What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-26 compared with 2023-03-16 · 176 added, 112 removed, 105 unchanged (73% of the section changed)

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● Zero lost time incidents or reportable environmental spills.

● Awarded Department of Defense funding to study antimony from Stibnite Gold Project

● Announced the United States Forest Service published the Supplemental Draft Environmental Impact Statement which identified Perpetua Resources’ proposed action as the Preferred Alternative (as defined below)

● Awarded a Technology Investment Agreement of up to $24.8 million under Title III of the Defense Production Act

● Completed summer field program including stream diversion activities and the removal of the Defense Minerals Exploration Administration legacy waste rock dump from within and along a tributary to the East Fork of the South Fork of the Salmon River

● Continued productive mediation discussions with the Nez Perce Tribe

● Received the Clean Air Act Permit to Construct from the Idaho Department of Environmental Quality

● Strengthened the Board of Directors (the “Board”) with appointment of Laura Dove who brings three decades of external affairs and stakeholder management experience to Perpetua

● Welcomed value-oriented Kopernik as a new shareholder

● Awarded contract for stream diversion work as part of Phase 1 early cleanup activities

● Published 2021 Sustainability Report, the Company’s ninth annual sustainability report

● Launched Sustainability Roadmap which outlines 13 goals to guide the Company as it advances the Stibnite Gold Project

● Promoted Jessica Largent to CFO and further strengthened team with hiring of Chris Fogg as Manager of Investor Relations

● The 75-day comment period on the Supplemental Draft Environmental Impact Statement (“SDEIS”) for the Stibnite Gold Project concluded with more than 15,000 letters submitted in support of the Project.

● Added to the Russell 2000® Index and the broad-market Russell 3000® Index.

● Held 2023 Annual General Meeting and shareholders voted in favor of all proposals.

● Published 2022 Sustainability Report, the Company’s tenth annual sustainability report.

● Signed definitized Technology Investment Agreement (“TIA”) for critical minerals award of $24.8 million under Title III of the Defense Production Act.

● Clean Water Act Settlement Agreement with the Nez Perce Tribe filed in the U.S.

District Court for the District of Idaho.

● Continued voluntary legacy waste cleanup and water quality improvement actions in historical Stibnite Mining District.

● Appointed Vice President of Projects to lead the Stibnite Gold Project.

● Awarded up to $15.5 million in DOD funding to demonstrate a fully domestic antimony trisulfide supply chain.

Recent Highlights

● Appointed mining veteran Jonathan Cherry as new President and CEO and to the Board

● Appointed Jessica Largent, Chief Financial Officer, to the Board

● Received $8.5 million in cash from Franco-Nevada through a new royalty agreement for net smelter return royalty on future payable silver production from the Project properties to Franco-Nevada

● Awarded additional conditional funding of up to $34.6 million under the TIA

2024 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 2023, Perpetua Resources continues to focus on advancing the permitting for the Stibnite Gold Project through the National Environmental Policy Act process.

In 2024, Perpetua Resources will continue to focus on advancing the permitting for the Stibnite Gold Project through the National Environmental Policy Act (“NEPA”) process in addition to state ancillary permits and other federal authorization.

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.

Supplemental Draft Environmental Impact Statement (“SDEIS”)

In response to public and agency feedback on the Draft Environmental Impact Statement released by the USFS in August 2020, Perpetua Resources proposed modifications to the mine plan analyzed in Alternative 2 in the DEIS and submitted a refined proposed action to the USFS in December 2020 (the “Modified Mine Plan”).

The Company is also advancing construction readiness activities in parallel with the permitting process.

In response to public and agency feedback on the Draft Environmental Impact Statement (“DEIS”) released by the United States Forest Service (“USFS”) in August 2020, Perpetua Resources proposed modifications to the mine plan analyzed in Alternative 2 in the DEIS and submitted a refined proposed action to the USFS in December 2020 (the “Modified Mine Plan”).

The Modified Mine Plan included refinements to reduce the project footprint, improve water quality, and lower water temperature.

The USFS decided to prepare a Supplemental Draft Environmental Impact Statement to further evaluate the project refinements and compare the Company’s proposed site access via Burntlog Route to an alternative option using current roads.

After nearly two years of review of the Modified Mine Plan by the USFS and other agencies, the SDEIS was published on October 28, 2022 for a 75-day public comment period.

In the SDEIS, the USFS highlights the net positive environmental outcomes that the Stibnite Gold Project can provide to the abandoned mine site based on the results of comprehensive scientific analysis conducted over the last six years.

