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OFFON

PARAMOUNT GOLD NEVADA CORP.

(PZG)
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PARAMOUNT GOLD NEVADA : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

09/17/2021 | 05:33pm EDT

Overview


We are a company engaged in the business of acquiring, exploring and developing
precious metal projects in the United States of America. Paramount owns advanced
stage exploration projects in the states of Nevada and Oregon. 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 ended June 30, 2021 and 2020 and
compares each year's results to the results of the prior year.

Operating Highlights:




In April 2021, Paramount purchased 152 unpatented lode mining claims ("South
Sleeper Claims") located two miles south of the Company'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 ended March 31, 2021, Paramount continued to
progress its permitting activities at its Grassy Mountain Project. In addition
to conducting several meetings with the State of Oregon to address comments
Paramount received on its initial Consolidated Mining Application, the Company
received acceptance of its wildlife baseline data report for its proposed gold
mine in Malheur 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.



In September 2020, we announced the results of a Canadian NI 43-101 Feasibility
Study ("FS") for our Grassy Mountain Project in Oregon. The FS was completed by
a group of industry leading consulting firms led by Ausenco 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

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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.




In July 2020, the Company announced that the Oregon 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 which Paramount submitted in November 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 the State of Oregon's
CPA completeness review ("Review") received in February 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
the State of Oregon to determine whether to issue a state mining permit for the
Grassy Mountain Project. In addition to the State 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 the Federal Register once the application is deemed complete. The Notice
initiates the EIS process under the National Environmental Policy Act.  To
complete these activities Paramount will engage specialized mining consulting
firms, work with State and Federal contracted third parties and work directly
with both state and federal permitting agencies.

Sleeper Gold Project:


During our fiscal year-ended June 30, 2021, Paramount initiated several targeted
programs including metallurgical testing to enhance the value of the Sleeper
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 the Sleeper 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.

Frost Project:

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 June 30, 2021 as compared to June 30, 2020


Results of Operations

We did not earn any revenue from mining operations for the years ended June 30,
2021 and 2020. During the year ended June 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.

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Net Loss


Our net loss for the year ended June 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 ended June 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 the Grassy Mountain Project and
incurring a higher level of permitting costs to prepare and submit its CPA with
the State of Oregon. The feasibility study for the Grassy Mountain Project was
commenced in July 2019 and completed in October 2020.   For the year-ended June
30, 2021, the Company was focused on working with the State 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-ended June 30, 2021, were expenses of $324,516 (2020 -
$723,279) related to the Company's reclamation activities at the Sleeper
Project. Reclamation work continues to focus on reclaiming the past mine
operation collection ponds and continued monitoring as required by the State 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 the Sleeper Gold Project.

For the year ended June 30, 2020, the Company submitted the consolidated mining
permit application with the State of Oregon and submitted a revised POO for its
Grassy Mountain Project. It also continued to work on its feasibility study for
the Grassy Mountain project.

For the year ended June 30, 2021, land holding costs decreased by 9% or by $52,577 from the prior year to $540,401. The decrease is primarily due to not incurring lease costs for non-essential mining claims leased from third parties.




Salaries and Benefits

For the year ended June 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 ended June 30, 2021 and 2020 was non-cash stock based compensation of
$332,786 and $132,286 respectively.

Directors' Compensation

For the year ended June 30, 2021, directors' compensation increased by 72% or by $66,640 from the prior year ended June 30, 2020. The increase is due to the stock-based compensation recorded in the current year-ended June 30, 2021 compared to the prior year ended June 30, 2020.

Professional Fees and General and Administration


For the year ended June 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 ended June 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. At June 30, 2021, we had cash and cash equivalents of $3,113,064 compared
to $5,434,081 as at June

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30, 2020. In May 2020, the Company established an "at the market" equity
offering program ("ATM") with Cantor Fitzgerald & Co. and Canaccord Genuity LLC
to proactively increase financial flexibility. During the fiscal year ended June
30, 2021 the Company issued 3.209,133 shares for net proceeds of $3,722,554
under the program and subsequent to the year -ended June 30, 2021 issued
2,189,936 shares for gross proceeds of $1,875,521. At June 30, 2021, the
Company's prepaid expenses were $1,152,396 compared to $442,596 for the
year-ended June 30, 2020. Included in the total for the year-ended June 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 the Paramount'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 $ 5,956,071.

In addition to cash used in operating activities, the Company used and received cash as follows:

• Cash used to purchase mining claims in the State of Nevada of $87,500;

• Cash received from equity financings of $3,722,554.

We anticipate our twelve-month cash expenditures for our fiscal year ending June 30, 2022 to be as follows:

$2.3 million on corporate and general expenses

For discretionary exploration and permitting programs, subject to available cash on hand and additional share issuances, we are budgeting the following amounts:

$2.0 million on the Grassy Mountain Project state and federal permitting

        activities


  • $0.7 million on the Frost Project exploration programs


  • $1.25 million on the Sleeper 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 of June 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.

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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 of Paramount'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 ended June 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 ended June 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




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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.

© Edgar Online, source Glimpses

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