Dakota Gold Corp. — Q1 2023 Form 10-Q
Business context and reporting period. This unaudited report covers the three months ended March 31, 2023. Dakota Gold is an exploration-stage gold company focused on properties in South Dakota’s Homestake District; it has no operating revenue and has not identified proven or probable reserves or mineral resources under S-K 1300. The company changed its fiscal year-end to December 31, so 2023 Q1 is its first calendar-year quarter. The 2022 comparison is affected by the March 2022 DTRC merger and related non-controlling-interest accounting.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Operating revenue | $0 | $0 |
| Exploration expense | $6.84 million | $1.22 million |
| General and administrative expense | $2.74 million | $6.42 million |
| Operating loss | $9.58 million | $7.64 million |
| Net loss | $9.27 million | $2.19 million |
| Basic and diluted loss per share | $0.13 | $0.04 profit per share attributable to Dakota Gold |
| Cash used in operating activities | $8.46 million | $2.76 million |
| Cash and cash equivalents | $20.27 million | $23.91 million at Dec. 31, 2022 |
| Working capital | Approximately $18.8 million | — |
- Exploration spending increased as drilling activity expanded from one rig in the prior-year period to four rigs. The company completed 77,994 feet of drilling during the quarter.
- Lower G&A primarily reflected reduced stock-based compensation and deal-related professional, investor-relations, and consulting costs associated with the 2022 DTRC transaction.
- Cash from investing activities was an outflow of $72,000 per the cash-flow statement. Financing provided $4.90 million net, principally from issuing 1,886,800 shares through the ATM program.
- Total liabilities were $3.54 million, including $2.48 million of accounts payable and accrued liabilities and a $1.06 million deferred tax liability. The filing reports no borrowings or interest-bearing debt.
- Total assets were $101.60 million, including $78.76 million in mineral rights and properties. No operating margin is meaningful because the company has no revenue.
Material changes and developments
- Net loss increased year over year despite lower G&A, as exploration expense rose substantially and the deferred tax benefit fell to $275,000 from $5.30 million.
- The company issued shares under its ATM, increasing shares outstanding from 73.34 million at year-end to 75.29 million at March 31. It had authority under the program to sell up to $50 million of shares.
- Management reported discovery of the Unionville Zone in February 2023. After quarter-end, the company announced the JB Gold Zone at Maitland, including an intersection of 0.365 oz/ton gold over 15.3 feet.
Outlook, commentary, and risks
For calendar 2023, management anticipates approximately $30 million in cash expenditures, with exploration focused on Maitland and Richmond Hill and continued permitting and targeting work at other properties. Management says additional capital will be required to sustain that spending level. It believes cash, anticipated ATM use, and the ability to reduce exploration spending should maintain more than 12 months of funding; the filing does not provide a quantified spending runway under the full $30 million program. After quarter-end, the company raised approximately $78,000 gross through the ATM.
Key uncertainties include unsuccessful exploration, the absence of defined resources or reserves, financing availability and potential dilution, permitting and environmental requirements, land and title matters, cost increases, commodity-price movements, and the substantial capital and regulatory needs of any future mine development. The company reports that it has eight active permits and another application in progress. It does not anticipate that ordinary-course legal or tax matters will materially affect its financial position, results, or liquidity; no legal proceedings were reported. Management stated that disclosure controls were effective at March 31, 2023 and that there were no material changes in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether drilling results can establish economically viable resources or reserves; none have been established under S-K 1300.
- Whether the company can raise the additional capital needed for its approximately $30 million 2023 expenditure plan, and the resulting dilution.
- Whether management’s stated funding flexibility and more-than-12-month funding expectation remain valid as exploration spending and cash balances change.
- Progress on permits, exploration results, and the Unionville and JB Gold Zone discoveries.
- The comparability of year-over-year results given the 2022 merger, tax-benefit difference, and share-count changes.