The USFS identified Perpetua Resources’ proposed action, the “Modified Mine Plan,” as the Preferred Alternative because the Modified Mine Plan:

● incorporates water management and closure activities to reduce the duration of long-term water treatment requirements,

● includes measures to manage stream temperatures, and

● reduces potential impacts associated with access, transportation and hazardous materials on alternative access routes to the project site.

The USFS also concluded the Preferred Alternative would reasonably accomplish the purpose and need for consideration of approval of the Stibnite Gold Project, while giving consideration to environmental, economic, and technical factors.

Under NEPA, a “Preferred Alternative” is identified by a Federal agency in a DEIS to let the public know which action the agency is leaning toward selecting as final.

However, identification of a “Preferred Alternative” does not represent a final decision and the USFS may still choose various actions based on the Modified Mine Plan or each of the alternatives analyzed in the SDEIS when developing the Final Environmental Impact Statement.

In the SDEIS, the USFS highlighted the net positive environmental outcomes that the Stibnite Gold Project can provide to the abandoned mine site based on the results of comprehensive scientific analysis conducted over the last six years.

The USFS identified Perpetua Resources’ proposed action, the “Modified Mine Plan,” as the Preferred Alternative and also concluded the Preferred Alternative would reasonably accomplish the purpose and need for consideration of approval of the Stibnite Gold Project, all while considering environmental, economic, and technical factors.

Under NEPA, a “Preferred Alternative” is identified by a Federal agency in a DEIS to advise the public which action the agency is leaning toward selecting as final.

However, identification by an agency of a “Preferred Alternative” does not represent a final decision and the USFS may still select an action based on the Modified Mine Plan or a combination of each of the alternatives analyzed in the SDEIS when developing the Final Environmental Impact Statement (“FEIS”).

The SDEIS public review period closed on January 10, 2023.

Following completion of the comment period and analysis, the Company expects the USFS to provide a schedule update including the expected timing to the FEIS, draft Record of Decision and to final Record of Decision.

On January 1, 2024, the USFS released an updated schedule for the Project.

Based on the updated schedule, the Company anticipates that the USFS will publish a FEIS and a Draft Record of Decision in the second quarter of 2024 and a Final Record of Decision (“ROD”) in the fourth quarter of 2024.

The USFS has confirmed that cooperating agency review of the FEIS is nearing completion and is focused on progressing both documents towards final consultations and reviews in Washington D.C.

The publication of the permitting schedule does not indicate any commitments on the part of the USFS regarding the content or timing of a final decision.

In developing the FEIS, the USFS may select an action based on components of each of the alternatives analyzed in the SDEIS.

Furthermore, the USFS is not bound by the permitting schedule and anticipated milestones may be delayed materially or not be satisfied.

Ancillary Permitting Update

The Company continued to advance work on several ancillary permits in 2023 which are being progressed in parallel with the NEPA process.

Recent updates include:

● The public comment period on the Company’s 404 permit application and Compensatory Mitigation Plan to the U.S.

Army Corps of Engineers ended in October 2023.

● The Company submitted a Tailings Storage Facility (“TSF”) dam safety application to Idaho Department of Water Resources (“IDWR”) in July 2023.

IDWR sent a letter of conditional approval for the Company’s Stage 1 TSF in October 2023.

● The Company submitted a cyanidation facility permit application in August 2023 to the Idaho Department of Environmental Quality (“IDEQ”).

IDEQ issued a letter of incompleteness in September 2023.

The Company expects to resubmit an updated permit application in the second quarter of 2024.

● The Final Point of Compliance determination was issued in August 2023 and the Company submitted the required groundwater sampling and well installation plans in October 2023.

Previously submitted permit applications that are continuing through the administrative process and include Clean Air Act Permit to Construct and Idaho Pollutant Discharge Elimination System industrial outfalls with IDEQ in addition to water rights with IDWR.

Department of Defense Funding

In September 2022, Perpetua Resources was awarded two funding grants from the U.S.

Department of Defense (“DOD”) Defense Logistics Agency to study the domestic production of military-grade antimony trisulfide, an essential component in ammunition and dozens of other defense materials.

Perpetua Resources expects to receive up to $200,000 in total to evaluate whether antimony from the Stibnite Gold Project can meet military specifications (“Mil-Spec”) to help secure America’s defense and commercial ammunition supply chain while also evaluating alternate methods for purifying antimony trisulfide.

Perpetua Resources submitted two proposals to DLA’s “Production of Energetic Materials and Associated Precursors” Small Business Innovation Research (“SBIR”) grant solicitation.

In September 2022, Perpetua Resources was awarded two funding grants of $100,000 each from the U.S.

Department of Defense (“DOD”) Defense Logistics Agency (“DLA”) under DLA’s “Production of Energetic Materials and Associated Precursors” Small Business Innovation Research (“SBIR”) grant solicitation to study the domestic production of military-grade antimony trisulfide, an essential component in ammunition and dozens of other defense materials.

