Paramount Gold Nevada Corp. — Form 10-Q Summary
Reporting period: Fiscal quarter and six months ended December 31, 2022. Paramount is a development-stage precious-metals exploration and development company, with projects in Nevada and Oregon. It reported no mining revenue.
Financial performance and position
- Quarterly net loss: $1.43 million, compared with $2.70 million in the prior-year quarter; loss per share was $0.03 versus $0.07.
- Six-month net loss: $3.27 million, compared with $4.62 million in the prior-year period; loss per share was $0.07 versus $0.12. Lower exploration spending was the principal contributor to the reduced loss.
- Expenses: Six-month total expenses were $3.12 million, down from $4.53 million. Exploration expense fell to $1.30 million from $3.16 million; professional fees increased to $269,000 from $66,000, partly due to audit, consulting and legal costs.
- Cash flow: Cash used in operations was $2.30 million for the six months, compared with $3.55 million. Investing used $30,000; financing provided $1.16 million, including $1.00 million borrowed from Seabridge. Cash declined by $1.17 million to $1.31 million.
- Liquidity and debt: Current assets were $1.99 million and current liabilities were $5.84 million, a current-liability excess of approximately $3.86 million. The balance sheet showed $4.25 million of 2019 convertible notes and $1.00 million of related-party notes payable, plus $656,000 of related-party convertible debt. Approximately $5.3 million of debt is due in September 2023.
- Assets and equity: Total assets were $54.27 million, including $51.77 million in capitalized mineral properties. Total liabilities were $10.64 million and stockholders’ equity was $43.63 million.
- Margins are not meaningful because the company had no mining revenue.
Material changes and operating developments
- Quarterly exploration spending fell 76% year over year; six-month exploration spending fell 59%, reflecting different project activity and lower spending than in the prior-year periods.
- The BLM accepted the Grassy Mountain Plan of Operations as complete, a step toward initiating the federal Environmental Impact Statement process. The Oregon State Technical Review Team approved two baseline-data reports, but Oregon had not yet determined that the consolidated permit application was complete.
- The U.S. Forest Service issued a drill permit for the Bald Peak Project. Paramount also continued digitizing and verifying the Sleeper project’s historical drilling database.
- Shares outstanding increased during the period through ATM issuance and shares issued to pay interest. Subsequent to quarter-end, the company issued additional shares for convertible-note interest and vested RSUs, and sold shares through its ATM.
Outlook, risks and contingencies
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern over the twelve months after issuance of the financial statements. Paramount expects continuing losses and does not expect operating cash flow to turn positive in the near future.
- The company expects to seek funding through existing cash and working capital, its ATM program, the Seabridge note facility, other debt or equity financing, or royalty sales. It cautioned that additional funding may not be available on acceptable terms.
- Management estimated approximately $3.2 million in corporate, land-maintenance and general expenses over the next twelve months, plus discretionary spending, subject to available cash, of $3.0 million for Grassy Mountain permitting and $250,000 for Sleeper.
- The Seabridge bridge note bears 12% interest, permits borrowing up to $1.5 million, and matures September 30, 2023. Seabridge is affiliated with the board chairman and owns approximately 5.7% of Paramount’s common stock.
- Reclamation obligations totaled $4.64 million. Management estimated undiscounted Sleeper reclamation costs of approximately $3.64 million under BLM requirements and $5.28 million under NDEP requirements; some work is expected in 2023 and future costs may differ from estimates.
- Other contingencies include Seabridge’s right, following a positive Grassy Mountain production decision and secured construction financing, to require Paramount to purchase a net profit interest for CDN$10 million. Project advancement also depends on permitting and financing, and there is no assurance that mineral properties contain economically recoverable reserves.
Investor verification points
- Confirm the plan and available financing to repay approximately $5.3 million of debt due in September 2023, and review subsequent ATM and related-party borrowing activity.
- Track cash usage against the stated twelve-month corporate and project spending estimates, given the disclosed going-concern substantial doubt.
- Verify progress on Oregon’s completeness determination for the Grassy Mountain permit application and on the federal EIS process.
- Review the basis and timing of reclamation estimates, expected insurance reimbursements, and the potential CDN$10 million Seabridge net profit interest purchase obligation.