UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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PERPETUA RESOURCES CORP.
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | |
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1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and “forward-looking information” within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project,” “outlook,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Forward-looking statements are based on certain estimates, beliefs, expectations and assumptions made in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that may be appropriate.
Forward-looking statements necessarily involve unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed or implied in such statements. Due to the risks, uncertainties and assumptions inherent in forward-looking information, you should not place undue reliance on forward-looking statements. Factors that could have a material adverse effect on our business, financial condition, results of operations and growth prospects can be found in Item 1A, Risk Factors, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report and in Item 1A, Risk Factors and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021. These factors include, but are not limited to, the following:
| ● | analyses and other information based on expectations of future performance and planned work programs; |
| ● | possible events, conditions or financial performance that are based on assumptions about future economic conditions and courses of action; |
| ● | assumptions and analysis underlying our mineral reserve estimates and plans for mineral resource exploration and development; |
| ● | timing, costs and potential success of future activities on the Company’s properties, including but not limited to development and operating costs in the event that a production decision is made; |
| ● | potential results of exploration, development and environmental protection and remediation activities; |
| ● | future outlook and goals; |
| ● | permitting timelines and requirements, regulatory and legal changes, requirements for additional capital, requirements for additional water rights and the potential effect of proposed notices of environmental conditions relating to mineral claims; |
| ● | current or future litigation or environmental liability; |
| ● | planned expenditures and budgets and the execution thereof, including the ability of the Company to discharge its liabilities as they become due; |
| ● | access to capital for future exploration and development plans; |
| ● | global economic, political and social conditions and financial markets; |
| ● | changes in gold and antimony commodity prices; |
| ● | our ability to implement our strategic plan and to maintain and manage growth effectively; |
| ● | loss of our key executives; |
| ● | labor shortages and disruptions; |
| ● | cyber-attacks and other security breaches of our information and technology systems; and |
| ● | other factors and risks described under the heading “Risk Factors” in Item 1A of this Quarterly Report. |
Statements concerning mineral resource and mineral reserve estimates may also be deemed to constitute forward-looking information to the extent that such statements involve estimates of the mineralization that may be encountered if a property is developed.
2
With respect to forward-looking information contained herein, the Company has applied several material factors or assumptions including, but not limited to, certain assumptions as to production rates, operating cost, recovery and metal costs; that any additional financing needed will be available on reasonable terms; the exchange rates for the U.S. and Canadian currencies will be consistent with the Company’s expectations; that the current exploration, development, environmental other objectives concerning the Company’s Stibnite Gold Project (the “Project” or “Stibnite Gold Project”) can be achieved and that the Company’s other corporate activities will proceed as expected; that the formal review process under the National Environmental Policy Act (“NEPA”) (including a joint review process involving the United States Forest Service (“USFS” or “Forest Service”), the State of Idaho and other agencies and regulatory bodies) as well as the public comment period and environmental impact statements will proceed in a timely manner and as expected; that the progression of the litigation involving the Nez Perce Tribe will proceed in a timely manner and as expected; that the current price and demand for gold and other metals will be sustained or will improve; that general business and economic conditions will not change in a materially adverse manner and that all necessary governmental approvals for the planned exploration, development and environmental protection activities on the Project will be obtained in a timely manner and on acceptable terms; and that the continuity of economic and political conditions and operations of the Company will be sustained.
These risks are not exhaustive. Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this Quarterly Report. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the effects of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under applicable securities laws. We qualify all of our forward-looking statements by these cautionary statements.
