Business context and reporting period
Paramount Gold Nevada Corp. (NYSE American: PZG) is a pre-production gold and silver exploration and development company with projects in Nevada and Oregon. This 10-K covers the fiscal year ended June 30, 2022, compared with the year ended June 30, 2021; it is not a standalone 2021 fourth-quarter report.
The company’s principal development project is Grassy Mountain, Oregon; Sleeper, Nevada, is an exploration-stage project. Neither property was producing at year-end.
Financial and operating highlights
| Metric | FY2022 | FY2021 |
|---|---|---|
| Operating revenue | None | None |
| Net loss | $7.84 million | $5.90 million |
| Exploration and development expense | $4.44 million | $2.82 million |
| Cash used in operating activities | $6.70 million | $5.96 million |
| Cash and cash equivalents at year-end | $2.48 million | $3.11 million |
FY2022 loss per share was $0.19, versus $0.17. Exploration and development spending rose 57%, largely reflecting work at Grassy Mountain and Frost and exploration and reclamation activity in Nevada. The filing reports no operating revenue, so operating margins are not meaningful.
At June 30, 2022, current assets were $3.77 million and current liabilities were $0.76 million, implying working capital of approximately $3.01 million. Total assets were $56.01 million; total liabilities were $9.61 million. The company reported $4.22 million of net carrying value on its secured convertible notes, due September 2023, and approximately $4.3 million of principal to repay. The notes bear 7.5% interest and are secured by a lien on company assets. FY2022 interest expense was $0.33 million.
The company raised $6.12 million net through its at-the-market equity program, issuing 7.77 million shares. It also issued 404,584 shares to pay accrued note interest. Shares outstanding increased to 46.59 million at fiscal year-end from 38.15 million a year earlier.
Material changes and project information
- Net loss increased approximately 33% year over year; cash used in operations increased by about $0.75 million.
- The Sleeper reclamation and environmental obligation rose to $4.48 million from $1.85 million. The increase included a $2.48 million estimate change, primarily for converting historic processing ponds; the work is expected in the second half of calendar 2024. The company says these reclamation costs are expected to be reimbursed by insurance.
- At June 30, 2022, Grassy Mountain had estimated proven and probable reserves of approximately 380,000 ounces of gold and 554,000 ounces of silver. Its feasibility-study economics assume gold at $1,750/oz and silver at $22/oz: post-tax NPV at 5% of $114.1 million, post-tax IRR of 22.54%, and initial capital of $136.2 million. These are project-study estimates, not company guidance or achieved results.
- Sleeper’s reported gold resource is inferred only: 2.417 million ounces of gold and 24.458 million ounces of silver. Resources are not reserves and do not establish economic viability.
- Paramount submitted modified state and federal permit applications for Grassy Mountain in December 2021 and continued permitting work. The filing describes state and federal approvals as outstanding.
Outlook, risks, and unusual items
Management budgets approximately $3.3 million for corporate, land-maintenance, and general expenses in FY2023, plus discretionary budgets of $3.0 million for Grassy Mountain permitting, $0.25 million for Sleeper, and $0.8 million for Bald Peak, subject to available cash and financing. It expects to rely on existing cash, ATM share sales, other debt or equity financings, and royalty sales. The company stated that substantial doubt exists about its ability to continue as a going concern, including because of ongoing losses, limited cash, and the September 2023 note repayment.
Key risks include inability to raise capital or refinance debt; permitting delays or failure to obtain mine approvals; volatile metal prices; uncertainty in resource estimates and project economics; reclamation and environmental obligations; and dilution from equity financing. The Grassy Mountain project also carries royalty obligations, including a Seabridge option that could require a CDN$10 million purchase if specified production-decision and financing conditions are met.
Moss Adams issued an unqualified opinion on the FY2022 financial statements but included a going-concern explanatory paragraph. MNP resigned in July 2022 and Moss Adams was engaged for FY2022. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Confirm financing plans and ability to repay or refinance the approximately $4.3 million of notes due September 2023; the going-concern warning is material.
- Check progress, timing, and cost of state and federal permits for Grassy Mountain, and whether project financing can be secured.
- Review the feasibility-study assumptions, required initial and sustaining capital, reserve estimates, and applicable royalties; actual results may differ materially.
- Verify the insurance coverage and reimbursement terms for Sleeper reclamation costs, including the increased pond-conversion estimate.
- Reconcile the filing’s statement that none of the projects have proven or probable reserves with its Grassy Mountain reserve tables, which report proven and probable reserves. The summary tables also show small rounding differences.
- Assess potential dilution and funding dependence: ATM proceeds supported FY2022 operations, and the stated FY2023 discretionary budgets depend on available cash and additional share issuance.