Business context and reporting period
Paramount Gold Nevada Corp. is an exploration and development company with precious-metal projects in Nevada and Oregon; it had no mining revenue. This 10-Q covers the three months ended September 30, 2022, the company’s fiscal first quarter, compared with the three months ended September 30, 2021. The filing was signed November 10, 2022.
Key financial metrics
| Metric | Quarter ended September 30, 2022 | Comparable 2021 period |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $1.84 million | $1.91 million |
| Loss per share, basic and diluted | $0.04 | $0.05 |
| Cash used in operating activities | $1.21 million | $1.28 million |
| Cash and cash equivalents, period-end | $1.27 million | $3.66 million |
At September 30, 2022, total assets were $54.40 million, including $51.74 million of capitalized mineral properties. Current liabilities were $4.85 million versus current assets of $2.15 million, implying a working-capital deficit of approximately $2.69 million. The company reported $4.24 million carrying value of convertible debt as current; the notes’ face amount is approximately $4.28 million and they mature in September 2023. Total liabilities were $9.56 million. No operating margin is meaningful because there was no revenue.
Material changes versus the prior period
- Net loss decreased 4% year over year, mainly alongside lower exploration spending and lower other income; total expenses fell to $1.75 million from $1.93 million.
- Exploration expense fell 33% to $839,594: $398,250 related to Grassy Mountain and $441,344 to Sleeper and other Nevada projects. Land holding costs increased to $161,055 from $141,193.
- Professional fees increased to $133,328 from $44,963, primarily due to audit fees. Salaries and benefits rose 33% to $307,374, and directors’ compensation rose to $35,341, reflecting higher stock-based compensation and a new board member.
- Cash declined $1.21 million during the quarter. The company issued no shares through its at-the-market program in the quarter, but issued 341,297 shares valued at $160,413 to pay accrued interest on its 2019 notes.
- Convertible debt was reclassified from non-current at June 30 to current at September 30 as maturity approached.
Outlook, risks and unusual items
- Management disclosed substantial doubt about the company’s ability to continue as a going concern over the twelve months following issuance of the financial statements. The company expects continuing operating losses and does not expect positive operating cash flow in the near future.
- Management estimates approximately $4.3 million is needed to repay the 2019 convertible notes due September 2023. Expected twelve-month spending includes $3.0 million for corporate, land-claim maintenance and general costs; discretionary plans, subject to available cash, include $3.1 million for Grassy Mountain permitting and $0.25 million for Sleeper.
- Potential funding sources include cash and working capital, the existing ATM facility, other debt or equity financings, and royalty sales. Management cautioned that additional financing may not be available on acceptable terms or at all. The notes are secured by a lien on company assets and require a $250,000 working-capital balance; the filing says the covenant was met when excluding the current notes.
- Grassy Mountain permitting continued. Oregon’s technical review team accepted the geochemistry and groundwater baseline reports; federal environmental review is expected to follow acceptance of an updated Plan of Operations. The company plans further Sleeper data verification and an updated initial assessment in 2023.
- Sleeper reclamation obligations totaled $4.56 million, including $120,000 current; the company estimates undiscounted reclamation costs of $3.64 million under BLM requirements and $5.28 million under NDEP requirements. Planned Sleeper reclamation expenditures are expected by the company to be reimbursed by insurance proceeds.
- If Grassy Mountain reaches a positive production decision and secures construction financing, Seabridge may require the company to purchase a net profit interest for CDN$10 million. The filing says additional financing would likely be needed for that payment.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. It reported no material changes to the risk factors in the latest 10-K.
Important facts for investors to verify
- Near-term liquidity and the company’s ability to secure funding, particularly for the approximately $4.3 million note maturity in September 2023.
- Progress and timing of state and federal permitting for Grassy Mountain, including completion of the permit application and commencement of the federal environmental review.
- Whether Sleeper reclamation work is reimbursed by insurance as anticipated, and any changes to reclamation estimates or regulatory requirements.
- The potential CDN$10 million Seabridge net profit interest purchase obligation if its triggering conditions occur.
- Any updates to mineral-resource estimates, project economics, or development plans; the filing notes that capitalized mineral-property costs do not establish economically recoverable reserves.