Overview
We are a company engaged in the business of acquiring, exploring and developing precious metal projects inthe United States of America .Paramount owns advanced stage exploration projects in the states ofNevada andOregon . We enhance the value of our projects by implementing exploration and engineering programs that are likely to expand and upgrade known mineralized material to reserves. The following discussion updates our outlook and plan of operations for the foreseeable future. It also analyzes our financial condition and summarizes the results of our operations for the years endedJune 30, 2021 and 2020 and compares each year's results to the results of the prior year.
Operating Highlights:
InApril 2021 ,Paramount purchased 152 unpatented lode mining claims ("South Sleeper Claims") located two miles south of theCompany's Sleeper Gold Project .Paramount paid a total consideration of$365,441 in a combination of cash and common stock of the Company. The mining claims are subject to a mineral production royalty based on net smelter returns of 1%. The South Sleeper Claims are without known mineral reserves. Also, during the three-month period endedMarch 31, 2021 ,Paramount continued to progress its permitting activities at itsGrassy Mountain Project . In addition to conducting several meetings with theState of Oregon to address commentsParamount received on its initial Consolidated Mining Application, the Company received acceptance of its wildlife baseline data report for its proposed gold mine inMalheur County . To date, 20 of 22 baseline data reports have been accepted by the state regulators. The final two reports, ground water and geochemistry, are expected to be filed in advance of submitting the revised Consolidated Permit Application. InSeptember 2020 , we announced the results of a Canadian NI 43-101 Feasibility Study ("FS") for ourGrassy Mountain Project inOregon . The FS was completed by a group of industry leading consulting firms led byAusenco Engineering Canada Inc. ("Ausenco") who managed the overall study and were responsible for processing and infrastructure design and oversaw metallurgical testing;Mine Development Associates ("MDA") who updated the mineral resource estimate and completed the mine planning and reserves estimation;Golder Associates designed the tailings storage facility; and EM Strategies oversaw the environmental aspects of the FS. This mining scenario in the FS results in an average annual production of 47,000 ounces of gold and 55,000 ounces of silver for eight years. The metal prices used for the economic analysis includes$1,472 per ounce of gold sold and$16.64 per ounce of silver sold. The life of mine average cash operating costs are estimated to be$583 per gold ounce including silver revenues as by product credit and the total initial capital requirements are estimated to be$97.5 million resulting in a net present value of$105 million using a 25
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5% discount rate. There can be no assurance that the foregoing scenario can be achieved, or if achieved, that it would generate the anticipated economic return. In October, 2020, we filed the completed FS on SEDAR as required by Canadian securities laws.
InJuly 2020 , the Company announced that theOregon Water Resource Department ("OWRD") had reviewed and approved the plans and specifications for the tailings dam proposed for the Grassy Mountain mine and stated that from a safety perspective the plans are construction ready. The OWRD reviewed the data within the Consolidated Permit Application whichParamount submitted inNovember 2019 and which included all tailings design drawings, safety analysis, field data collected and laboratory testing. The OWRD and its engineering team are required to review and evaluate the data and design, classify the hazard level (high, significant, or low hazard rating) and evaluate readiness for construction from a dam safety perspective. Considering the project's remote geographic location, low population density, arid nature with no rivers or permanent streams in close proximity, seismic analysis and all other data compiled, OWRD has rated the dam as low hazard, its lowest risk level. The approval for construction is valid for 5 years with extensions possible on request. .
Outlook and Plan of Operation:
We believe that investors will gain a better understanding of our company if they understand how we measure and talk about our results. As an exploration and development company, we recognize the importance of managing our liquidity and capital resources. We pay close attention to non-discretionary cash expenses and look for ways to minimize them when possible. We ensure we have sufficient cash on hand to meet our annual land holding costs as the maintenance of mining claims and leases are essential to preserve the value of our mineral property assets.
For the upcoming fiscal year, we intend to undertake the following:
Grassy Mountain Project :Paramount expects to respond to theState of Oregon's CPA completeness review ("Review") received inFebruary 2019 . The Review provided included proposed resolutions and additional information required by the Company and will assist the Company in submitting a revised CPA. The Company expects the revised CPA to address all the comments and requests for additional information with the objective of submitting a complete revised CPA that allows theState of Oregon to determine whether to issue a state mining permit for theGrassy Mountain Project . In addition to theState of Oregon permitting activities,Paramount expects to respond to BLM comments it received on its PoO. Once all the comments have been addressed, the BLM will register a Notice in theFederal Register once the application is deemed complete. The Notice initiates the EIS process under the National Environmental Policy Act. To complete these activitiesParamount will engage specialized mining consulting firms, work with State and Federal contracted third parties and work directly with both state and federal permitting agencies.
