Paramount Gold Nevada Corp. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2019, the first quarter of Paramount’s fiscal 2020. The filing compares results with the three months ended September 30, 2018. Paramount is an exploration and development company with projects in Nevada and Oregon; it reported no revenue from mining operations.
Key financial metrics
| Metric | September 30, 2019 / quarter | Comparable or prior period |
|---|---|---|
| Other income / total revenue | $31,359 | $104,521 in Q1 FY2019 |
| Total expenses | $1,023,600 | $1,167,883 |
| Net loss | $1,006,499 | $1,058,893 |
| Loss per share, basic and diluted | $0.04 | $0.04 |
| Cash used in operating activities | $1,477,910 | $1,642,739 |
| Cash and cash equivalents | $4,187,587 | $463,690 at June 30, 2019 |
| Total assets | $54,280,216 | $49,275,729 at June 30, 2019 |
| Convertible debt, carrying value | $5,204,452 | None at June 30, 2019 |
| Stockholders’ equity | $47,327,697 | $47,329,742 at June 30, 2019 |
Current liabilities were $881,758, compared with current assets of $5,836,350. The company’s $47.1 million of mineral properties comprised the Sleeper and Grassy Mountain projects. It has not established proven or probable reserves; exploration costs are expensed as incurred. No operating margin was reported because the company had no mining revenue.
Material changes and operating performance
- Net loss narrowed by about 5% year over year. Total expenses fell about 12%, while other income declined about 70%, primarily because reimbursement of reclamation costs was lower.
- Exploration expense decreased 3% to $458,572; Grassy Mountain accounted for $350,375. Land-holding costs fell 15% to $137,577, which management attributed mainly to dropping non-essential leased claims.
- Cash rose by $3.72 million during the quarter, principally due to $5.20 million of net proceeds from convertible notes, partly offset by operating cash use of $1.48 million. There was no investing cash flow.
- Shares outstanding increased to 27,616,745 from 26,519,954. The company issued 1,096,791 shares, valued at $976,144, to Ausenco for Grassy Mountain feasibility-study services; the shares are held in escrow pending delivery of the study.
Outlook, financing, and risks
- Management expects to submit a consolidated mining-permit application to Oregon and a plan of operations to the Bureau of Land Management for Grassy Mountain, and to continue the feasibility study. Ausenco’s study was expected to be completed in mid-2020. The company also planned selective exploration at the Frost Project.
- For the remainder of fiscal 2020, management estimated expenditures of $1.3 million for corporate administration, $0.5 million for Sleeper, and $3.0 million for Grassy Mountain. These are plans, not guaranteed outcomes. Management said spending would be funded by cash on hand and other capital resources.
- The September financing comprised notes with $5.478 million face value, issued at 97.5% of face and due in 2023. They bear 7.5% annual interest, payable semi-annually, and are convertible at $1.00 per share. The notes are secured by a lien on all company assets; the company must maintain at least $250,000 of working capital. Paramount may force conversion after the second anniversary if its share price stays above $1.75 for 20 consecutive trading days.
- Management expects continued losses and says the company does not generate cash from operations. It warned that inability to obtain additional capital could significantly impair exploration and development. Project advancement also depends on permitting, feasibility work, and whether mineral properties can be shown to contain economically recoverable reserves.
- Reclamation and environmental obligations totaled about $963,596, including a $97,287 current portion. The estimated undiscounted reclamation cost for existing Sleeper disturbances was $3,977,751; management said reclamation expenses are reimbursed under an insurance program. Cash balances exceeded federally insured limits by $3.89 million.
- The filing reported no material change in risk factors from the June 30, 2019 Form 10-K, and no material change in internal control over financial reporting. Management assessed disclosure controls as effective.
Important facts for investors to verify
- Whether the Grassy Mountain feasibility study and state and federal permitting proceed on the stated timetable and within the planned budget.
- How long available cash will support operating plans, and whether additional financing or other capital resources will be needed.
- Compliance with the secured-note working-capital covenant, and the notes’ interest, maturity, collateral, and potential conversion-related dilution.
- Whether reclamation reimbursements and insurance coverage remain sufficient and timely, and how estimated reclamation obligations may change.
- Whether exploration and feasibility work establish economically recoverable reserves; the filing states that none have been established to date.