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Perpetua Resources Corp.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, | December 31, | |||||
| 2022 |
| 2021 | |||
ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents | $ | | $ | | ||
Receivables |
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Prepaid expenses |
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NON-CURRENT ASSETS |
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Buildings and equipment, net |
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Right-of-use assets |
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Environmental reclamation bond (Note 9) | | | ||||
Mineral properties and interest (Note 3) |
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TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Trade and other payables | $ | | $ | | ||
Lease liabilities |
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Environmental reclamation liabilities (Note 9) | | | ||||
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NON-CURRENT LIABILITIES |
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Warrant derivative (Note 4) |
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Lease liabilities |
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| — | ||
Environmental reclamation liabilities (Note 9) |
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TOTAL LIABILITIES |
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COMMITMENT AND CONTINGENCIES (Note 10) |
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SHAREHOLDERS’ EQUITY (Note 7) |
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Common stock, |
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Additional paid-in capital | | | ||||
Accumulated deficit |
| ( |
| ( | ||
TOTAL SHAREHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | | $ | | ||
See accompanying notes to the unaudited condensed consolidated financial statements
4
Perpetua Resources Corp.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended June 30, | For the six months ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
EXPENSES |
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Consulting | $ | | $ | | $ | | $ | | ||||
Corporate salaries and benefits |
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Depreciation |
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Directors’ fees |
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Exploration | | | | | ||||||||
Environmental liability expense | | — | | | ||||||||
Gain on sale of equipment | ( | — | ( | — | ||||||||
Office and administrative |
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Professional fees |
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Shareholder and regulatory |
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Travel and related costs |
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OPERATING LOSS |
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OTHER EXPENSES (INCOME) |
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Change in fair value of convertible note derivative (Note 6) |
| — |
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| — |
| ( | ||||
Change in fair value of warrant derivative (Note 4) |
| ( |
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| ( |
| ( | ||||
Finance costs |
| — |
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| — |
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Foreign exchange loss |
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Interest income |
| ( |
| ( |
| ( |
| ( | ||||
Total other loss (income) |
| ( |
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| ( |
| ( | ||||
NET LOSS | $ | | $ | | $ | | $ | | ||||
NET LOSS PER SHARE, BASIC AND DILUTED | | | | | ||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED |
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See accompanying notes to the unaudited condensed consolidated financial statements
5
Perpetua Resources Corp.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
For the three and six months ended June 30, 2022 and 2021
Common Stock | Additional Paid | Accumulated | ||||||||||||
| Shares |
| Amount |
| in Capital |
| Deficit |
| Total | |||||
BALANCE, December 31, 2020 |
| | $ | | $ | | ( | | ||||||
Share based compensation |
| — |
| — | |
| — |
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Shares issued through stock appreciation rights |
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| | ( |
| — |
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Exercise of share purchase options |
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| | ( |
| — |
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Net loss for the period |
| — |
| — | — |
| ( |
| ( | |||||
BALANCE, March 31, 2021 |
| | | | ( | | ||||||||
Share based compensation | — | — | | — | | |||||||||
Shares issued upon conversion of convertible notes | | | — | — | | |||||||||
Shares issued through stock appreciation rights | | | ( | — | | |||||||||
Exercise of share purchase options | | | ( | — | | |||||||||
Net loss for the period | — | — | — | ( | ( | |||||||||
BALANCE, June 30, 2021 | | $ | | $ | | $ | ( | $ | | |||||
BALANCE, December 31, 2021 | | $ | | $ | | $ | ( | $ | | |||||
Share based compensation |
| — |
| — | |
| — |
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Restricted and performance share units distributed | | | ( | — | — | |||||||||
Net loss for the period |
| — |
| — | — |
| ( |
| ( | |||||
BALANCE, March 31, 2022 | | | | ( | | |||||||||
Share based compensation | — | — | | — | | |||||||||
Restricted and performance share units distributed | | | ( | — | — | |||||||||
Net loss for the period | — | — | — | ( | ( | |||||||||
BALANCE, June 30, 2022 |
| | $ | | $ | | $ | ( | $ | | ||||
See accompanying notes to the unaudited condensed consolidated financial statements
6
Perpetua Resources Corp.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the six months ended June 30, | ||||||
| 2022 |
| 2021 | |||
OPERATING ACTIVITIES: |
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Net loss | $ | ( | $ | ( | ||
Noncash items included in net loss: |
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Share based compensation (Note 7) |
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Depreciation |
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Accretion of convertible debt discount (Note 6) |
| — |
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Change in fair value of warrant derivative (Note 4) |
| ( |
| ( | ||
Change in fair value of convertible note derivative (Note 6) |
| — |
| ( | ||
Environmental liability expense | | | ||||
Unrealized foreign exchange loss |
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Gain on sale of equipment | ( | — | ||||
Changes in: |
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Receivables |
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Prepaid expenses |
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Trade and other payables |
| ( |
| ( | ||
Environmental reclamation liabilities | ( | ( | ||||
Net cash used in operating activities |
| ( |
| ( | ||
INVESTING ACTIVITIES: |
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Purchase of building and equipment |
| ( |
| ( | ||
Proceeds from sale of equipment | | — | ||||
Purchase of surety bond | — | ( | ||||
Net cash used in investing activities |
| ( |
| ( | ||
FINANCING ACTIVITIES: |
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Proceeds from exercise of share purchase options (Note 7) |
| — |
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Net cash provided by financing activities |
| — |
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Effect of foreign exchange on cash and cash equivalents |
| ( | | |||
Net increase in cash and cash equivalents |
| ( | ( | |||
Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period | $ | | $ | | ||
NONCASH INVESTING AND FINANCING ACTIVITIES |
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Recognition of operating lease liability and right-of-use asset | $ | | $ | — | ||
CASH AND CASH EQUIVALENTS |
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Cash | $ | | $ | | ||
Investment savings accounts |
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GIC and term deposits |
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Total cash and cash equivalents | $ | | $ | | ||
See accompanying notes to the unaudited condensed consolidated financial statements
7
Perpetua Resources Corp.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.Nature of Operations and Basis of Presentation
Perpetua Resources Corp. (the “Corporation”, the “Company”, “Perpetua Resources” or “Perpetua”) was incorporated on February 22, 2011 under the Business Corporation Act (British Columbia) (the “BCBCA”). The Company 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 Company’s principal asset is
The unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Perpetua Resources Corp. and its wholly owned subsidiaries, Perpetua Resources Idaho, Inc. and Idaho Gold Resource Company, LLC. Intercompany transactions and balances have been eliminated.
