Perpetua Resources Corp. — Q2 2023 Form 10-Q Summary
Business context and reporting period
Perpetua Resources is a British Columbia corporation focused on mineral exploration, permitting, restoration, and development of the Stibnite Gold Project in Idaho. The project is intended to support domestic gold and antimony production and restoration of an abandoned mining site. The company has no operating mine or commercial revenue and reports as a single mineral-exploration segment.
The filing covers the three and six months ended June 30, 2023. The condensed consolidated financial statements are unaudited. As of August 4, 2023, the company had 63,165,367 common shares outstanding.
Financial position and results
| Metric | Q2 2023 / June 30, 2023 | Comparable period / December 31, 2022 |
|---|---|---|
| Revenue | No operating revenue reported | No operating revenue reported |
| Net loss — three months | $7.7 million | $6.3 million in Q2 2022 |
| Net loss — six months | $12.3 million | $12.5 million in the first six months of 2022 |
| Basic and diluted loss per share — three months | $0.12 | $0.10 |
| Basic and diluted loss per share — six months | $0.19 | $0.20 |
| Cash and cash equivalents | $14.1 million | $22.7 million at December 31, 2022 |
| Total assets | $94.2 million | $99.4 million at December 31, 2022 |
| Total liabilities | $19.0 million | $13.6 million at December 31, 2022 |
| Shareholders’ equity | $75.3 million | $85.8 million at December 31, 2022 |
Six-month operating expenses were $20.0 million, compared with $12.6 million in the prior-year period. Exploration expense increased to $12.0 million from $8.9 million, principally because of higher engineering and permitting costs. The company recorded a $5.0 million Clean Water Act settlement expense in Q2 2023.
Grant income of $4.1 million in Q2 and $7.4 million for the six months partially offset expenses. This included $4.1 million and $7.3 million, respectively, related to the Department of Defense Technology Investment Agreement. Interest income was $0.2 million in Q2 and $0.3 million for the six months.
Net cash used in operating activities was $8.5 million for the six months, compared with $11.7 million in the prior-year period. Investing activities used $0.1 million, financing activities provided $0.1 million from option exercises, and ending cash was $14.1 million. The company has no senior debt reported; lease liabilities were approximately $0.1 million and the CWA settlement payable was $5.0 million.
Material changes versus the prior comparable period
- Q2 net loss increased by approximately $1.4 million, primarily because of the $5.0 million CWA settlement charge and a $2.0 million increase in exploration expense, partly offset by $4.1 million of new grant income and lower environmental liability expense.
- Six-month net loss decreased by approximately $0.2 million despite higher exploration expense and the settlement charge, primarily because of $7.4 million in new grant income and lower professional fees.
- Exploration expense increased 47% year over year in Q2 and 36% for the six months, reflecting higher engineering, permitting, consulting, and labor costs.
- Cash declined by $8.6 million from year-end 2022, while total liabilities increased by $5.4 million, including recognition of the CWA settlement payable.
- The company entered into a $20 million controlled equity offering program in May 2023. No shares had been sold under the program as of June 30, 2023.
- The company’s 200,000 outstanding warrants expired in May 2023.
Guidance, outlook, risks, contingencies, and unusual items
Management expects to continue advancing the Stibnite Gold Project through the NEPA and ancillary permitting processes, voluntary environmental cleanup, environmental monitoring, and construction-readiness activities. The USFS schedule contemplated a Final Environmental Impact Statement and draft Record of Decision by the end of 2023 and a final Record of Decision in early 2024, but the company cautions that the schedule is not binding and may be delayed or changed.
The DOD definitized the Technology Investment Agreement on July 25, 2023 at a not-to-exceed amount of $24.8 million. The funding is restricted primarily to permitting, environmental baseline studies, technical studies, and construction-readiness activities. Management expects to recognize approximately $10.3 million of additional TIA grant income over the next six months and expects approximately $17.6 million of 2023 expenditures to be funded through DPA reimbursements.
The company estimates 2023 expenditures of approximately $38.7 million, including $11.1 million for permitting, $9.2 million for general corporate and administrative costs, $6.3 million for engineering and design, and $12.1 million for early restoration and field operations. Long-term project development capital is estimated at approximately $1.3 billion according to the technical report referenced in the filing.
Management’s liquidity forecast indicates that cash resources available for expenses not eligible for DPA reimbursement may be exhausted in the first quarter of 2024. The filing states that absent additional financing, the company may be unable to meet ongoing obligations or continue critical permitting efforts. This condition raises substantial doubt about the company’s ability to continue as a going concern for at least one year after issuance of the interim financial statements.
The August 8, 2023 CWA Settlement Agreement, subject to regulatory and court approval, requires total payments of $5.0 million through 2027: $4.0 million to a South Fork Salmon Water Quality Enhancement Fund and $1.0 million for legal expenses. The first payments could begin in the first half of 2024. The litigation would initially be dismissed without prejudice and with prejudice after payment obligations are satisfied.
Environmental reclamation liabilities totaled $9.0 million at June 30, 2023, including $8.4 million classified as current. The company expects inflation, fuel costs, labor availability, permitting delays, litigation, environmental obligations, commodity prices, access to financing, and the ability to obtain required approvals to materially affect future results.
Most important facts for investors to verify
- Whether the CWA Settlement Agreement receives required review and court approval, and the timing and source of the related payments.
- Whether the company can raise additional equity, debt, government funding, or project financing before projected liquidity exhaustion in Q1 2024.
- The restrictions, reimbursement timing, and remaining availability under the $24.8 million DPA/TIA award.
- Progress and timing of the FEIS, draft and final Records of Decision, and ancillary permits for the Stibnite Gold Project.
- Changes to the $9.0 million environmental reclamation liability and the company’s ability to fund ASAOC obligations.
- Whether the project’s estimated development capital requirement of approximately $1.3 billion can be financed and whether project economics, reserves, and permits support construction.
- Potential dilution from the unused $20 million equity offering program and outstanding equity awards.