Business context and reporting period
Paramount Gold Nevada Corp. is an exploration and development company with precious-metal projects in Nevada and Oregon; it does not produce or sell mined product. The supplied filing is a Form 10-Q for the quarter ended March 31, 2017 (fiscal 2017 third quarter), with nine-month comparisons to March 31, 2016. This differs from the requested “2016 Q3” metadata.
Financial results and position
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Other income; no mining revenue | 2017: $237,694; 2016: $0 | 2017: $283,599; 2016: $130,924 |
| Expenses | 2017: $1,765,137; 2016: $1,033,971 | 2017: $4,943,431; 2016: $2,704,457 |
| Net loss | 2017: $1,424,462; 2016: $1,100,601 | 2017: $1,295,860; 2016: $2,637,561 |
| Loss per share, basic and diluted | 2017: $0.09; 2016: $0.13 | 2017: $0.08; 2016: $0.31 |
- There are no meaningful operating margins because the company had no mining revenue. Exploration expense was $2,988,956 for the nine months, including $2,548,275 at Grassy Mountain.
- Nine-month operating cash use was $3,962,287; investing cash use was $1,005,128, primarily related to the Calico acquisition; financing provided $3,558,497. Cash declined by $1,408,918 to $4,465,340.
- At March 31, 2017, current assets were $4,803,994, current liabilities $698,455, and working capital $4,110,880. Total assets were $53,360,748 and total liabilities $1,819,361. The filing reports no borrowings or other debt.
- Mineral properties totaled $46,460,386, including $20,785,728 for acquired Grassy Mountain. Reclamation and environmental obligations were $1,226,712.
Material changes versus prior comparable periods
- Third-quarter net loss increased by about $324,000, largely as exploration costs rose to $1,133,141 from $101,938, reflecting Grassy Mountain pre-feasibility work and drilling. Winter snowfall delayed drilling in January and February; work resumed in mid-March.
- Nine-month net loss fell by about $1.34 million despite higher expenses, principally because a $3,215,418 deferred tax recovery offset costs. This recovery followed the Calico acquisition and recognition of tax-loss benefits; it was not operating cash income.
- Calico became a wholly owned subsidiary on July 7, 2016. Paramount issued 7,171,163 shares valued at $15,202,866 as consideration. The acquisition added the Grassy Mountain project.
- On February 14, 2017, Paramount issued 2,090,000 units for gross proceeds of $3,657,500. Each unit included one share and a warrant for one-half share. Shares outstanding rose to 17,779,954 from 8,518,791 at June 30, 2016.
- Professional fees declined year over year as prior-period Calico transaction costs subsided. Land holding and exploration costs increased with Grassy Mountain activity.
Outlook, risks and unusual items
- For the fiscal year ending June 30, 2017, management budgeted approximately $1.75 million for corporate administration, $690,000 for Sleeper, $570,000 for Grassy Mountain non-discretionary costs, and $4.5 million for discretionary Grassy Mountain pre-feasibility and permitting work.
- Management said cash on hand was expected to fund non-discretionary spending, but additional capital would be required to complete the discretionary budget. Failure to obtain financing could significantly curtail exploration and development.
- The Grassy Mountain drill program and pre-feasibility study support mine planning, engineering and permitting. The company planned to submit a mine Plan of Operation and initiate an environmental impact statement and permitting work in 2017. No production or revenue guidance was provided.
- The company expects continued losses and has not established proven or probable reserves or commercial feasibility at its exploration prospects. Mineral-property values and project outcomes therefore remain uncertain.
- Nonrecurring or notable items included the $3.2 million deferred tax recovery, $100,000 gain on sale of non-core claims, and $278,293 reclamation-cost reimbursement in other income. The Sleeper reclamation insurance policy provides coverage up to $25 million if the bond is insufficient; estimated undiscounted reclamation costs for existing disturbances were $3,835,050.
- About $4.2 million of cash was above federally insured limits. Management reported disclosure controls effective and no material change in internal control; it reported no material changes to the risk factors in its prior annual report.
Important facts for investors to verify
- Whether available cash and future financing are sufficient to fund planned Grassy Mountain work and corporate obligations.
- Progress, final results and cost of the delayed drill program, pre-feasibility study, mine plan and environmental permitting.
- Technical and economic evidence supporting mineral-property carrying values, including whether any reserves or commercial feasibility are established.
- The assumptions and realizability of the deferred tax asset benefit, and the distinction between that noncash recovery and recurring operating performance.
- Potential dilution from outstanding warrants and options, including 1,045,000 warrants and 1,045,000 options reported outstanding at March 31, 2017.
- Reclamation obligations, insurance and bonding adequacy, and exposure of cash balances above insured limits.