The unaudited condensed consolidated financial statements do not include all disclosures required of annual consolidated financial statements and, accordingly, should be read in conjunction with our annual financial statements for the year ended December 31, 2021. Operating results for the six months ended June 30, 2022 may not be indicative of results expected for the full year ending December 31, 2022. Management estimates that the Company’s 2022 effective tax rate will be
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results for the interim periods reported.
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 second quarter 2022 financial statements are issued, and to meet its administrative and overhead requirements for the same period. Future financings to fund additional permitting efforts and construction are anticipated through efforts to raise additional equity, new debt, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional financing prior to the second half of 2023 or alter the timing of controllable expenditures to the extent needed to maintain adequate liquidity to progress critical permitting efforts and maintain environmental baseline data. 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, or our ability to adequately reduce expenses, if necessary, to maintain sufficient liquidity or capital resources.
Loss per share
Basic loss per share is computed by dividing the net loss by the weighted average number of shares outstanding during the reporting period. Diluted loss per share is computed similar to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of share purchase options and warrants, if dilutive. The Company’s potential dilutive shares of common stock include outstanding share purchase options, restricted share units, performance share units, deferred share units, warrants and, in 2021, convertible notes. Potentially dilutive shares as of June 30, 2022 and 2021:
June 30, | ||||
| 2022 |
| 2021 | |
Share purchase options | | | ||
Share units | | — | ||
Warrants |
| | | |
Convertible notes | — | | ||
Balance |
| | | |
8
All potentially dilutive shares were excluded from the calculation of diluted loss per share as their exercise and conversion would be anti-dilutive.
2.Recently Issued Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40),” which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative or for convertible debt issued at a substantial premium. The ASU removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, permitting more contracts to qualify for the exception. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The ASU is effective for annual reporting periods beginning after December 15, 2021, including interim reporting periods within those annual periods, with early adoption permitted no earlier than the fiscal year beginning after December 15, 2021. The adoption of this update on January 1, 2022 did not have a material impact on our unaudited condensed consolidated financial statements.
From time to time, new accounting pronouncements are issued by the FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a material impact on the Company’s consolidated financial statements upon adoption.
3.Mineral Properties and Interest
The Company’s mineral properties and interest at the Stibnite Gold Project totaled $
The Company’s subsidiaries acquired mineral rights to the Stibnite Gold Project through several transactions. All mineral rights held by the Company’s subsidiaries are held through patented and unpatented mineral and mill site claims, except the Cinnabar option claims which are held under an Option to Purchase (“OTP”), and all of the Stibnite Gold Project is subject to a
Included in mineral properties and interest are annual payments made under option agreements, where the Company is entitled to continue to make annual option payments or, ultimately, purchase certain properties. Annual payments due under option agreements during 2022 are $
As of June 30, 2022, it has not yet been determined that the Project’s mining deposits can be economically and legally extracted or produced because the Project’s estimated reserves do not yet meet the definition of proven reserves under the United States Securities and Exchange Commission (“SEC”) Regulation S-K 1300.
Accordingly, development costs related to such reserves will not be considered capitalized unless they are incurred after such determination. Upon commencement of commercial production, capitalized costs will be amortized over their estimated useful lives or units of production, whichever is a more reliable measure.
Although the Company has taken steps to review and verify mineral rights to the properties in which it has an interest, in accordance with industry standards for properties in the exploration stage, these procedures do not guarantee the Company’s title and interests. Mineral title may be subject to unregistered prior agreements and noncompliance with regulatory requirements.
4.Warrant Derivative
In May 2013, the Company issued to Franco Nevada Company (“Franco”)
9
The exercise price of the Franco Warrants is denominated in Canadian dollars; however, the functional currency of the Company is the U.S. dollar. As a result of this difference in currencies, the proceeds that will be received by the Company are not fixed and will vary based on foreign exchange rates and the warrants are a derivative and are required to be recognized and measured at fair value at each reporting period. Any changes in fair value from period to period are recorded as a gain or loss in the unaudited condensed consolidated statements of operations. There are no circumstances in which the Company would be required to pay any cash upon exercise or expiry of the warrants.
A reconciliation of the change in fair values of the derivative is below:
| Fair Value of Warrant | ||
Derivative | |||
Balance, December 31, 2020 | $ | | |
Change in fair value of warrant derivative | ( | ||
Balance, June 30, 2021 | $ | | |
Balance, December 31, 2021 | $ | | |
Change in fair value of warrant derivative |
| ( | |
Balance, June 30, 2022 | $ | | |
The fair value of the warrants was calculated using the Black-Scholes valuation model. As of June 30, 2022 and 2021, the inputs used in the Black-Scholes valuation model are:
Six months ended June 30, | ||||
| 2022 |
| 2021 | |
Share price | C$ | C$ | ||
Exercise price |
| C$ |
| C$ |
Expected term (in years) |
|
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Expected share price volatility |
| |||
Annual rate of quarterly dividends |
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Risk-free interest rate |
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5.Convertible Notes
On March 17, 2016, the Company issued unsecured convertible notes (the “2016 Notes”) for gross proceeds of $
Each set of convertible notes are deemed to contain an embedded derivative (collectively, the “Convertible Note Derivatives”) relating to the conversion option. The Convertible Note Derivatives were valued upon initial recognition at fair value using partial differential equation methods. At inception, for each set of notes, the face value of the notes was reduced by the estimated fair value of the related convertible note derivative and the transaction costs.