During our fiscal year-endedJune 30, 2021 ,Paramount initiated several targeted programs including metallurgical testing to enhance the value of theSleeper Gold Project . As a result of a review of all geological, geochemical and geophysical data, the Company has identified several targets for exploration drilling. The purpose of an exploration drill at theSleeper Gold Project is to locate additional higher-grade mineralization in the close proximity of the original Sleeper pit or in the large mining claim package owned by the Company and to facilitate further metallurgical testing. This commencement of this exploration program is subject to having sufficient capital on hand.
The Company will implement an initial reverse circulation drill program to test historical drill results and additional selective targets.
Comparison of Operating Results for the year ended
Results of Operations We did not earn any revenue from mining operations for the years endedJune 30, 2021 and 2020. During the year endedJune 30, 2021 , we completed various activities and milestones as described above in operating highlights. Other normal course of business activities included filing annual mining claim fees with the BLM, reclamation work at the Sleeper mine site and on-going reviews of its mining claims were completed. 26
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Net Loss
Our net loss for the year endedJune 30, 2021 was$5,903,618 compared to a net loss of$6,430,141 in the previous year. The decrease of approximately 8% is fully described below. We will continue to incur losses for the foreseeable future as we continue with our planned exploration and development programs.
Expenses
Exploration, Reclamation and Land Holding Costs
For the year endedJune 30, 2021 , exploration expenses were$2,816,685 compared to$4,201,138 in the prior year. This represents a decrease of 33% or$1,384,453 mainly due to the Company not incurring comparable costs as in the previous fiscal year to complete its feasibility study at theGrassy Mountain Project and incurring a higher level of permitting costs to prepare and submit its CPA with theState of Oregon . The feasibility study for theGrassy Mountain Project was commenced inJuly 2019 and completed inOctober 2020 . For the year-endedJune 30, 2021 , the Company was focused on working with theState of Oregon to address information requests required to advance the permitting process and submit a revised consolidated permit application. Total exploration expenses at Grassy Mountain during the year were$1,949,753 . Included, for the year-endedJune 30, 2021 , were expenses of$324,516 (2020 -$723,279 ) related to the Company's reclamation activities at theSleeper Project . Reclamation work continues to focus on reclaiming the past mine operation collection ponds and continued monitoring as required by theState of Nevada and the BLM. These reclamation expenses are reimbursed from funds held in a commutation account as part of the Company's insurance program for outstanding reclamation and environmental obligations at theSleeper Gold Project . For the year endedJune 30, 2020 , the Company submitted the consolidated mining permit application with theState of Oregon and submitted a revised POO for itsGrassy Mountain Project . It also continued to work on its feasibility study for the Grassy Mountain project.
For the year ended
Salaries and Benefits For the year endedJune 30, 2021 , salary and benefits increased by 39% or by$383,849 from the prior year to$1,373,451 . Salary and benefits are comprised of cash and stock-based compensation of the Company's executive and corporate administration teams. The increase in expenses was primarily due to stock-based compensation incurred for new option grants, as well as bonuses awarded to the Company's employees. Included in the salary and benefits expense amount for the year endedJune 30, 2021 and 2020 was non-cash stock based compensation of$332,786 and$132,286 respectively.
Directors' Compensation
For the year ended
Professional Fees and General and Administration
For the year endedJune 30, 2021 , professional fees were$174,039 compared to$166,894 in the prior year. This represents a increase of 4% or$7,145 . Professional fees included legal, advisory and consultant expenses incurred on corporate and operational activities being performed by the Company on a period-by-period basis. For the year endedJune 30, 2021 , general and administration expenses decreased by 2% to$483,608 from$495,628 in the prior year. In general, these expenses remained stable from the prior year comparable period and any decrease was due to reduced travel related expenses due to restrictions resulting from the COVID-19 global pandemic.
Liquidity and Capital Resources
As an exploration and development company,Paramount funds its operations, reclamation activities and discretionary exploration programs with its cash on hand. AtJune 30, 2021 , we had cash and cash equivalents of$3,113,064 compared to$5,434,081 as atJune 27
-------------------------------------------------------------------------------- 30, 2020. InMay 2020 , the Company established an "at the market" equity offering program ("ATM") withCantor Fitzgerald & Co. andCanaccord Genuity LLC to proactively increase financial flexibility. During the fiscal year endedJune 30, 2021 the Company issued 3.209,133 shares for net proceeds of$3,722,554 under the program and subsequent to the year -endedJune 30, 2021 issued 2,189,936 shares for gross proceeds of$1,875,521 . AtJune 30, 2021 , the Company's prepaid expenses were$1,152,396 compared to$442,596 for the year-endedJune 30, 2020 . Included in the total for the year-endedJune 30, 2021 were annual payments to hold the Company's mining claims in the for all its mineral properties of$548,127 . The prepaid expenses also included amounts to secure a drill rig for theParamount's upcoming drill program at the Frost project. Drill rigs and related services have been in high-demand from an industry perspective as the US economy re-opens from the restrictions placed due to the COVID-19 pandemic.
