You should read the following discussion and analysis of our financial condition
and results of operations for the three months ended March 31, 2022 and 2021
with our consolidated financial statements and related notes and other financial
information appearing in this Quarterly Report. Some of the information
contained in this discussion and analysis or set forth elsewhere in this
Quarterly Report, including information with respect to our plans and strategy
for our business, operations, and product candidates, includes forward-looking
statements that involve risks and uncertainties. You should review the sections
of this Quarterly Report captioned "Risk Factors" and "Cautionary Note Regarding
Forward-Looking Statements" for a discussion of important factors that could
cause our actual results to differ materially from the results described in or
implied by the forward-looking statements contained in the following discussion
and analysis.
Overview
Perpetua Resources (formerly Midas Gold Corp.) was incorporated on February 22,
2011 under the Business Corporations Act (British Columbia) (the "BCBCA"). The
Corporation was organized to hold shares in wholly owned subsidiaries that
locate, acquire, develop and restore mineral properties located principally in
the Stibnite - Yellow Pine mining district in Valley County, Idaho, USA. The
Corporation's principal asset is 100% ownership in subsidiaries that control the
Stibnite Gold Project. The Corporation currently operates in one segment,
mineral exploration in the United States. The registered office of the Perpetua
Resources is 400-725 Granville St, Vancouver, BC, V7Y 1G5, Canada and the
corporate head office is located at 201-405 S 8th St, Boise, ID 83702, USA.
COVID-19 Response
The Company has implemented policies at its offices in Boise and Donnelly
designed to ensure the safety and well-being of all employees and the people
associated with them. In that regard, to reduce risk, our employees have been
encouraged to get fully vaccinated against COVID-19, have been asked to work
remotely, avoid non-essential business travel, when possible, adhere to good
hygiene practices, and engage in social distancing. Continuation of COVID-19 in
2022 and beyond could impact employee health, workforce productivity, insurance
premiums, ability to travel, the availability of industry experts, personnel and
equipment, restrictions or delays to field work, studies, and assay results, and
other factors that will depend on future developments that may be beyond our
control.
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Recent Key Developments
2022 Outlook and Goals
Perpetua Resources' vision is to provide the United States with a domestic
source of the critical mineral antimony, develop one of the largest and
highest-grade open pit gold mines in the country and restore an abandoned
brownfield site. In 2022, Perpetua Resources continues to focus on advancing the
permitting for the Stibnite Gold Project through the National Environmental
Policy Act ("NEPA") process. The NEPA process is intended to ensure that federal
agencies and the public are informed of a proposed action's potential
environmental impacts before a final decision is made by the agency regarding
the action.
In response to public comments received on the Draft Environmental Impact
Statement ("DEIS"), Perpetua Resources submitted a refined proposed action to
the USFS in December 2020. To ensure a full analysis of the improved Project,
the USFS will issue a Supplemental Draft Environmental Impact Statement
("SDEIS") followed by an opportunity for public comment. The preliminary SDEIS
was circulated for cooperating agency review in April 2022. The publication of
the SDEIS for public review and comment is expected in early third quarter 2022.
The USFS is expected to provide a formal schedule later this year regarding the
remaining steps in the NEPA review process.
First Quarter 2022 Highlights
? Zero lost time incidents or reportable environmental spills
? Announced USFS expected to publish the SDEIS for public review and comment in
the third quarter of 2022
? Promoted Jessica Largent to CFO and further strengthened team with hiring of
Chris Fogg as Manager of Investor Relations
? Strengthened Board with appointment of Laura Dove who brings three decades of
external affairs and stakeholder management experience to Perpetua
? Launched a Sustainability Roadmap which outlines 13 goals to guide the Company
as it advances the Stibnite Gold Project towards development
The forwardlooking information contained in this section is subject to the risk
factors and assumptions contained in the "Cautionary Note Regarding
Forward-Looking Statements" and "Risks Factor" sections.