During the years ended December 31, 2021 and 2020, convertible notes in the aggregate principal amount of C$
6.Convertible Note Derivative
Convertible Note Derivatives related to each set of convertible notes (see Note 5) were valued upon initial recognition at fair value using partial differential equation methods and are subsequently re-measured at fair value at each period end through the unaudited condensed consolidated statements of operations. During the six months ended June 30, 2021, a change in fair value of $
In 2021, the Convertible Note Derivatives expired upon conversion of all convertible notes (see Note 5). The balance of the derivative at December 31, 2021 and June 30, 2022 is
10
7.Equity
| a. | Authorized |
| ● |
| ● |
| ● |
On January 27, 2021, the Corporation completed a-for-ten (1:10) reverse share split of all of its issued and outstanding common shares (“Share Consolidation”), resulting in a reduction of the and common shares from
Share based compensation
Share based compensation was recognized in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 as follows:
Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Exploration | $ | | $ | | $ | | $ | | ||||
Consulting | — | |
| — |
| | ||||||
Corporate salaries and benefits | | |
| |
| | ||||||
Directors’ fees | | |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | ||||
Share purchase options
A summary of share purchase option activity within the Company’s share-based compensation plan (the “Plan”) for the year ended December 31, 2021 and six months ended June 30, 2022 is as follows:
Weighted Average | |||||
| Number of Options |
| Exercise Price (C$) | ||
Balance December 31, 2020 |
| | $ | | |
Options granted |
| |
| | |
Options expired |
| ( |
| | |
Options terminated via SAR |
| ( |
| | |
Options exercised |
| ( |
| | |
Balance December 31, 2021 |
| | $ | | |
Options cancelled or forfeited |
| ( |
| | |
Options expired | ( | | |||
Balance June 30, 2022 |
| | $ | | |
During the three and six months ended June 30, 2022 and 2021, the Company’s total share based compensation from options was $
11
Six months ended | |||
| June 30, 2021 | ||
Fair value options granted | $ | ||
Risk-free interest rate |
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Expected term (in years) |
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Expected share price volatility |
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Expected dividend yield |
| — | |
An analysis of outstanding share purchase options as of June 30, 2022 is as follows:
Options Outstanding |
| Options Exercisable | ||||||||||||
Range of Exercise | ||||||||||||||
Prices (C$) |
| Number |
| Price (C$)1 |
| Remaining Life2 |
| Number |
| Price (C$)1 |
| Remaining Life2 | ||
$ |
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$ |
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$ |
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$ |
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$ |
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1 Weighted Average Exercise Price (C$)
2 Weighted Average Remaining Contractual Life (Years)
As of June 30, 2022, all unvested options are expected to vest and unvested compensation of approximately $
Restricted Share Units
The following table summarizes activity for restricted share units (“RSUs”) awarded under the Plan that vest over the required service period of the participant.
|
|
| Weighted Average | ||
Share | Grant Date | ||||
Units |
| Fair Value | |||
Unvested, January 1, 2021 | |
| $ | — | |
Granted | |
| | ||
Distributed (vested) | ( |
| | ||
Unvested, December 31, 2021 | |
| | ||
Granted | | | |||
Distributed (vested) | ( | | |||
Cancelled | ( | | |||
Unvested, June 30, 2022 | | $ | | ||
During the six months ended June 30, 2022, the Company awarded
12
During the three and six months ended June 30, 2022, the Company has recognized $
Remainder of 2022 |
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2023 | | |
2024 |
| |
2025 | | |
Total |
| |
Unvested units will be forfeited by participants upon termination of employment in advance of vesting, with the exception of termination due to retirement if certain criteria are met.
