Perpetua Resources Corp. — Q2 2022 Form 10-Q Summary
Business Context and Reporting Period
Perpetua Resources is a British Columbia corporation focused on mineral exploration, restoration, and development in the Stibnite-Yellow Pine mining district in Idaho. Its principal asset is the Stibnite Gold Project, which is intended to provide domestic gold and antimony production and restore an abandoned brownfield site. The company had no commercial production or revenue during the three and six months ended June 30, 2022.
The filing covers the quarter and six-month period ended June 30, 2022. The financial statements are unaudited and prepared under U.S. GAAP. The company reported 62,987,859 common shares outstanding as of August 5, 2022.
Financial Results and Position
| Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Operating loss | $6.4 million | $7.6 million | $12.6 million | $23.8 million |
| Net loss | $6.3 million | $14.3 million | $12.5 million | $19.0 million |
| Basic and diluted loss per share | $0.10 | $0.28 | $0.20 | $0.39 |
| Net cash used in operating activities | Not separately provided | Not separately provided | $11.7 million | $14.0 million |
Exploration expense was $4.3 million in the quarter and $8.9 million year to date, down 28% and 30%, respectively, from the comparable 2021 periods. The company recorded $0.7 million of additional environmental liability expense in the quarter and year to date.
At June 30, 2022, cash and cash equivalents were $36.1 million, compared with $47.9 million at December 31, 2021. Total current assets were $37.0 million, total assets were $112.6 million, and total liabilities were $12.0 million. Shareholders’ equity was $100.6 million. The company had no outstanding convertible notes; its remaining derivative liability was a $6,025 warrant derivative.
Environmental reclamation liabilities totaled $9.6 million, including $5.8 million classified as current. The company also held a $3.0 million environmental reclamation bond. No income tax provision or benefit was recorded because of the company’s cumulative loss position and available net operating losses.
Material Changes Versus the Prior Comparable Period
- Quarterly net loss decreased by $8.0 million, primarily because the prior-year period included a $5.9 million loss from the convertible note derivative, while 2022 had no such expense.
- Year-to-date net loss decreased by $6.5 million, primarily due to $6.8 million less environmental liability expense and lower exploration, foreign exchange, and corporate salary costs.
- Year-to-date operating cash use improved by $2.3 million to $11.7 million.
- Cash declined by $11.8 million during the first six months of 2022, compared with a $16.5 million decline in the prior-year period.
- Professional fees increased to $1.2 million year to date from $0.3 million, primarily due to legal work associated with the transition to a U.S. domestic issuer and accounting work related to U.S. GAAP reporting.
- Environmental reclamation liabilities increased from $6.9 million at June 30, 2021 to $9.6 million at June 30, 2022, reflecting additional cost estimates and ongoing early-action work.
- The company issued no new shares through financing during the first half of 2022. Shares outstanding increased modestly from 62,971,859 at December 31, 2021 to 62,987,859 at June 30, 2022.
Guidance, Outlook, Risks, and Unusual Items
Management expects approximately $28.0 million of 2022 expenditures, funded from cash on hand: approximately $12.6 million for permitting, $10.1 million for general corporate and administrative purposes, $0.7 million for engineering and design, and $4.6 million for early restoration and field operations.
The company expects the Supplemental Draft Environmental Impact Statement to be published for public review and comment in the third quarter of 2022. During the quarter, it received an Idaho Clean Air Act Permit to Construct and awarded a contract for stream diversion work associated with Phase 1 early cleanup activities.
Management believes current liquidity is sufficient to advance the project and meet administrative requirements for at least 12 months from issuance of the second-quarter financial statements. However, continued operations are dependent on obtaining additional financing before the second half of 2023 or reducing and timing expenditures. Potential financing sources include equity, new debt, project-specific debt, or other means, but no assurance is provided that financing will be available on acceptable terms.
Key risks include permitting and NEPA delays, litigation with the Nez Perce Tribe regarding alleged Clean Water Act violations, environmental remediation costs, availability of capital, commodity prices, project development and operating costs, labor and supply disruptions, COVID-19 impacts, regulatory changes, title and mineral-rights uncertainties, and the absence of proven reserves under SEC Regulation S-K 1300. The litigation was stayed while the parties pursue alternative dispute resolution; the stay was extended through October 31, 2022.
The company’s $9.6 million environmental liability is subject to changes in cost estimates and actual work performed. The Stibnite Gold Project remains an exploration-stage project, and the filing does not establish commercial production timing or a definitive construction decision.
Important Facts for Investors to Verify
- Progress and timing of the NEPA review, including publication of the Supplemental Draft Environmental Impact Statement.
- Availability and terms of financing required before the second half of 2023.
- Actual 2022 cash expenditures versus the approximately $28.0 million budget.
- Changes in the $9.6 million environmental reclamation liability and the $7.5 million financial assurance obligation.
- Status and potential financial consequences of the Nez Perce Tribe litigation and related ADR process.
- Whether the Project ultimately meets SEC Regulation S-K 1300 reserve requirements and receives all required permits.
- Future dilution from approximately 2.0 million outstanding options, 0.8 million share units, and 200,000 warrants.
- Whether cash resources and future financing are sufficient to fund permitting, restoration, construction, and ongoing corporate expenses.