As described in the grant’s objective, the program is focused on reducing “foreign reliance and single points of failure for the domestic manufacturing of energetic materials” through the development of a domestic source.

After a competitive review process, Perpetua Resources was awarded SBIR Phase 1 funding of $100,000 for both programs.

Each study is expected to be completed within the next six to 12 months.

After the completion of the proposed programs, Phase 2 funding could be made available for more advanced stage pilot-scale testing within the next year.

Together, the Phase 1 and Phase 2 programs could confirm the Project’s ability to provide the domestic antimony source needed to meet the defense procurement demand and support commercial markets.

In December 2022, Perpetua Resources was awarded a TIA of up to $24.8 million under Title III of the DPA.

The funding objective of the TIA, issued by the Air Force Research Laboratory, is to complete environmental and engineering studies necessary to obtain a FEIS, a Final Record of Decision, and other ancillary permits to sustain the domestic production of antimony trisulfide capability for defense energetic materials.

After a competitive review process, Perpetua Resources was awarded SBIR Phase 1 funding of $100,000 under each of the two programs.

Under the DLA grants, Perpetua Resources evaluated whether antimony from the Stibnite Gold Project can meet military specifications (“mil-spec”) and also evaluated alternate methods for synthesizing antimony trisulfide.

During the years ended December 31, 2023 and 2022, $124,997 and $75,000, respectively, was recognized as grant income for these grants.

The programs were complete in September 2023 and no further grant income is anticipated under these grants.

In December 2022, Perpetua Resources was awarded an undefinitized TIA of up to $24.8 million under Title III of the DPA.

On July 25, 2023, the TIA was definitized with the DOD, establishing the full not-to-exceed amount of $24.8 million.

The funding objective of the TIA, issued by the Air Force Research Laboratory, is to complete environmental and engineering studies necessary to obtain a FEIS, a ROD, and other ancillary permits to sustain the domestic production of antimony trisulfide capability for defense energetic materials.

The DPA funding allows the Company to advance the construction readiness of the Stibnite Gold Project while the Company continues through the ongoing permitting process, led by the USFS.

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The DPA funding does not interrupt the ongoing NEPA review process.

The TIA is subject to negotiation of a definitized agreement with the DOD.

Until the agreement is definitized, the maximum funding available under the TIA is capped at $18,600,000, 75% of the not-to-exceed amount.

Perpetua Resources expects to enter into a definitized agreement in the first half of 2023.

However, there is no assurance that Perpetua Resources will be able to finalize the definitized agreement on the expected timeline or at all.

The TIA contains customary terms and conditions for technology investment agreements, including ongoing reporting

The TIA contains customary terms and conditions for technology investment agreements, including ongoing reporting obligations.

Perpetua Resources is evaluating other U.S.

government funding opportunities, including programs available through the DOD.

inflation rate has been steadily increasing since 2021 and throughout 2022.

These inflationary pressures have resulted in and may result in additional increases to the costs of our goods, services and personnel, which in turn cause our capital expenditures and labor costs to rise, including the estimated costs to complete the ASAOC environmental reclamation work.

Sustained levels of high inflation have likewise caused the U.S.

Federal Reserve and other central banks to increase interest rates, which could have the effects of raising the cost of capital and depressing economic growth, either of which—or the combination thereof—could adversely affect our business.

On February 12, 2024, the Company announced a conditional award of up to $34.6 million in additional funding under the TIA.

Full funding of the additional award is conditioned on modifying the existing TIA to expand the in-scope work for advancing permits and construction readiness and to extend the outside date to June 30, 2025.

The amendment will not change any other material terms of the definitized TIA.

The modification is anticipated to be completed in the first quarter of 2024.

During the year ended December 31, 2023, $15,601,205 was recognized as grant income related to the TIA.

Subject to approval of the TIA in-scope modification, the Company anticipates recognizing approximately $37,000,000 of additional grant income in 2024.

During the year ended December 31, 2023, the Company was reimbursed $14,369,180 for certain costs incurred.

On August 18, 2023, the Company’s wholly owned subsidiary, Perpetua Resources Idaho, Inc.

was awarded an Ordnance Technology Initiative Agreement (“OTIA”) of up to $15.5 million under the Prototype Other Transaction authority of the DOD through the DOD Ordnance Technology Consortium (“DOTC”).

The OTIA will build on research conducted under a previously announced Small Business Innovation Research Grant.

The funding objective of the OTIA is to demonstrate a fully domestic antimony trisulfide supply chain using ore from the Stibnite Gold Project site.