Performance Share Units
The following table summarizes activity for performance share units (“PSUs”) and market-based performance share units (“MPSUs”) awarded under the Plan:
|
|
| Weighted Average | ||
Share | Grant Date | ||||
Units | Fair Value | ||||
Unvested, January 1, 2021 |
| |
| $ | — |
Granted |
| |
|
| |
Unvested, December 31, 2021 |
| |
|
| |
Granted | | | |||
Distributed | ( | | |||
Cancelled | ( | | |||
Unvested, June 30, 2022 | | | |||
During the three and six months ended June 30, 2022, the Company has recognized $
PSUs: These PSUs vest upon completion of the performance period (through September 2022 and 2023) and specific performance conditions set forth for each individual grant for individually defined reporting and operating measurement objectives. The Company determines the factor to be applied to that target number of PSUs, with such percentage based on level of achievement of the performance conditions. Upon the achievement of the conditions, any unvested PSUs become fully vested. During the six months ended June 30, 2022, the Company awarded
Market-based PSUs: On March 5, 2022, the Company granted MPSUs where vesting is based on the Company’s cumulative total shareholder return (“TSR”) as compared to the constituents that comprise the VanEck Junior Gold Miners ETF (“GDXJ Index”) a group of similar junior gold mining companies, over the period from March 5, 2022 to March 5, 2025 (the “Performance Period”). The ultimate number of MPSUs that vest may range from
13
During the six months ended June 30, 2022, the Company awarded
| Six months ended | |
| June 30, 2022 | |
Risk-free interest rate |
| |
Expected term (in years) |
| |
Expected share price volatility |
| |
Expected dividend yield |
| — |
The expected volatility utilized is based on the historical volatilities of the Corporation’s common stock and the GDXJ Index in order to model the stock price movements. The volatility used was calculated over the most recent three year period. The risk-free interest rates used are based on the implied yield available on a U.S. Treasury zero-coupon bill with a term equivalent to the Performance Period. The expected dividend yield of zero was used since it is the mathematical equivalent to reinvesting dividends in each issuing entity over the Performance Period.
Deferred Share Units
The following table summarizes activity for deferred share units (“DSUs”) awarded under the Plan:
Weighted Average | |||||
Share | Grant Date | ||||
| Units |
| Fair Value | ||
Outstanding, January 1, 2021 | | $ | | ||
Granted | | | |||
Outstanding, December 31, 2021 |
| |
| | |
Granted |
| |
| | |
Outstanding, June 30, 2022 |
| |
| | |
Under the Plan, the Company may issue DSUs to non-employee directors. During the three and six months ended June 30, 2022,
| b. | Warrants |
There was a total of
8.Financial Instruments and Fair Value Measurements
At June 30, 2022, the Company’s financial instruments consist of cash and cash equivalents and environmental reclamation bond which approximate their fair value due to their short-term nature.
14
The Company’s financial instruments also consist of the warrant derivative at June 30, 2022 and December 31, 2021. The derivative is valued at fair value at the end of each reporting period. At June 30, 2022 and December 31, 2021, the levels in the fair value hierarchy into which the Company’s financial assets and liabilities are measured and recognized on the balance sheet at fair value are categorized as follows:
| Level 1 |
| Level 2 |
| Level 3 | ||||
June 30, 2022 | |||||||||
Warrant Derivative (Note 4) | $ | — | $ | — | $ | | |||
Total | $ | — | $ | — | $ | | |||
| December 31, 2021 | ||||||||
Warrant Derivative (Note 4) |
| — |
|
| — |
|
| | |
Total | $ | — | $ | — | $ | | |||
The Company uses the Black-Scholes option pricing model or other valuation models for valuation of its warrant derivative. Valuation models require the input of subjective assumptions including expected share price volatility, interest rate and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s net loss.
9.Environmental Reclamation Liability
On January 15, 2021, the Company agreed to an Administrative Settlement and Order on Consent (“ASAOC”). The Company has accounted for its obligation under the ASAOC as an environmental reclamation liability. The aggregate cost of the obligation was estimated to be approximately $
| Six months ended June 30, | |||||
| 2022 |
| 2021 | |||
Balance at beginning of period |
| $ | | $ | — | |
Additions |
| |
| | ||
Work performed on early action items |
| ( |
| ( | ||
Balance at end of period |
| $ | | $ | | |
Current portion |
| $ | $ | | ||
Long-term portion | | |||||
Balance at end of period | $ | $ | | |||
The Company provided $
10.Commitments and Contingencies
The Company currently holds mining claims on which it has an annual assessment obligation to the Bureau of Land Management of $
15
| b. | Stibnite Foundation |
Upon formation of the Stibnite Foundation on February 26, 2019, the Company became contractually liable for certain future payments to the Stibnite Foundation based on several triggering events, including receipt of a final Record of Decision issued by the USFS, receipt of all permits and approvals necessary for commencement of construction, commercial production, and of the final reclamation phase. These payments could begin as early as late 2023 based on the current permitting schedule and range from $
The Stibnite Foundation will support projects that benefit the communities surrounding the Stibnite Gold Project and was created through the establishment of the Community Agreement between Perpetua Resources Idaho, Inc. and
| c. | Option Payments on Other Properties |
The Company is obligated to make option payments on mineral properties in order to maintain an option to purchase these properties. As of June 30, 2022, the option payments due on these properties in 2022 are $
| d. | Off balance sheet arrangements |
The Company has
e.Legal Update
The Company is a party to ongoing legal proceedings with the Nez Perce Tribe for alleged violations of the Clean Water Act related to historical mining activities. In August 2019, the Nez Perce Tribe filed suit in the United States District Court for the District of Idaho. The Company promptly filed a motion to dismiss and, in the alternative, a motion to stay the litigation. Both motions were denied and the Company subsequently filed an answer generally denying liability for the allegations contained in the complaint. Later, the court allowed the Company to amend its answer and file a third-party complaint and the Company also filed a separate citizen suit against the USFS alleging the point source discharges, referred to by the Nez Perce Tribe in its complaint, were occurring on lands owned and controlled by the United States. Pursuant to the terms of the Comprehensive Environmental Response, Compensation, and Liability Act (the “CERCLA”) ASAOC executed with the U.S. EPA and the United States Department of Agriculture, the Company later dismissed its pending actions against USFS. The remaining parties to the ongoing legal proceeding agreed to stay the litigation and explore Alternative Dispute Resolution (“ADR”) options. The stay has been extended on subsequent occasions, and a request to extend the stay through October 31, 2022 was filed jointly by the parties on July 26, 2022 and subsequently ordered by the court on the same date.
