimate for historical Richmond Hill resource areas.
- The filing states that no project has established mineral resources or reserves under SEC S-K 1300. Exploration may not identify an economic deposit; permitting, financing, commodity prices, operating costs, property rights and other mining risks could affect plans and results.
- Shares outstanding rose to 76.86 million at June 30 from 73.34 million at December 31, mainly reflecting ATM issuance. The ATM can issue up to $50 million in aggregate; further equity financing may dilute shareholders.
- The company reported no material changes to previously disclosed risk factors, no legal proceedings, and effective disclosure controls as of June 30.
Important facts for investors to verify
- Whether additional financing will be available and on what terms, and how the subsequent ATM proceeds affect the company’s runway.
- Actual 2023 spending versus the approximately $30 million outlook, and whether management needs to reduce drilling activity.
- Drilling results, permitting progress and the timing and assumptions behind any Richmond Hill resource estimate; no SEC-defined resources or reserves are established.
- The extent of future share issuance and dilution under the ATM and equity incentive plans.
- The recoverability of mineral-property carrying values and the impact of tax valuation allowances and deferred tax estimates.