Business context and reporting period
Paramount Gold Nevada Corp. filed this Form 10-K for the fiscal year ended June 30, 2015. The company is a Nevada precious-metals exploration company, not a producer; it reported no operating revenue and no proven or probable reserves. Its principal asset is the Sleeper Gold Project in Nevada.
The company was spun off from Paramount Gold and Silver Corp. (PGSC) on April 17, 2015, and began trading as PZG on NYSE MKT on April 20. Thus, the annual financial statements largely reflect the business while it was integrated with PGSC; management cautions that allocated historical costs may differ from standalone costs. The filing also presents unaudited fourth-quarter data for fiscal 2015 and fiscal 2014.
Financial and operating metrics
| Metric | FY ended June 30, 2015 | FY ended June 30, 2014 |
|---|---|---|
| Operating revenue | None | None |
| Other income | $136,437 | $77,697 |
| Total expenses | $3,151,287 | $2,663,377 |
| Net loss | $5,231,207 | $5,034,744 |
| Basic and diluted loss per share | $0.64 | $0.62 |
| Cash used in operating activities | $2,041,579 | $2,046,058 |
| Cash and cash equivalents, at year-end | $9,282,534 | $452,436 |
| Net working capital, at year-end | $9,348,781 | Not stated |
| Total liabilities, at year-end | $1,527,697 | $16,684,519 |
FY2015 loss increased approximately 4% year over year. Expense increases included professional fees, salaries and benefits, and general and administrative costs associated with the separation and standalone-company operations; lower exploration and insurance expenses partly offset them. The company also expensed $337,400 for claims it dropped. Interest and service charges were $2,252,527, primarily imputed interest on PGSC advances; those advances were converted to equity in the separation, leaving no amount due to PGSC at June 30, 2015.
Cash rose by $8,830,098, primarily from an $8,445,860 PGSC cash contribution and $1,470,000 received for shares issued to Coeur Mining, partly offset by operating cash use. The filing reports no conventional debt at year-end. The asset-retirement obligation was $1,294,497; accounts payable and accrued liabilities were $233,200. The company held $2,499,396 in a reclamation commutation account. It reported no operating profit or meaningful operating margin because it has no operating revenue.
For fiscal 2015 fourth quarter, revenue was $38,902 and net loss was $1,455,361, or $0.18 per share; fiscal 2014 fourth-quarter revenue was $33,837 and net loss was $1,230,862, or $0.15 per share.
Material changes versus the prior comparable period
- Cash increased from $452,436 to $9.28 million following the spin-off funding and Coeur share issuance.
- Total liabilities fell from $16.68 million to $1.53 million after PGSC debt was converted to equity; the company reported no PGSC balance due at year-end.
- Annual net loss rose by about $196,000, while operating cash use was broadly unchanged.
- Professional fees rose by $475,186 and salaries and benefits by $202,465; exploration expense fell by $622,048.
- The company wrote down $337,400 of Sleeper claims determined to have no remaining exploration potential.
Outlook, risks, contingencies, and unusual items
Management expected approximately $2.8 million of cash expenditures in fiscal 2016, funded from cash on hand. The planned budget included approximately $1.0 million for exploration-related work and claim fees, including a new NI 43-101-compliant preliminary economic assessment and a geophysical survey, plus approximately $1.8 million for general and administrative costs. Management also budgeted approximately $100,000 to evaluate acquisition opportunities. Drilling plans depend on results and available resources.
The company warned that it will continue to incur losses and needs substantial additional capital to explore and, if warranted, develop its properties. It stated that production would likely require a joint-venture partner. Key risks include no established commercial reserves, uncertainty of exploration and project economics, volatile precious-metals prices, unpatented-claim title and permitting risks, environmental and reclamation costs, and higher standalone-company expenses. The prior Sleeper preliminary economic assessment is not a forecast; the filing states there is no certainty its scenarios or estimated economics will be realized.
Six putative shareholder class actions related to PGSC’s merger with Coeur remained pending after the merger closed on April 17, 2015. The company and other defendants deny wrongdoing and are defending the cases; the filing does not provide a clear estimate of potential loss. The estimated undiscounted reclamation cost for existing Sleeper disturbances was $3,915,626, versus the recorded obligation of $1,294,497. Management said annual reclamation outlays are expected to be about $100,000 for five years and reimbursed by the existing bond. Approximately $8.9 million of cash exceeded federally insured limits.
Management concluded disclosure controls were effective. The filing did not include management’s internal-control assessment under the transition relief for newly public companies, and the auditor did not attest to internal-control effectiveness. The financial statements received an unqualified audit opinion.
Important facts for investors to verify
- Confirm the company’s available cash and expected spending against the fiscal 2016 plan, including standalone corporate costs and exploration funding needs.
- Review updated Sleeper resource estimates, the planned economic assessment, and whether exploration results support further investment; no proven or probable reserves are established.
- Assess the adequacy and terms of reclamation funding, the recorded asset-retirement obligation, and the outcome of required regulatory reviews.
- Monitor the six merger-related lawsuits and any subsequent estimate or disclosure of potential exposure.
- Reconcile the timing and classification of spin-off contributions, PGSC debt conversion, and the Coeur share issuance when comparing historical results with future standalone periods.