The CERCLA ASAOC entered into by the Company, the U.S. EPA, and the United States Department of Agriculture requires numerous voluntary early cleanup actions to occur over the next several years. Perpetua Resources Idaho, Inc. is presently executing the development of the Phase 1 early cleanup actions (known under CERCLA as “time critical removal actions”) that, upon final work plan approval by the federal agencies, will be designed and constructed to efficiently improve water quality in a number of areas on the Site while other, longer-term proposed actions relating to Project operations are being evaluated through the NEPA process.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 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 Suite 1008-550 Burrard St, Vancouver, BC, V6C 2B5, 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.
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 the third quarter of 2022. The USFS is expected to provide a formal schedule later this year regarding the remaining steps in the NEPA review process.
Second Quarter 2022 Highlights
| ● | Zero lost time incidents or reportable environmental spills |
| ● | Received first permit, the Clean Air Act Permit to Construct from the Idaho Department of Environmental Quality |
| ● | Launched Sustainability Roadmap which outlines 13 goals to guide the Company as it advances the Stibnite Gold Project towards development |
| ● | Held 2022 Annual General Meeting and shareholders voted in favor of all proposals |
| ● | Welcomed value-oriented Kopernik as a new shareholder |
| ● | Awarded contract for stream diversion work this summer as part of Phase 1 early cleanup activities |
| ● | Published 2021 Sustainability Report, the Company’s ninth annual sustainability report |
17
The forward‐looking 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.
Results of Operations
Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021
| For the three months ended June 30, |
| For the six months ended June 30, | |||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
EXPENSES |
|
|
|
|
|
| ||||||
Consulting | $ | 7,275 | $ | 122,299 | $ | 18,155 | $ | 227,216 | ||||
Corporate salaries and benefits |
| 524,876 |
| 507,463 |
| 828,287 |
| 1,397,352 | ||||
Depreciation |
| 14,870 |
| 5,697 |
| 26,336 |
| 24,819 | ||||
Directors’ fees |
| 89,526 |
| 185,589 |
| 352,474 |
| 489,800 | ||||
Exploration |
| 4,306,285 |
| 5,995,203 |
| 8,866,338 |
| 12,576,066 | ||||
Environmental liability expense |
| 665,370 |
| — |
| 665,370 |
| 7,473,805 | ||||
Gain on sale of equipment |
| (44,763) |
| — |
| (44,763) |
| — | ||||
Office and administrative |
| 197,868 |
| 513,713 |
| 411,351 |
| 985,981 | ||||
Professional fees |
| 498,512 |
| 90,089 |
| 1,233,041 |
| 257,425 | ||||
Shareholder and regulatory |
| 116,093 |
| 126,427 |
| 275,066 |
| 378,052 | ||||
Travel and related costs |
| 10,944 |
| 3,581 |
| 16,034 |
| 3,707 | ||||
OPERATING LOSS | 6,386,856 | 7,550,061 | 12,647,689 | 23,814,223 | ||||||||
OTHER EXPENSE (INCOME) |
|
|
|
|
|
|
|
| ||||
Change in fair value of convertible note derivative (Note 6) |
| — |
| 5,903,877 |
| — |
| (5,692,913) | ||||
Change in fair value of warrant derivative (Note 4) |
| (79,497) |
| 121,167 |
| (94,745) |
| (365,232) | ||||
Finance costs |
| — |
| 104,713 |
| — |
| 361,711 | ||||
Foreign exchange loss |
| 2,595 |
| 650,302 |
| 33,346 |
| 952,779 | ||||
Interest income |
| (52,583) |
| (2,909) |
| (84,025) |
| (26,780) | ||||
Total other loss (income) | (129,485) | 6,777,150 | (145,424) | (4,770,435) | ||||||||
NET LOSS | $ | 6,257,371 | $ | 14,327,211 | $ | 12,502,265 | $ | 19,043,788 | ||||
Net Loss
Net loss for the three months ended June 30, 2022 was $6.3 million compared with a net loss of $14.3 million for the three months ended June 30, 2021. This $8.0 million decrease compared to the prior year period was primarily attributable to a $5.9 million decrease in the loss related to the change in fair value of the convertible note derivative, a $1.7 million decrease in exploration expense, a $0.7 million decrease in foreign exchange loss and a $0.3 million decrease in office and administrative expense. These changes were partially offset by a $0.7 million increase in environmental liability expense and a $0.4 million increase in professional fees.
