Paramount Gold Nevada Corp. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2020 (the first quarter of fiscal 2021), compared with the three months ended September 30, 2019. The filing is for 2020 Q1 on a fiscal-year basis, not calendar-year Q1. Paramount is an exploration and development company; it reported no revenue from mining operations.
Financial results and position
| Metric | Quarter ended Sep. 30, 2020 | Prior-year quarter |
|---|---|---|
| Other income / total revenue | $68,948 | $31,359 |
| Total expenses | $1,277,995 | $1,023,600 |
| Net loss | $1,331,508 | $1,006,499 |
| Loss per share, basic and diluted | $0.04 | $0.04 |
| Cash used in operating activities | $1,713,117 | $1,477,910 |
| Cash and cash equivalents at period end | $4,491,478 | $5,434,081 at June 30, 2020 |
- Net loss increased 32%, driven in part by higher exploration spending, salaries and benefits, professional fees, and interest and service charges.
- Exploration expense was $636,027, up 39%; land-holding costs were $131,183, down from $137,577. Total expenses rose about 25%.
- Operating cash outflow was partly offset by $770,514 in net proceeds from an at-the-market equity offering. Cash declined by $942,603 during the quarter.
- Current assets were $5.21 million and current liabilities were $599,385. Total liabilities were $6.19 million, including $5.08 million of convertible debt reported net of discount and issuance costs.
- The 2019 secured convertible notes carry 7.5% annual interest, are due in 2023, and are convertible at $1 per share. The notes are secured by a lien on company assets; the company must maintain at least $250,000 of working capital.
- Stock issued during the quarter included 595,281 shares for financing, 183,395 shares for accrued interest, and 200,000 shares on conversion of notes. After quarter-end, a further 350,609 shares were issued on conversion of notes.
Projects, outlook, and risks
- Paramount reported Oregon Water Resources Department approval of the proposed Grassy Mountain tailings-dam plans as construction-ready from a dam-safety perspective, with a low-hazard rating. The approval is valid for five years, with extensions possible.
- A September feasibility-study summary for Grassy Mountain estimated average annual production of 47,000 ounces of gold and 55,000 ounces of silver over eight years. The study used gold and silver prices of $1,472 and $16.96 per ounce, respectively, and estimated initial capital of $97.5 million and an NPV of $105 million at a 5% discount rate. These are project-study estimates, not company guidance or operating results.
- Management planned continued Grassy Mountain permitting and responses to state and federal review comments; Sleeper exploration and evaluation work; and an initial reverse-circulation drill program at Frost.
- For the remainder of fiscal 2021, management estimated spending of $1.35 million on corporate administration, $0.85–$1.1 million on Sleeper, and $2.0 million on Grassy Mountain and Frost. It expected to fund spending from cash and other capital resources, while warning that failure to obtain additional financing could significantly harm exploration and development activities.
- The company expects losses to continue and stated it does not generate operating cash flow. It cited uncertainty around economically recoverable reserves, permitting and financing, and potential material effects from COVID-19. Management said most work was being performed remotely.
- Reclamation and environmental obligations totaled $566,975 at quarter-end. The filing gives an undiscounted reclamation-cost estimate of $4,010,403 for existing Sleeper disturbances; actual costs could differ from estimates.
- Management reported no material change in the risk factors from its fiscal 2020 Form 10-K, no material change in internal control over financial reporting, and effective disclosure controls at quarter-end.
Important facts for investors to verify
- Available funding and expected cash needs against the planned remaining-year expenditures, including the company’s ability to raise additional capital.
- Progress and timing of Grassy Mountain state and federal permits, the revised permit application, and the environmental impact statement process.
- The complete feasibility study and the assumptions underlying its production, capital-cost, and NPV estimates; these estimates are not guarantees of results.
- Convertible-note balance, interest burden, future conversions and related dilution; verify the post-quarter share conversion disclosures.
- Reclamation obligations, insurance and bond coverage, and whether actual closure costs may differ materially from estimates.