Paramount Gold Nevada Corp. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended December 31, 2019. The company explores and develops precious-metal projects, principally Grassy Mountain in Oregon and Sleeper in Nevada; it reported no revenue from mining operations.
Financial performance and position
| Metric | Three months ended Dec. 31, 2019 | Six months ended Dec. 31, 2019 |
|---|---|---|
| Other income | $306,059 | $337,418 |
| Net loss | $2,342,517 | $3,349,016 |
| Loss per share, basic and diluted | $0.08 | $0.12 |
| Operating cash used | Not separately stated for the quarter | $3,654,751 |
- Costs and margins: With no mining revenue, operating margins are not meaningful. Six-month exploration expense was $2,267,200; total expenses were $3,554,946.
- Cash and liquidity: Cash was $2,007,303 at December 31, versus $463,690 at June 30, 2019. Current assets were $3,191,449 and current liabilities $515,547. The company reported a $250,000 minimum working-capital requirement under its notes.
- Debt: The company issued senior secured convertible notes due 2023, bearing 7.5% interest and convertible at $1.00 per share. Net proceeds were $5,201,807; year-end carrying value was $5,221,836. Notes are secured by a lien on all company assets.
- Equity and assets: Mineral properties were carried at $47,055,132. Stockholders’ equity was $45,016,376. The company issued 1,096,791 shares valued at $976,144 for Grassy Mountain feasibility-study services.
Changes versus prior comparable periods
- Six-month net loss increased $859,800, or 35%, from $2,489,216; quarterly net loss increased 64% from $1,430,323.
- Six-month exploration expense rose 73% to $2,267,200, primarily reflecting Grassy Mountain permitting and feasibility work and Sleeper reclamation. Quarterly exploration expense increased 116% to $1,808,632.
- Six-month other income increased to $337,418 from $183,790, mainly due to reimbursement of reclamation costs. Interest and service charges rose to $144,228 for the six months, compared with $4,081, including costs associated with the new financing.
- Cash increased after the convertible-note financing, while operating cash use exceeded the prior-year six-month period’s $2,908,494.
Outlook, risks and unusual items
- Management expected to spend during the remainder of fiscal 2020 approximately $0.9 million on corporate administration, $0.3 million on Sleeper and $2.0 million on Grassy Mountain, funded by cash on hand and other capital resources. Management warned that inability to obtain additional financing could significantly adversely affect exploration and development.
- Grassy Mountain’s Oregon consolidated permit application was submitted in November 2019 and was undergoing completeness review. The company planned to submit an amended plan of operations to the U.S. Bureau of Land Management. The feasibility study was expected in mid-2020; these are forward-looking expectations, not completed outcomes.
- The company expected to focus Sleeper activity on reclamation and claim management. It reported no proven or probable reserves and stated that commercial feasibility of its exploration prospects had not been established.
- Reclamation obligations were $681,184 at December 31; estimated undiscounted reclamation costs for existing Sleeper disturbances were $3,977,751. A reclamation insurance policy provides coverage up to $25 million if the bond is insufficient. Actual costs may differ from estimates.
- After period end, 161,217 shares were issued to pay interest accrued on the convertible notes. The notes’ conversion feature, security interest, interest cost and working-capital covenant are material financing considerations.
- Management reported no material change in risk factors from the June 30, 2019 Form 10-K and stated disclosure controls were effective. Cash balances included $1.71 million above federally insured limits.
Important facts for investors to verify
- Current status and timing of Oregon and federal permitting, and delivery of the Grassy Mountain feasibility study.
- Available funding against planned spending, future financing needs, and compliance with the notes’ $250,000 working-capital covenant.
- Convertible-note terms, including the all-assets lien, interest payments, conversion dilution and 2023 maturity.
- Progress toward establishing economically recoverable reserves and the assumptions underlying mineral-property and reclamation valuations.
- Actual reclamation costs and timing, and the terms and sufficiency of the Sleeper reclamation insurance and bond arrangements.