Net loss for the six months ended June 30, 2022 was $12.5 million compared with a net loss of $19.0 million for the six months ended June 30, 2021. This $6.5 million decrease compared to the prior year period was primarily attributable to a $6.8 million decrease in environmental liability expense, a $3.7 million decrease in exploration expense, a $0.9 million decrease in foreign exchange loss and a $0.6 million decrease in corporate salaries and benefits. These changes were partially offset by a $5.7 million decrease in the gain related to the change in fair value of the convertible note derivative and a $1.0 million increase in professional fees.
As noted above, for the six months ended June 30, 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 and six months ended June 30, 2022 were 94% lower and 92% lower, respectively, than the 2021 comparative periods due to consulting work to support various corporate activities in the first half of 2021, including the share consolidation and listing on the NASDAQ and lower stock based compensation.
18
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 June 30, 2022 were 3% higher than the 2021 comparative periods due to slightly higher stock-based compensation. Salaries and benefits for the six months ended June 30, 2022 were 41% lower than the 2021 comparative periods 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 expense for the three and six months ended June 30, 2022 were 52% lower and 28% lower than the 2021 comparative periods due to lower stock-based compensation.
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 $4.3 million during the three months ended June 30, 2022 were $1.7 million, or 28%, lower than the three months ended June 30, 2021 primarily due to a $1.1 million decrease in permitting, a $0.2 million decrease in environmental and reclamation and a $0.2 million decrease in consulting and labor cost including lower stock based compensation expense. Exploration expenses of $8.9 million during the six months ended June 30, 2022 were $3.7 million, or 30%, lower than the six months ended June 30, 2021 primarily due to a $1.6 million decrease in permitting, a $1.6 million decrease in consulting and labor cost including lower stock based compensation expense and a $0.3 million decrease in environmental and reclamation. Additional details of expenditures incurred are as follows:
| For the three months ended June 30, |
| For the six months ended June 30, | |||||||||
2022 |
| 2021 | 2022 |
| 2021 | |||||||
Consulting and labor cost | $ | 1,355,904 | $ | 1,520,567 | $ | 2,691,075 | $ | 4,284,192 | ||||
Engineering |
| 142,540 |
| 271,250 |
| 298,470 |
| 620,034 | ||||
Environmental and reclamation |
| 24,014 |
| 251,398 |
| 88,381 |
| 480,459 | ||||
Field operations and drilling support |
| 549,033 |
| 542,403 |
| 1,018,561 |
| 1,003,718 | ||||
Legal and sustainability |
| 385,296 |
| 457,151 |
| 841,661 |
| 646,275 | ||||
Permitting |
| 1,849,498 |
| 2,952,434 |
| 3,928,190 |
| 5,541,388 | ||||
TOTAL EXPLORATION | $ | 4,306,285 | $ | 5,995,203 | $ | 8,866,338 | $ | 12,576,066 | ||||
Environmental 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 and six months ended June 30, 2022, the total cost estimate to complete Phase 1 early cleanup actions increased $665,370, all of which increased in the three months ended June 30, 2022. As of June 30, 2022, the estimate for the environmental liability was $9.6 million.
Office and Administrative
This expense is predominantly insurance policies for the U.S. offices. This expense for the three and six months ended June 30, 2022 were 62% lower and 58% lower than the 2021 comparative periods primarily due to lower insurance premiums.
Professional Fees
This expense relates to the legal and accounting costs of the Corporation. This expense for the three and six months ended June 30, 2022 were 453% higher and 379% higher, respectively, than the 2021 comparative periods 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.
19
Shareholder and Regulatory
This expense relates to marketing, licenses and fees, and shareholder communications. This expense for the three and six months ended June 30, 2022 were 8% lower and 27% lower than the 2021 comparative periods primarily due to fees related to the NASDAQ listing which commenced in February 2021.
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).
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).
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 and six months ended June 30, 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 transactions associated with the Corporation’s Canadian dollar denominated balances. The impact was larger in the three and six months periods ended June 30, 2021 compared to the same periods of 2022 primarily due to the conversion of the Convertible Notes and convertible note derivatives in 2021.
Interest Income
This income results from interest received on the Company’s cash balances. Interest income increased $49,674 and $57,245 in the three months and six months ended June 30, 2022, respectively, compared to the three months and six months ended June 30, 2021 as a result of higher average cash balances and higher interest rates in the first half of 2022.
