Dakota Gold Corp. — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2022, corresponding to fiscal 2023 Q2. The company filed this unaudited report on November 8, 2022. Dakota Gold is an exploration-stage gold company focused on properties in South Dakota’s Homestake District; it has no operating revenue and has not established proven or probable mineral reserves.
Financial performance and condition
| Metric | Three months ended Sept. 30, 2022 | Six months ended Sept. 30, 2022 |
|---|---|---|
| Revenue | None | None |
| Exploration expense | $4.68 million | $8.45 million |
| General and administrative expense | $2.40 million | $5.70 million |
| Operating loss | $7.07 million | $14.15 million |
| Net loss | $6.58 million | $12.38 million |
| Basic and diluted loss per share | $0.09 | $0.17 |
Cash flow: For the six months, operating activities used $12.34 million, investing activities used $1.02 million, and financing activities provided $0.02 million. Cash and cash equivalents declined $13.33 million to $28.07 million.
Liquidity and liabilities: Working capital was $26.91 million at September 30. Current liabilities were $2.03 million, consisting of accounts payable and accrued liabilities; total liabilities were $3.99 million, including a $1.95 million deferred tax liability. The balance sheet lists no borrowings. Total assets were $108.74 million, including $78.49 million of mineral rights and properties. The company reported retained earnings of $0.68 million.
Operating and profit margins are not meaningful because the company has no revenue and is not profitable.
Material changes versus the prior comparable period
- Quarterly exploration expense rose to $4.68 million from $1.88 million, primarily reflecting drilling, related exploration, an airborne geophysical survey, and historical-data work. Quarterly operating loss increased to $7.07 million from $5.17 million; net loss increased to $6.58 million from $5.00 million.
- For the six-month period, exploration expense increased to $8.45 million from $4.06 million. General and administrative expense fell to $5.70 million from $14.03 million, primarily because stock-based compensation was substantially lower than in the prior-year period. Net loss declined to $12.38 million from $17.85 million.
- Operating cash use increased to $12.34 million from $4.44 million, while investing cash use decreased to $1.02 million from $3.55 million. Financing cash provided fell to $0.02 million from $49.06 million; the prior period included substantial DTRC share-sale proceeds.
- Cash fell from $41.40 million at March 31, 2022 to $28.07 million at September 30, 2022. Mineral rights and properties increased to $78.49 million from $76.96 million. Shares outstanding rose to 72.18 million from 70.85 million at March 31.
Prior-year comparisons reflect the DTRC merger, which closed effective March 31, 2022; the filing’s periods therefore may not be fully comparable in corporate structure. In the prior-year quarter, $2.36 million of net loss was attributable to non-controlling interests, unlike the current period.
Outlook, risks, contingencies, and unusual items
- Fiscal 2023 planned cash expenditures total 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 general and administrative costs. Management stated funds were sufficient for the remainder of the fiscal year and that spending was being managed within budget. Actual spending and exploration outcomes are uncertain.
- Planned work includes exploration drilling at Maitland, Richmond Hill and City Creek, and exploration, permitting studies and targeting at Blind Gold and Tinton. At the time of the report, three drill rigs were operating: two at Maitland and one at Richmond Hill.
- After quarter-end, the company established a $50 million at-the-market equity program. It had sold 1 million shares at an average $3.10 for $3.1 million gross proceeds by the report date. This provides potential financing but may dilute shareholders.
- The company amended its Richmond Hill option in September 2022, extending the exercise deadline to March 7, 2026, and issued 180,000 shares for the amendment. Exercise remains subject to assuming associated liabilities and bonds; the option also includes additional share and royalty terms.
- Management reported that disclosure controls and procedures were not effective at September 30, 2022. A previously identified material weakness in internal control over financial reporting was still being remediated; no material control changes during the quarter were reported.
- The company disclosed ordinary-course legal and tax contingencies, but did not expect their resolution to materially affect financial position, results or liquidity. No legal proceedings were reported. Principal risks include exploration failure, need for future financing, permitting and environmental requirements, cost and supply pressures, property rights, commodity-price exposure, and the absence of producing operations.
Important facts for investors to verify
- Whether exploration results and permitting progress support the planned drilling and fiscal 2023 expenditure program; the company has not established proven or probable reserves.
- Cash burn and remaining liquidity relative to the $26.5 million planned cash budget, including contractor availability and actual property-acquisition spending.
- ATM sales to date, any further share issuance, and resulting dilution; the filing reports 73,178,251 shares outstanding as of November 8, 2022.
- Progress remediating the material weakness and improving disclosure controls, which management deemed ineffective.
- Key Richmond Hill and other property-option deadlines, obligations, royalties, and potential liabilities assumed upon exercise.