Paramount Gold Nevada Corp. — Form 10-Q Summary
Business context and reporting period
For the fiscal quarter and six-month period ended December 31, 2016. Paramount is an exploration-stage precious-metals company with projects in Nevada and Oregon; it reported no revenue from mining operations and has not established economically recoverable reserves.
On July 7, 2016, Paramount acquired Calico Resources, adding the Grassy Mountain Gold Project in Oregon. Paramount issued 7,171,163 shares valued at approximately $15.2 million; shares outstanding increased from 8,518,791 at June 30 to 15,689,954 at December 31.
Financial performance and position
| Metric | Three months ended Dec. 31, 2016 | Six months ended Dec. 31, 2016 |
|---|---|---|
| Revenue (other income only) | $40,599 | $45,905 |
| Total expenses | $1,907,971 | $3,178,293 |
| Net loss (income) | Loss of $1,824,892 | Income of $128,604 |
| Exploration expense | $1,318,444 | $1,855,815 |
| Cash used in operating activities | Not provided for the quarter | $3,060,777 |
- The six-month net income resulted from a $3,215,418 deferred tax recovery recognized after the Calico acquisition; it was not operating income. The three-month and six-month 2015 periods recorded net losses of $734,967 and $1,536,960, respectively.
- Cash and cash equivalents were $1,813,694 at December 31, down from $5,874,258 at June 30. The six-month cash decline was $4,060,564; investing activities used $999,787, primarily for the Calico transaction.
- Net working capital was $1,614,873. Current assets were $2,247,589 and current liabilities $632,716. Total liabilities were $1,656,529, including $1,407,912 of reclamation and environmental obligations; the filing reports no borrowings.
- Total assets were $51,016,688, including $46,460,386 in mineral properties. The increase in mineral properties chiefly reflects Grassy Mountain, recorded at $20,785,728.
- No meaningful operating margin is reported because the company has no mining revenue. Six-month exploration expense rose from $446,171 to $1,855,815, largely due to Grassy Mountain work.
Changes, outlook and risks
- Paramount began a 29-hole Grassy Mountain drill program in late November as part of a pre-feasibility study (PFS); four holes had been completed during the quarter. The company said the program was expected to continue into its third fiscal quarter.
- For the fiscal year ending June 30, 2017, the company budgeted approximately $1.75 million for corporate administration, $690,000 for Sleeper, and $570,000 for Grassy Mountain non-discretionary costs, plus $4.5 million for discretionary Grassy Mountain PFS and permitting work. Management said additional capital would be needed to complete the discretionary budget and that inability to raise funds could materially impair exploration and development.
- Paramount planned to submit a mine Plan of Operation to the BLM and begin an Environmental Impact Statement and permitting process in 2017. It expects losses to continue while exploration proceeds.
- On February 6, 2017, the company entered into agreements to sell 2,090,000 units for $3,657,500. Each unit includes one share and a warrant for one-half share, exercisable at $2.00 in year one or $2.25 in year two. The filing describes definitive agreements; it does not establish in this text that the financing had closed.
- Reclamation costs for existing Sleeper disturbances were estimated at $3,835,050 undiscounted; the recorded obligation reflects discounted estimated costs. The company also disclosed that approximately $1.5 million of cash exceeded federally insured limits.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. It reported no material changes to risk factors from its prior Form 10-K.
Important facts for investors to verify
- Whether the February 2017 financing closed, and the resulting net proceeds, share dilution and warrant dilution.
- Current cash, projected cash runway and the company’s ability to fund the stated PFS, drilling and permitting plans.
- Grassy Mountain drill results, PFS progress and any resulting estimates of project economics or recoverable reserves.
- Permitting and environmental review milestones, and whether reclamation cost estimates or obligations have changed.
- The composition and sustainability of reported six-month net income, which depended on the one-time deferred tax recovery.