Paramount Gold Nevada Corp. — Fiscal Q1 2019 Form 10-Q
Period: Three months ended September 30, 2018; comparative period is the three months ended September 30, 2017. The filing is for the company’s first fiscal quarter, not calendar-year Q1. Paramount is an exploration and development company with projects in Nevada and Oregon and reported no revenue from mining operations.
Financial performance and position
- Income: Other income was $104,521, primarily $99,001 of reclamation-cost reimbursements. Net loss was $1,058,893, or $0.04 per basic and diluted share, versus a $1,082,719 loss, or $0.06 per share, a year earlier. No income tax expense was reported.
- Expenses: Total expenses were $1,167,883, compared with $1,170,135. Exploration expense fell 27% to $471,816; salaries and benefits rose 72% to $245,407, partly reflecting the Executive Chairman’s compensation; professional fees rose to $41,582, including one-time legal and advisory fees.
- Cash flow and liquidity: Operating activities used $1,642,739, versus $1,819,193 in the prior-year quarter. A $2,911,286 net financing inflow helped increase cash to $1,565,936 from $297,389 at June 30, 2018. Current assets were $2,120,613 and current liabilities $642,649.
- Capital and debt: The company raised $3 million gross by issuing 2.4 million units at $1.25 each; each unit included one share and a warrant for one-half share. Net proceeds were $2,911,286. Shares outstanding increased to 25,474,954. The balance sheet reports no interest-bearing debt; total liabilities were $1,555,982, including reclamation obligations.
- Assets: Total assets were $52,666,275, including $48,860,386 of capitalized mineral-property acquisition costs. These carrying values do not establish the properties’ economic value or the existence of economically recoverable reserves.
Changes, operations and outlook
- Net loss narrowed about 2% year over year. Exploration spending decreased, while compensation, professional fees and general and administrative costs increased.
- At Grassy Mountain, the company received approval of seven additional baseline environmental reports, bringing the total accepted to 12. It also began mine-design and permitting work, a helicopter survey and deep monitoring-well drilling, and filed a Plan of Operation with the Bureau of Land Management.
- For fiscal 2019, management planned to pursue a consolidated Oregon mining-permit application, additional baseline studies, selective exploration and proposals for a feasibility study. The filing estimates approximately $4 million for Grassy Mountain activities and $0.7 million for Sleeper reclamation and claim-management activities. Separately, it estimates remaining fiscal-year expenditures of $1.5 million for corporate administration, $0.44 million for Sleeper and $3.65 million for Grassy Mountain. The filing does not clearly reconcile these budget presentations.
- Management expects continued losses and says planned spending will be funded by cash on hand and other capital resources. It warns that inability to obtain additional financing would significantly affect exploration and development.
- A subsequent agreement gives Paramount the right to acquire 100% of 44 Grassy Mountain claims, with annual lease payments of $40,000 for the first two years and $60,000 thereafter, plus a $560,000 purchase option.
Risks, contingencies and other items
- The company has not established proven and probable reserves or the commercial feasibility of its exploration prospects; exploration costs are expensed as incurred. Funding availability and permitting progress are key uncertainties.
- The recorded Sleeper reclamation obligation was $1,014,926; the current undiscounted estimate of reclamation costs for existing disturbances was $3,835,050. A policy provides coverage up to $25 million if the reclamation bond is insufficient. The company reported no material change to previously disclosed risk factors.
- At September 30, $1.27 million of cash balances exceeded federally insured limits. Management stated it uses financial institutions it believes have sufficient credit quality.
- Management assessed disclosure controls as effective at period-end and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether available cash and future financing can support the stated exploration, permitting and corporate spending plans.
- How the two sets of fiscal 2019 expenditure estimates relate, including their timing and whether they overlap.
- Progress toward required baseline-study approvals, the Oregon permit application and feasibility-study work at Grassy Mountain.
- Whether project resources can ultimately support economically recoverable reserves, and how reclamation estimates and insurance coverage compare with actual obligations.
- The dilution and potential warrant exercise effects of the financing, alongside future capital needs.