The main uses of cash were comprised of the following material amounts:
• Cash used to fund our operations which included general and administration
expenses, land holding costs, exploration programs at our Grassy Mountain
of
In addition to cash used in operating activities, the Company used and received cash as follows:
• Cash used to purchase mining claims in the
• Cash received from equity financings of
We anticipate our twelve-month cash expenditures for our fiscal year ending
•
For discretionary exploration and permitting programs, subject to available cash on hand and additional share issuances, we are budgeting the following amounts:
•
activities •$0.7 million on theFrost Project exploration programs •$1.25 million on theSleeper Gold Project exploration programs Our anticipated expenditures will be funded by our cash on hand and other capital resources. Historically, we and other similar exploration and development public companies have accessed capital through equity financing arrangements or by the sale of royalties on its mineral properties. If, however we are unable to obtain additional capital or financing, our exploration and development activities will be significantly adversely affected.
Contractual Obligations
The following table summarizes our obligations and commitments as ofJune 30, 2021 to make future payments under certain contracts, aggregated by category of contractual obligation, for specified time periods: Payments due by period Contractual Obligations Total Less than 1 year 1-3 years 4-5 years More than 5 years Accounts Payable & Accrued Liabilities$ 638,950 $ 638,950 - - - Asset Retirement Obligations$ 1,849,644 $ 310,022$ 581,575 $ 44,892 $ 913,156 Total$ 2,488,594 $ 948,972$ 581,575 $ 44,892 $ 913,156 Critical Accounting Policies Management considers the following policies to be most critical in understanding the judgments that are involved in preparing the Company's consolidated financial statements and the uncertainties that could impact the results of operations, financial condition and cash flows. Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. Management believes the Company's critical accounting policies are those related to mineral property acquisition costs, exploration and development cost, stock-based compensation, derivative accounting and foreign currency translation. 28
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Estimates
The Company prepares its consolidated financial statements and notes in conformity to United States Generally Accepted Accounting Principles ("U.S. GAAP") and requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, including those related the adequacy of the Company's reclamation and environmental obligation, share based compensation, valuation of deferred tax asset and assessment of impairment of mineral properties. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Mineral property acquisition costs
The Company capitalizes the cost of acquiring mineral properties and will amortize these costs over the useful life of a property following the commencement of production or expense these costs if it is determined that the mineral property has no future economic value or the properties are sold or abandoned. Costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts of the specific mineral property at the time the payments are made.
The amounts recorded as mineral properties reflect actual costs incurred to acquire the properties and do not indicate any present or future value of economically recoverable reserves.
Exploration expenses
We record exploration expenses as incurred. When we determine that precious metal resource deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration expenses related to such reserves incurred after such a determination will be capitalized. To date, we have not established any proven or probable reserves and will continue to expense exploration costs as incurred.
Asset Retirement Obligation
The fair value of the Company's asset retirement obligation ("ARO") is measured by discounting the expected cash flows using a discount factor that reflects the credit-adjusted risk free rate of interest, while taking into account the inflation rate. The Company prepares estimates of the timing and amounts of expected cash flows and ongoing reclamation expenditures are charged against the ARO as incurred to the extent they relate to the ARO. Significant judgments and estimates are made when estimating the fair value of ARO.
Stock Based Compensation
For stock option grants with market conditions that affect vesting, the Company uses a lattice approach incorporating a Monte Carlo simulation to value stock options granted. Option awards are generally granted with an exercise price equal to the market price ofParamount's stock at the date of grant and have contractual lives of 5 years. To better align the interests of its key executives, employee and directors with those of its shareholders a significant portion of those share option awards will vest contingent upon meeting certain stock price appreciation performance goals and other performance conditions. Option and share awards provide for accelerated vesting if there is a change in control (as defined in the employee share option plan). For stock option grants made in the fiscal years endedJune 30, 2021 and 2020, the Company used the Black-Scholes option valuation model to value stock options granted. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model requires management to make estimates which are subjective and may not be representative of actual results. Changes in assumptions can materially affect estimates of fair values. For purposes of the calculation, the following assumptions were used for the fiscal years endedJune 30, 2021 and 2020: 2021 2020 WA Risk free interest rate .22% 1.60% WA Expected dividend yield 0% 0% WA Expected stock price volatility 60% 61% WA Expected life of options 5 years 5 years 29
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Off-Balance Sheet Arrangements
We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital resources.
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