Liquidity and Capital Resources
Capital resources of Perpetua Resources consist primarily of cash and liquid short-term investments. As of June 30, 2022, Perpetua Resources had cash and cash equivalents totaling approximately $36.1 million, approximately $1.0 million in other current assets and $2.3 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 for the next 12 months. Over the next 12 months, 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; |
20
| ● | 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. |
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 second quarter 2022 financial statements are issued, and to meet its administrative and overhead requirements for the same period. Future financings to fund additional permitting efforts and construction are anticipated through efforts to raise additional equity, new debt, project specific debt, and/or other means. Our continued operations are dependent on our ability to obtain additional financing prior to the second half of 2023 or alter the timing of controllable expenditures to the extent needed to maintain adequate liquidity to progress critical permitting efforts and maintain environmental baseline data. 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, or our ability to adequately reduce expenses, if necessary, to maintain sufficient liquidity or capital resources.
Our anticipated expenditures in fiscal year 2022 are approximately $28.0 million, which are expected to be funded from cash on hand. These expenditures include an estimated $12.6 million to fund permitting of the Stibnite Gold Project, $10.1 million for general corporate purposes and administrative costs, $0.7 million for engineering and design work and $4.6 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2022 (the “Evaluation Date”). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the Evaluation Date.
Changes in Internal Control Over Financial Reporting
As of the Evaluation Date, there were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
21
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to an ongoing legal proceeding with the Nez Perce Tribe for alleged violations of the Clean Water Act related to historical mining activities. In August 2019, the Nez Perce Tribe filed suit in the United States District Court for the District of Idaho. The Company promptly filed a motion to dismiss and, in the alternative, a motion to stay the litigation. Both motions were denied and the Company later filed an answer generally denying liability for the allegations contained in the complaint. Later, the court allowed the Company to amend its answer and file a third-party complaint and the Company also filed a separate citizen suit against the USFS alleging the point source discharges, referred to by the Nez Perce Tribe in its complaint, were alleged to be occurring on lands owned and controlled by the United States. Pursuant to the terms of the CERCLA ASAOC executed with the U.S. EPA and the United States Department of Agriculture, the Company dismissed its pending actions against USFS. The remaining parties to the ongoing legal proceedings agreed to stay the litigation and explore Alternative Dispute Resolution (“ADR”) options. The stay has been extended on subsequent occasions, and a request to extend the stay through October 31, 2022 was filed jointly by the parties on July 26, 2022 and subsequently ordered by the court on the same date.
Item 1A. Risk Factors.
In addition to other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our businesses, financial condition, or future results. Additional risks and uncertainties currently unknown to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition, or future results. There have been no material changes in our risk factors from those described in the Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities; Issuer’s Purchases of Equity Securities
None.
Use of Proceeds from Registered Securities
On August 16, 2021, we completed an underwritten public offering pursuant to a prospectus supplement to our short form base shelf prospectus dated April 1, 2021, filed pursuant to General Instruction II.L. of Form F-10, and declared effective by the SEC on April 2, 2021 (File No. 333-254517, the “Prospectus Supplement”). The Corporation issued 10,952,382 common shares, which included 1,428,572 common shares issued pursuant to the overallotment option granted to the underwriters, at a public offering price of $5.25 per common share for gross proceeds of approximately $57.5 million before deducting underwriting discounts and commissions and offering expenses. The net proceeds from the issuance were $54.3 million, after deduction of underwriting discounts and commissions and offering expenses of $3.2 million. B. Riley Securities, Inc. and Cantor Fitzgerald Canada Corporation acted as joint-bookrunning managers for the offering.
The Prospectus Supplement included a proposed use of proceeds that would be compared to expenditures from October 1, 2021 onwards. A reconciliation of the use of proceeds is provided below. There has been no material change in the planned use of proceeds as described in our Prospectus Supplement.
| Proposed Use of |
| Actual Use of |
| Remaining to be | ||||
Expense Category (in Millions) | Proceeds | Proceeds | Spent/Difference | ||||||
Permitting | $ | 21.0 | $ | 6.0 | $ | 15.0 | |||
General Corporate Purposes(i) |
| 20.1 |
| 9.0 |
| 11.1 | |||
Early Restoration Field Operations |
| 7.9 |
| 2.7 |
| 5.2 | |||
Engineering Design |
| 5.3 |
| 0.5 |
| 4.8 | |||
$ | 54.3 | $ | 18.2 | $ | 36.1 | ||||
(i) Funds for general corporate purposes may be allocated for corporate expenses, business development and legal expenses.
None of the offering proceeds were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of any class of our equity securities, to any other affiliates or to others.
22
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) which is administered by MSHA. During the three and six months ended June 30, 2022, the Company and its subsidiaries were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required under Section 1503(a) of the Dodd-Frank Act.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibit |
| Description |
3.1 | ||
3.2 | ||
3.3 | ||
3.4 | ||
4.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 12, 2022 | PERPETUA RESOURCES CORP. | |
By: | /s/ Laurel Sayer | |
Name: | Laurel Sayer | |
Title: | President, Chief Executive Officer and | |
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