Perpetua Resources Corp. — Fiscal 2022 Form 10-K Summary
Business context and reporting period
Perpetua Resources is a development-stage mining company focused on permitting, restoration and potential redevelopment of the Stibnite Gold Project in Idaho. The Project is not in production or construction, and the Company has no mining revenue or operating cash flow. This filing covers the fiscal year ended December 31, 2022, with comparisons to fiscal 2021. Financial statements are presented in U.S. dollars under U.S. GAAP.
The Stibnite project contains gold, silver and antimony deposits. The Company held approximately 11,548 hectares in 1,668 claims and sites at year-end and had 30 employees. No exploration drilling was completed during 2022; activities focused on permitting, engineering, environmental studies and early restoration work.
Key financial metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | No operating revenue | No operating revenue | Project remains pre-production |
| Operating loss | $29.3 million | $41.3 million | Down $12.0 million |
| Net loss | $28.7 million | $36.0 million | Down $7.2 million |
| Basic and diluted loss per share | $0.46 | $0.66 | Improved |
| Cash used in operating activities | $24.7 million | $28.6 million | Use decreased $3.9 million |
| Cash and cash equivalents at year-end | $22.7 million | $47.9 million | Down $25.2 million |
| Total assets | $99.4 million | $124.5 million | Down $25.1 million |
| Total liabilities | $13.6 million | $12.9 million | Up $0.7 million |
| Shareholders’ equity | $85.8 million | $111.6 million | Down $25.8 million |
| Accumulated deficit | $561.9 million | $533.2 million | Increased by $28.7 million |
Major 2022 expenses included exploration and evaluation costs of $19.1 million, environmental liability expense of $4.6 million, corporate salaries and benefits of $1.9 million, professional fees of $1.8 million and shareholder and regulatory costs of $0.6 million. The Company had no outstanding convertible notes at December 31, 2022. Current liabilities included $9.6 million of environmental reclamation liabilities and $2.7 million of trade and other payables.
Net cash decreased by $25.2 million during 2022. Investing activities used $0.5 million, while financing activities provided no cash. The Company reported approximately $11.2 million of net working capital at year-end, based on approximately $23.6 million of current assets and $12.4 million of current liabilities.
Material changes versus the prior comparable period
- Net loss improved by $7.2 million, primarily due to lower environmental liability expense, exploration costs, foreign exchange losses and general and administrative costs.
- Exploration expense decreased 16% to $19.1 million, reflecting lower permitting, consulting, labor, engineering and environmental costs, partly offset by higher legal and sustainability costs.
- Environmental liability expense declined to $4.6 million from $12.2 million, but the estimated total obligation under the ASAOC increased to $16.8 million and the remaining recorded liability was $10.8 million at year-end.
- The Company recognized no convertible-note derivative gain in 2022 because all convertible notes were converted in 2021. The 2022 warrant derivative gain was $0.1 million, compared with $0.8 million in 2021.
- Cash declined by $25.2 million because operating expenditures were not offset by financing proceeds. The 2021 comparison included approximately $54.3 million of net proceeds from a public share offering.
- The U.S. Forest Service released a Supplemental Draft Environmental Impact Statement in October 2022 and identified the Company’s Modified Mine Plan as the Preferred Alternative. This was not a final approval or Record of Decision.
- The Company received a Technology Investment Agreement under the Defense Production Act for up to $24.8 million and two Department of Defense grants totaling $0.2 million to study domestic production of military-grade antimony trisulfide.
Guidance, outlook, risks and unusual items
Management expects 2023 expenditures of approximately $33.6 million, including $10.1 million for permitting, $9.1 million for corporate and administrative purposes, $2.9 million for engineering and design, and $11.5 million for early restoration and field operations. Management believes cash on hand together with the full potential DPA funding should support permitting, early restoration and construction-readiness activities beyond 2023. The Company expects additional financing will be required for pre-construction and construction.
The DPA award remains subject to a definitized agreement with the Department of Defense. Until finalized, available funding is capped at $18.6 million, or 75% of the maximum award. Funding is restricted to specified environmental, technical, permitting and construction-readiness activities and is not available for general corporate purposes.
The NEPA process remains ongoing. The SDEIS comment period closed January 10, 2023, but the filing does not provide a firm date for the Final Environmental Impact Statement or Record of Decision. Required ancillary permits also remain outstanding. The project is subject to ongoing litigation with the Nez Perce Tribe concerning alleged Clean Water Act violations; the case was stayed through June 30, 2023 for mediation and alternative dispute resolution.
Principal risks include failure or delay in obtaining permits, litigation, environmental and legacy-contamination liabilities, financing needs, inflation and cost escalation, commodity-price volatility, construction and operating risks, uncertain mineral reserve estimates, remote-site infrastructure requirements, community and tribal opposition, title risks and potential shareholder dilution. The Company has a 1.7% net smelter return royalty on future gold production.
The feasibility-study economics are projections rather than historical results. The study assumes approximately $1.263 billion of initial capital, including contingency, and a 15-year operating period. Projected life-of-mine recovered gold is 4.238 million ounces and recovered antimony is 115 million pounds. Projected life-of-mine cash costs after by-product credits are $538 per ounce of gold and projected AISC is $636 per ounce. The filing also reports total project CAPEX with contingency of approximately $1.658 billion when sustaining and closure costs are included.
Most important facts for an investor to verify
- Whether the DPA Technology Investment Agreement becomes definitized and the timing and conditions of reimbursements.
- The timing and outcome of the FEIS, draft and final Records of Decision, ancillary permits and any appeals or litigation.
- Whether the Company can secure the additional capital needed for an estimated $1.263 billion initial project investment and subsequent construction costs.
- The accuracy and continuing economic viability of the mineral reserve estimates, which were unchanged from 2021 and are based on assumed metal prices.
- Changes in the $10.8 million environmental reclamation liability and the total estimated $16.8 million ASAOC obligation.
- The status and potential cost of the Nez Perce Tribe litigation and other environmental or CERCLA obligations.
- Cash burn, 2023 spending of approximately $33.6 million and the Company’s ability to maintain liquidity without equity dilution.
- Commodity prices, inflation, labor and construction costs, particularly relative to the feasibility-study assumptions.
- Potential dilution from equity financing, outstanding equity awards and 200,000 warrants that were scheduled to expire in May 2023.