Paramount Gold Nevada Corp. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2015; filed May 22, 2015. The company is an exploration-stage precious-metals company with Nevada properties, principally the Sleeper Gold Project. It reported no operating revenue and has not established economically recoverable reserves.
Financial performance and position
| Metric | Three months ended March 31, 2015 | Nine months ended March 31, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $0 | $97,535 | $38,860; $43,860, respectively |
| Net loss | $1,214,312 | $3,775,846 | $1,228,620; $3,710,753, respectively |
| Total comprehensive loss | $1,197,891 | $3,884,273 | $1,102,334; $3,588,265, respectively |
| Cash used in operating activities | Not separately reported | $1,291,405 | $1,675,254 used |
- For the nine-month period, other income included $92,435 of reclamation-cost reimbursements and $5,100 from leasing water rights. There were no sales or other operating revenue.
- Nine-month expenses were $1,791,169, including $982,116 exploration expense, $231,740 professional fees, and a $337,400 write-down of mineral claims. Interest and service charges were $2,117,018, principally imputed interest on parent-company advances.
- At March 31, cash and cash equivalents were $874,134; marketable securities were $21,572; current assets were $1,125,385; and total assets were $31,735,233. Current liabilities were $16,629,592, including $16,614,827 due to the parent. Reported working capital was $1,110,620 excluding the parent balance.
- Total liabilities were $17,929,299 and shareholders’ equity was $13,805,934. Mineral properties totaled $28,036,135. The reclamation and environmental obligation was $1,299,707; estimated undiscounted reclamation costs for existing disturbances were $3,915,626.
- Cash increased by $421,698 during the nine months, mainly through $1,251,028 in parent funding and $462,075 net proceeds from securities sales, partly offset by operating cash use.
Changes versus the prior comparable periods
- Quarterly net loss decreased about 1% year over year; nine-month net loss increased about 2% (management describes the increase as 3%). Nine-month total expenses decreased about 4%, while the mineral-property write-down was a new expense.
- Exploration expense fell 23% year over year for the nine months as metallurgical testing wound down; the company said it conducted no active exploration program during the quarter. Imputed interest on parent debt rose 12% for the nine months.
- Cash and cash equivalents increased from $452,436 at June 30, 2014, while marketable securities declined from $560,099 to $21,572, reflecting security sales and fair-value movements.
Outlook, risks and unusual items
- Going concern: The filing states the company has never generated operating cash flow and is unlikely to do so in the foreseeable future. Its accumulated deficit was $24,524,851, and management said these conditions raised substantial doubt about its ability to continue as a going concern. The statements contain no adjustments that might be required if it cannot continue.
- Spin-off and financing after quarter-end: The company separated from Paramount Gold and Silver Corp. on April 17, 2015, and began trading on NYSE MKT as PZG on April 20. The parent contributed $8.25 million to equity; the company also issued 417,420 shares to Coeur for $1.47 million. The filing says parent intercompany debt was settled and re-characterized as an equity contribution after period-end. Management expected approximately $9.7 million cash on hand after the spin-off.
- Planned spending: Management anticipated approximately $3.4 million of cash expenditures over the next 12 months, including exploration and corporate costs. Plans include a $500,000 geophysical survey, a potential $300,000 preliminary economic assessment, $400,000 in claim fees, and $1.7 million in general and administrative expenses. The filing also cites an approximately $1.4 million exploration budget and $100,000 for acquisition evaluation.
- Business risks: The company has no proven or probable reserves, no mining operations, and no assurance that exploration will identify economically mineable deposits. It may require additional capital, and development into production would require substantial funding and potentially a joint-venture partner. Key risks include metal-price volatility, permitting and environmental obligations, reclamation costs, and uncertain claim title.
- Contingencies: Six putative shareholder suits challenged the parent’s proposed merger with Coeur, alleging fiduciary-duty and disclosure deficiencies. The merger closed April 17, 2015; defendants deny wrongdoing and are defending the suits. The filing does not state a clear quantified potential loss.
- Controls: Management reported disclosure controls were effective at March 31, 2015, with no material change in internal control over financial reporting during the period.
Important facts for investors to verify
- Confirm the post-spin cash balance, use of the parent’s $8.25 million contribution and Coeur’s $1.47 million payment, and the company’s remaining financing needs.
- Reconcile the stated $3.4 million 12-month cash-spending forecast with the listed budget items, which total $2.9 million, and clarify how it relates to the separate $1.4 million exploration budget.
- Review the shareholder litigation status and any subsequent developments or potential financial exposure.
- Assess the Sleeper project’s exploration results, reclamation funding and obligations, and whether any reserves or economic-study conclusions have been established.
- Interpret reported per-share losses cautiously: the interim statements use a weighted-average 1,000 shares before the spin-off, while 8,101,371 shares were distributed afterward and 417,420 additional shares were issued to Coeur. The filing presents loss per share as $1,214 for the quarter and $3,776 for the nine months, but the practical post-spin comparison requires verification.