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Results of Operations
Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31,
2021
Three months ended March 31,
2022 2021
EXPENSES
Consulting $ 10,880 $ 104,917
Corporate salaries and benefits 303,411 889,889
Depreciation 11,466 19,122
Directors' fees 262,948 304,211
Exploration 4,560,053 6,580,863
Environmental liability expense - 7,473,805
Office and administrative 213,483 472,268
Professional fees 734,529 167,336
Shareholder and regulatory 158,973 251,625
Travel and related costs 5,090 126
OPERATING LOSS 6,260,833 16,264,162
OTHER EXPENSES (INCOME)
Change in fair value of warrant derivative (15,248) (486,399)
Change in fair value of convertible note derivative - (11,596,790)
Finance costs - 256,998
Foreign exchange loss 30,751 302,477
Interest income (31,442) (23,871)
Total other loss (income) (15,939) (11,547,585)
NET LOSS $ 6,244,894 $ 4,716,577
Net Loss
Net loss for the three months ended March 31, 2022 was $6.2 million compared
with a net loss of $4.7 million for the three months ended March 31, 2021. This
$1.5 million increase compared to the prior year period was primarily
attributable to a $11.6 million decrease in the gain related to the change in
fair value of the convertible note derivative, a $0.5 million decrease in the
gain related to the change in fair value of the warrant derivative and a $0.6
million increase in professional fees. These changes were partially offset by a
$7.5 million decrease in environmental liability expense, a $2.0 million
decrease in exploration expenses, and a $0.6 million decrease in corporate
salaries and benefits. As noted above, for the three months ended March 31,
2022, the Company's main focus was the continued evaluation and advancement of
the Stibnite Gold Project.
Consulting
This expense relates to consulting services provided to the Corporation that do
not relate to the exploration and evaluation of the Stibnite Gold Project.
Consulting fees for the three months ended March 31, 2022 are 90% lower than the
previous year due to consulting work to support various corporate activities in
the first quarter of 2021, including the share consolidation and listing on the
NASDAQ.
Corporate Salaries and Benefits
This expense results from salaries and benefits of the employees that are not
directly related to the exploration and evaluation of the Stibnite Gold Project,
primarily corporate employees. Salaries and benefits for the three months ended
March 31, 2022 were $0.6 million, or 66%, lower than the previous year primarily
due to severance payments made to corporate employees in the first quarter of
2021 and lower stock-based compensation.
Directors' Fees
Each of the Corporation's non-executive directors is entitled to annual base
fees paid in quarterly installments, with the independent Lead Director, Chairs
of Board Committees and Members of Board Committees receiving additional fees
commensurate with each role. Directors' fees are inclusive of cash fees and
share-based compensation (deferred share units and stock options). This
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expense for the three months ended March 31, 2022, is $41,263, or 14%, lower
than the previous year primarily due to the number of stock options vesting in
the first quarter of 2021.
Exploration
This expense relates to all exploration and evaluation expenditures related to
the Stibnite Gold Project, including labor, drilling, field operations costs,
engineering, permitting, environmental, legal and sustainability costs. The
Company's exploration expenses of $4.6 million during the three months ended
March 31, 2022 are $2.0 million, or 31%, lower than the three months ended March
31, 2021 primarily due to a $1.4 million decrease in consulting and labor cost
including lower stock based compensation expense, a $0.5 million decrease in
permitting, and a $0.2 million decrease in engineering partially offset by a
$0.3 million increase in legal and sustainability. Additional details of
expenditures incurred are as follows:
Quarters Ended
March 31, 2022 March 31, 2021
Consulting and labor cost $ 1,335,170 $ 2,763,625
Engineering 155,930 348,784
Environmental and reclamation 64,367 229,061
Field operations and drilling support 469,529 461,315
Legal and sustainability 456,365 189,124
Permitting 2,078,692 2,588,954
Exploration $ 4,560,053 $ 6,580,863Environmental Liability Expense
This expense relates to the ASAOC signed in January 2021 to voluntarily address
environmental conditions at the abandoned mine site. Upon signing of the ASAOC,
the Company recorded an immediate expense of $7,473,805 and a corresponding
environmental reclamation liability. Cost estimates were developed with the use
of engineering consultants, independent contractor quotes and the Company's
internal development team, and the timing of cash flows is based on the current
schedule for early action items. In the three months ended March 31, 2022, the
total cost estimate to complete Phase 1 early cleanup actions did not change. As
of March 31, 2022, the estimate for the environmental liability was $9.4
million.
Office and Administrative
This expense is predominantly insurance policies for the U.S. offices and is
$258,785, or 55%, lower for the three months ended March 31, 2022, than the
three months ended March 31, 2021 primarily due to lower insurance premiums.
Professional Fees
This expense relates to the legal and accounting costs of the Corporation. The
costs for the three months ended March 31, 2022 were $567,193, or 339%, higher
than the three months ended March 31, 2021 primarily due to legal fees to
support the Company's transition to a U.S. Domestic Issuer and increased
accounting fees related to the change in the basis of accounting for the
Company's consolidated financial statements from international standards to U.S.
GAAP.
Shareholder and Regulatory
This expense relates to marketing, licenses and fees, and shareholder
communications. The expense for the three months ended March 31, 2022 is
$92,562, or 37%, lower than the three months ended March 31, 2021 primarily due
to fees related to the NASDAQ listing which commenced in February 2021.
