Paramount Gold Nevada Corp. — Form 10-Q
Reporting period: Three and six months ended December 31, 2023 (fiscal second quarter and first half); filed February 13, 2024. Paramount is a development-stage precious-metals exploration company with projects in Nevada and Oregon. It reported no mining revenue.
Financial condition and results
| Metric | Period / balance | Comparison |
|---|---|---|
| Net loss | $1.57 million for the quarter; $3.65 million for six months | Prior-year periods: $1.43 million and $3.27 million, respectively |
| Exploration expense | $1.77 million for the quarter; $3.03 million for six months | Up 281% and 132%, respectively |
| Loss per share, basic and diluted | $0.03 for the quarter; $0.06 for six months | Prior-year periods: $0.03 and $0.07 |
| Cash and cash equivalents | $8.57 million at December 31, 2023 | $0.82 million at June 30, 2023 |
| Working capital | Approximately $5.13 million at December 31, 2023 | Not stated for the comparable balance-sheet date |
| Total assets / total liabilities | $61.44 million / $20.66 million at December 31, 2023 | At June 30, 2023: $54.31 million / $11.47 million |
| Operating cash flow | $1.53 million used in the six months ended December 31, 2023 | $2.30 million used in the prior-year period |
| Financing cash flow | $9.33 million provided in the six months ended December 31, 2023 | $1.16 million provided in the prior-year period |
Profit margins are not meaningful because the company had no mining revenue. The six-month net loss increased 11%; management attributed the principal cost increase to higher exploration and reclamation activity. Insurance reimbursements for Sleeper reclamation work were recorded as other income: $1.29 million for the six months, versus $40,308 in the prior-year period.
Material changes and operating developments
- Exploration expense rose substantially as Sleeper work included pond conversions to evaporation cells and an updated technical report summary; Grassy Mountain spending continued on permitting.
- Oregon issued a Notice to Proceed with permitting and preparation of draft permits, and its Technical Review Team determined the Grassy Mountain consolidated permit application was complete.
- Paramount closed a $15 million secured royalty convertible debenture with Sprott in December. Proceeds helped repay the 2019 convertible notes and a related-party bridge loan; after repayments and transaction costs, $8.37 million in net proceeds was available.
- The 2019 convertible notes and Seabridge related-party loan were repaid during December. The company also raised $1.14 million net through its at-the-market (ATM) share program during the six months and issued shares to pay accrued interest.
Outlook, financing and risks
- Management expects continuing losses and negative operating cash flow; it does not expect positive operating cash flow in the near future, if ever, until production begins at Grassy Mountain.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern for the twelve months after the financial statements were issued. Funding plans include cash and working capital, the ATM program, insurance proceeds, equity financing and royalty sales; additional funding is not assured.
- Estimated next-12-month spending includes $4.2 million for corporate, land-claim maintenance and general costs; discretionary plans include $1.1 million for Grassy Mountain permitting, $0.2 million for Sleeper, and $1.0 million for Sleeper evaporation-cell conversions. The company expects insurance proceeds to reimburse planned Sleeper reclamation spending.
- The Sprott debenture bears 10% annual interest, payable in cash or shares at Paramount’s discretion. At commercial production or five years after closing, Sprott may elect cash repayment or a 4.75% gross-revenue royalty on Grassy Mountain production. The debt is secured by company and subsidiary assets; default interest is 13%. The agreement also includes a right of first refusal on certain future mineral interests and requires positive cash at all times and positive adjusted working capital at each quarter-end beginning March 31, 2024.
- At December 31, reclamation and environmental obligations totaled $4.60 million, including $2.56 million current. The company estimates approximately $1.0 million is needed in the next 12 months for Sleeper pond conversions. Actual reclamation costs may differ from estimates.
- Subsequent to quarter-end, the company sold 500,000 ATM shares for gross proceeds of $182,500, issued 125,000 shares upon RSU vesting, granted additional equity awards and awarded $360,700 in employee cash bonuses.
Most important facts for investors to verify
- Whether financing and insurance proceeds will be sufficient to fund planned operations and reclamation, given the disclosed going-concern substantial doubt.
- Progress, timing, costs and remaining approvals for Grassy Mountain permitting and the Sleeper evaporation-cell work.
- The Sprott debenture’s interest and repayment burden, royalty-conversion election, collateral, covenants and potential effect on future project economics.
- Reclamation cost estimates, timing, insurance coverage and whether expected reimbursements are received.
- Share dilution from ATM sales, interest paid in shares and subsequent equity awards.