Dakota Gold Corp. — Form 10-Q Summary
Reporting period: Unaudited fiscal first quarter ended June 30, 2022 (three months ended June 30); filed August 10, 2022. Dakota Gold is an exploration-stage gold company focused on properties in South Dakota’s Homestake District. It has not established proven or probable mineral reserves and has generated no operating revenue.
Financial results and liquidity
| Metric | Quarter ended June 30, 2022 | Comparable 2021 quarter |
|---|---|---|
| Revenue | $0 | $0 |
| Exploration expenses | $3.77 million | $2.18 million |
| General and administrative expenses | $3.31 million | $10.73 million |
| Operating loss | $7.08 million | $12.91 million |
| Net loss | $5.81 million | $12.84 million |
| Basic and diluted loss per share | $0.08 | $0.17 |
| Cash used in operating activities | $6.21 million | $1.94 million |
Revenue-based margins are not meaningful because the company has no revenue. A $1.22 million deferred tax benefit reduced the current-quarter net loss. The prior-year consolidated loss included a non-controlling interest following the DTRC merger.
Cash and cash equivalents were $35.04 million at June 30, down $6.36 million from March 31. Working capital was $34.13 million; total assets were $115.00 million and total liabilities were $5.04 million. Liabilities comprised $2.55 million of accounts payable and accrued liabilities and a $2.49 million deferred tax liability. The filing reports no interest expense for the quarter and no notes payable on the balance sheet.
Changes and operating developments
- Exploration expense increased 73% year over year, reflecting drilling and related work, an airborne geophysical survey, historical-data compilation, land staking and claim maintenance. Exploration-related stock compensation was lower than in the prior-year quarter.
- G&A fell substantially, primarily because the prior-year period included $9.25 million of administrative stock-based compensation, including bonus shares. Excluding stock compensation, G&A increased to $1.72 million from $1.48 million as the organization expanded.
- Operating cash use rose year over year, while investing cash use declined to $0.16 million from $1.04 million. Financing provided only $12,000 in the quarter, versus $16.87 million in the prior-year period, which included DTRC share-sale proceeds.
- Three drill rigs were operating: two at Maitland and one at Richmond Hill. Shares outstanding increased to 71.99 million from 70.85 million at March 31, including shares issued for restricted stock units and mineral-property consideration.
Outlook, risks and controls
Fiscal 2023 planned cash expenditures were approximately $26.5 million: $15.5 million for drilling, field programs, metallurgical testing and data compilation; $6.3 million for property acquisition; and $4.7 million for G&A. Management said available funds were sufficient for the remainder of the current fiscal year. Spending timing depends on factors including contractor availability, and actual expenses may differ from projections.
Management plans to advance drilling at Maitland, Richmond Hill and City Creek, while continuing permitting studies and target development at Blind Gold and Tinton. All projects remain at the exploration stage; exploration success, permitting, access to financing, cost increases, contractor and supply availability, commodity prices, environmental and regulatory matters, and property title are among the disclosed risks. The company also has option-related property payments and potential future royalty and share obligations. Management does not anticipate existing legal, tax or other contingencies will materially affect the company, but an unfavorable resolution could do so.
Management concluded disclosure controls and procedures were not effective at quarter-end. The company reported a material weakness in internal control over financial reporting identified at March 31, 2022 and said remediation efforts were continuing; no material control changes occurred during the quarter.
Important facts for investors to verify
- Whether exploration results, permits and project timelines support the planned fiscal 2023 program and expenditure budget.
- Cash burn and available liquidity relative to planned spending, including property-option commitments and the need for future financing.
- Progress in remediating the disclosed material weakness and improving disclosure controls.
- Potential dilution from outstanding options, warrants, restricted stock units and future equity issuances.
- That no project has established proven or probable mineral reserves and that exploration may not result in an economically viable deposit.