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Change in Fair Value of Warrant Derivative
The Corporation issued 200,000 warrants in a financing transaction in May 2013,
with an exercise price denominated in Canadian dollars. The Company determined
that warrants with an exercise price denominated in a currency that is different
from the entity's functional currency should be classified as a derivative and
carried at their fair value. Any changes in their fair value from period to
period have been recorded as a gain or loss. There are no circumstances under
which Perpetua Resources will be required to pay cash upon exercise or expiry of
the warrants or finder's options (see Note 4 in the Condensed Consolidated
Financial Statements - unaudited).
Change in Fair Value of Convertible Note Derivative
The Corporation issued unsecured convertible notes with an interest rate of
0.05% per annum in March 2016 and March 2020 (together, the "Convertible Notes")
with an exercise price denominated in Canadian dollars. The Company determined
that the Convertible Notes with an exercise price denominated in a currency that
is different from the entity's functional currency should be classified as a
derivative and carried at their fair value. Any changes in their fair value from
inception to balance sheet date have been recorded as a gain or loss in the
Consolidated Statements of Operations. The convertible note derivative is valued
at fair value. The decrease in fair value is due to the conversion of
Convertible Notes during the year. During 2021, the remaining Convertible Notes
in the aggregate principal amount of C$15,409,901 were converted for 4,351,850
common shares of Perpetua Resources at a conversion rate of C$3.541 per common
share (see Note 4 in the Condensed Consolidated Financial Statements -
unaudited).
Finance Costs
Finance costs for the Corporation include accretion of note discount and
interest expense related to the Convertible Notes described above. No such
expense was recognized for the three months ended March 31, 2022 given the
remainder of the Convertible Notes were converted in 2021.
Foreign Exchange Loss
Changes in foreign exchange are driven by the change in value of the Canadian
Dollar compared to the U.S. Dollar and the impact the change has on translating
the Corporation's Canadian dollar denominated balances. The impact was larger in
the first quarter of 2021 compared to the first quarter of 2022 primarily due to
the translation on the Convertible Notes and convertible note derivatives which
were fully converted in 2021.
Interest Income
This income results from interest received on the Company's cash balances.
Interest income increased $7,572 in the three months ended March 31, 2022,
compared to the three months ended March 31, 2021 as a result of higher average
cash balances in the first quarter of 2022.
Liquidity and Capital Resources
Capital resources of Perpetua Resources consist primarily of cash and liquid
short-term investments. As of March 31, 2022, Perpetua Resources had cash and
cash equivalents totaling approximately $41.2 million, approximately $1.0
million in other current assets and $2.0 million in trade and other payables.
In August 2021, the Corporation completed a public offering for total gross
proceeds of $57.5 million to be used to continue permitting, early restoration
and field operations, engineering and design and general corporate purposes.
With its current capital resources, Perpetua Resources believes that it has
sufficient funds to continue to advance the regulatory process related to
permitting for mine development beyond 2022. Perpetua Resources plans to:
Continue engaging with Project stakeholders to provide those stakeholders with
? the opportunity for a better understanding of the Project concepts and to
provide a forum for such stakeholders to provide further input into the
Project;
Continue to collect environmental baseline data in support of the ongoing
? regulatory processes related to permitting for site restoration and
redevelopment of the Project;
? Continue to advance the regulatory process for the restoration and
redevelopment of the Project; and
? Continue to advance the voluntary early cleanup actions under the ASAOC.
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It is management's opinion, based on the Corporation's current capital resources
and liquidity that the Corporation will have sufficient assets to discharge its
liabilities as they become due, to continue to advance the Stibnite Gold Project
for at least 12 months from the date these first quarter 2022 financial
statements are issued, and to meet its administrative and overhead requirements
for more than a year. Future financings to fund construction are anticipated
through debt, equity, project specific debt, and/or other means. Our continued
operations are dependent on our ability to obtain additional financing or to
generate future cash flows. However, there can be no assurance that we will be
successful in our efforts to raise additional capital on terms favorable to us,
or at all.
Our anticipated expenditures in fiscal year 2022 are approximately $27.5
million, which are expected to be funded from cash on hand. These expenditures
include an estimated $12.2 million to fund permitting of the Stibnite Gold
Project, $10.5 million for general corporate purposes and administrative costs,
$0.7 million for engineering and design work and $4.1 million to advance early
restoration and continue field operations. These costs are subject to change due
to cost over-runs, delays or other unbudgeted events.
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PERPETUA RESOURCES CORP. 
