Paramount Gold Nevada Corp. — Form 10-Q Summary
Reporting period: Three and six months ended December 31, 2017; the quarter is fiscal Q2 2018. The company explores and develops precious-metal projects in Nevada and Oregon, principally Sleeper and Grassy Mountain. It had no mining operations or operating revenue.
Financial position and results
| Metric | Period / date | Reported value |
|---|---|---|
| Revenue | Three months ended December 31, 2017 | $0 |
| Other income | Six months ended December 31, 2017 | $85,548 |
| Net loss | Three months ended December 31, 2017 | $1,818,890 |
| Net loss | Six months ended December 31, 2017 | $2,901,609 |
| Cash and cash equivalents | December 31, 2017 | $5,227,000 |
| Total current assets / current liabilities | December 31, 2017 | $5,632,556 / $697,636 |
| Total assets / total liabilities | December 31, 2017 | $54,117,733 / $1,817,936 |
| Cash used in operating activities | Six months ended December 31, 2017 | $3,509,056 |
| Cash provided by financing | Six months ended December 31, 2017 | $6,824,886 |
No debt is reported on the balance sheet. Revenue and profit margins are not meaningful for this pre-production exploration company. Cash increased from $1,911,170 at June 30, 2017, primarily following equity financing. Mineral properties were carried at $46,460,386; the filing states that this carrying value does not establish the properties’ present or future economic value.
Changes versus prior comparable periods
- Six-month net loss was $2.90 million, compared with net income of $128,604 in the prior-year period. The prior-year result included a $3.22 million deferred tax recovery related to the Calico acquisition; there was no corresponding recovery in 2017.
- Six-month loss before tax declined 6% to $2.90 million from $3.09 million. Exploration expense increased 5% to $1.95 million, while salaries and benefits and professional fees declined, partly reflecting lower stock compensation and the absence of prior-year Calico integration fees.
- The company issued 5,295,000 shares in a public offering and private placement for $7.4 million in gross proceeds. Shares outstanding rose from 17,779,954 at June 30 to 23,074,954 at December 31.
Operations, outlook and risks
- During the six-month period, Paramount completed a 30-hole Grassy Mountain drill program, drilled deep monitoring wells, filed a mine Plan of Operations with the BLM, and completed additional site-characterization work after receiving state and federal approvals.
- Management expected to complete a Grassy Mountain preliminary feasibility study in fiscal Q3 and submit a consolidated Oregon mining permit application in the first half of calendar 2018. The filing provides no production or revenue guidance.
- For the remainder of fiscal 2018, management estimated expenditures of $0.88 million for corporate administration, $0.1 million for Sleeper, and $1.6 million for Grassy Mountain, to be funded from cash on hand. Management cautioned that further financing may be needed and that inability to obtain capital could significantly affect exploration and development.
- Key uncertainties include whether projects contain economically recoverable reserves, obtaining permits and completing environmental review, reclamation-cost estimates, and access to future funding. The company said it had not established proven and probable reserves and expected to incur losses for the foreseeable future.
- At December 31, $4.9 million of cash balances exceeded federally insured limits. Sleeper reclamation obligations totaled $1,256,267; the current undiscounted reclamation estimate was $3,835,050. An insurance policy covers reclamation costs up to an aggregate $25 million if the bond is insufficient.
- After quarter-end, the company granted 500,000 options at a $1.40 exercise price with five-year terms; certain grants vest upon specified project, transaction, or share-price performance conditions. Management reported effective disclosure controls and no material change in internal control over financial reporting. No material changes to annual-report risk factors were reported.
Investor verification priorities
- Track Grassy Mountain feasibility-study findings, permit applications, NEPA/EIS progress, and any changes to the project schedule or costs.
- Verify cash burn against management’s remaining-year spending estimates and assess financing needs and potential dilution.
- Review the prior-year deferred tax recovery when comparing reported earnings, and distinguish it from recurring operating performance.
- Assess reserve and economic-feasibility evidence, reclamation obligations and coverage, and the risks associated with uninsured cash balances.