Paramount Gold Nevada Corp. — Form 10-Q Summary
Business context and reporting period. The company explores and develops precious-metal projects in Nevada and Oregon and had no mining revenue. This report covers the fiscal second quarter and six months ended December 31, 2020; comparative results are for the periods ended December 31, 2019. Amounts are in U.S. dollars.
Key financial metrics
| Metric | Three months ended Dec. 31, 2020 | Six months ended Dec. 31, 2020 | Comparable 2019 period |
|---|---|---|---|
| Mining revenue | None | None | None |
| Other income | $185,852 | $254,800 | $306,059 and $337,418, respectively |
| Net loss | $1,774,899 | $3,106,407 | $2,342,517 and $3,349,016, respectively |
| Loss per share, basic and diluted | $0.05 | $0.09 | $0.08 and $0.12, respectively |
| Cash used in operating activities | Not presented for quarter | $2,833,344 | $3,654,751 for six months |
At December 31, 2020, cash and cash equivalents were $3.50 million, down from $5.43 million at June 30, 2020. Current assets were $4.05 million and current liabilities $624,000. Non-current convertible debt, net of discount and issuance costs, was $4.76 million; there was also a $35,859 promissory note. Total liabilities were $5.79 million and stockholders’ equity $46.07 million. No operating profit or operating margin was reported; the company remains pre-production.
Material changes versus prior comparable periods
- Quarterly net loss narrowed 24%, and six-month net loss narrowed 7%, year over year. Lower exploration costs were the primary offset to higher salaries, benefits, directors’ compensation, and insurance.
- Six-month exploration expense declined 33% to $1.51 million, reflecting completion of the Grassy Mountain feasibility study and lower comparative-period study and permitting costs. Salaries and benefits rose 63% to $836,000, primarily due to incentive and stock-based compensation.
- Operating cash use decreased to $2.83 million from $3.65 million. Financing provided $897,356, principally from the at-the-market equity program; cash declined by $1.94 million over the six months.
- The company issued shares for equity financing, interest payments, services, and conversion of notes. Shares outstanding increased from 32.96 million at June 30 to 34.59 million at December 31. All 1.2 million outstanding warrants expired during the period.
Outlook, commentary, risks, and unusual items
- Management expected remaining fiscal 2021 spending of approximately $0.9 million on corporate administration, $0.75–$1.0 million on Sleeper, and $1.2 million on Grassy Mountain and Frost. It expected to fund spending with cash on hand and other capital resources, while warning that inability to obtain additional financing could significantly impair exploration and development.
- For Grassy Mountain, the feasibility study described average annual production of 47,000 ounces of gold and 55,000 ounces of silver over eight years, estimated initial capital of $97.5 million, and a $105 million NPV at a 5% discount rate. These are project-study estimates, not company guidance or current operating results. The company planned continued state and federal permitting; Oregon had approved the proposed tailings-dam plans as construction-ready from a dam-safety perspective and assigned the dam its lowest hazard rating.
- Planned work included Grassy Mountain permitting, Sleeper exploration and metallurgical/resource work, and an initial reverse-circulation drill program at Frost. Management said losses were expected to continue for the foreseeable future.
- The notes bear 7.5% annual interest, are due in 2023, and are secured by a lien on company assets; the company must maintain at least $250,000 of working capital. During the six months, $551,000 face amount of notes was converted into shares.
- After quarter-end, the company issued shares on further note conversions and for accrued interest, and sold 1,111,142 shares through its at-the-market program for approximately $1.35 million gross proceeds. These transactions added liquidity but increased share dilution.
- COVID-19 could materially affect business, financial position, results, or cash flows; the company said it could not predict the impact. It also faces exploration, permitting, mineral-reserve, funding, and reclamation-estimate risks. The filing reports no material change in risk factors from its latest 10-K and no material change in internal control over financial reporting.
Most important facts for investors to verify
- Cash runway against planned spending, future financing needs, and the amount ultimately raised under the at-the-market program.
- Current note principal, conversion terms, maturity and interest obligations, plus the effect of subsequent conversions on fully diluted shares.
- Progress and timing of Grassy Mountain state and federal permits, including completion of the revised permit application and the federal environmental review process.
- Assumptions behind the feasibility study’s production, capital, cost, metal-price, and NPV estimates, and whether project economics remain viable as assumptions change.
- Whether exploration can establish economically recoverable reserves; the $47.33 million mineral-property carrying value does not itself demonstrate recoverable reserves.
- Reclamation obligations and funding: the recorded obligation was $396,133, while the current undiscounted estimate for existing Sleeper disturbances was $4.01 million; verify bond and insurance coverage and future requirements.