The OTIA designates funding to the Company to conduct activities to meet this objective, including obtaining additional core samples from the Project site, conducting a pilot plant study to produce mil-spec antimony trisulfide from the samples, designing a full-scale process circuit, and delivering a modular pilot plant for the DOD to use in further investigations.

Under the OTIA, the Company will be reimbursed for these activities on a cost-plus fixed fee basis over the 24-month period of performance.

The current estimated amount is $15.5 million, which is subject to adjustment by the DOD based on scope, costs, budget, or other factors as the program advances.

Perpetua will be entitled to reimbursement for all costs incurred under the agreement, with the negotiated fee being 12%.

The OTIA contains customary terms and conditions for OTIAs, including ongoing reporting obligations.

During the year ended December 31, 2023, $5,351,680 was recognized as grant income related to the OTIA.

The Company anticipates recognizing approximately $6,800,000 of additional grant income in 2024.

During the year ended December 31, 2023, the Company was reimbursed $3,085,656 for certain costs incurred and received a 12% fee of $370,278.

Construction Readiness Activities

The Company is advancing construction readiness activities in parallel with the permitting process and these activities are reimbursable under the DPA funding outlined above.

Recent updates include:

● Appointed mining veteran Jonathan Cherry as new President and CEO

● Appointed Vice President of Projects to lead the Stibnite Gold Project;

● Completed project execution planning and scheduling;

● Continued construction manager general contractor contract negotiations with Ames Construction, while advancing constructability reviews, value engineering studies, and detailed engineering for the Burntlog Route, the Company’s proposed access route, with Ames and the road design consultants,

● Continued power line detailed scoping and engineering with Idaho Power, who has now engaged Kiewit, and identified long-lead items required for power line construction;

● Issued a Request for Proposal for Basic and Value Engineering

Franco-Nevada Silver Royalty

On March 21, 2024, the Company entered into a royalty agreement with a wholly-owned subsidiary of Franco-Nevada Corporation (“Franco-Nevada”) pursuant to which Perpetua, through its subsidiaries, sold Franco-Nevada a royalty on the future payable silver production from the Project in exchange for a cash payment of $8.5 million.

Silver represents less than 0.3% of projected life-of-mine revenue in the 2020 Feasibility Study.

Under the agreement, Franco-Nevada will receive all of the payable silver by-product revenue over the life-of-mine, subject to the terms of the agreement.

Perpetua intends to use the proceeds for general corporate purposes.

Nez Perce Tribe Litigation Settlement

On August 8, 2023, the Company and the Nez Perce Tribe (“Parties”) filed a final Settlement Agreement (“Settlement Agreement”) to resolve a Clean Water Act (“CWA”) lawsuit brought by the Nez Perce Tribe in 2019.

The Settlement Agreement provides for total payments of $5.0 million by Perpetua over a four-year period, which includes $4.0 million of contributions by Perpetua to a South Fork Salmon Water Quality Enhancement Fund to be used by the Nez Perce Tribe to support water quality improvement projects in the South Fork Salmon River watershed, and $1.0 million of reimbursements to the Nez Perce Tribe for legal expenses.

Perpetua intends to fund these payments from cash on hand or funds expected to be raised in connection with construction of the Project.

Following a 45-day review period by the United States Justice Department and the U.S.

Environmental Protection Agency (the “U.S.

EPA”), the U.S.

District Court for the District of Idaho approved the Stipulation for Dismissal and entered a Judgment on October 2, 2023 which resulted in the CWA lawsuit being dismissed without prejudice.

Under the Settlement Agreement, a dismissal with full prejudice will follow after completion of Perpetua’s required payments.

See Note 10 to the Consolidated Financial Statements for the year ended December 31, 2023 for more information regarding the CWA lawsuit and the terms of the settlement.

After giving effect to the receipt of the $8.5 million upfront payment from Franco-Nevada under the silver royalty on March 21, 2024, the Company’s latest liquidity forecast indicates that available cash resources are expected to be exhausted in the fourth quarter of 2024.

Although the Company’s current capital resources and liquidity include up to $24.8 million in total funding awarded under the TIA pursuant to Title III of the DPA ($59.4 million upon modification of the TIA to effect an additional conditional award of $34.6 million), such funding is available only for the specified costs related to permitting, environmental baseline data monitoring, environmental and technical studies, and advancing construction readiness and is not available to fund the Company’s costs under its ASAOC obligations and certain corporate expenses, including under the Settlement Agreement.

Although we expect the DPA funding to provide the Company with sufficient liquidity to complete permitting and environmental monitoring activities on the current timeline as well as additional liquidity to begin advancing construction readiness in 2024, due to costs of the ASAOC restoration obligations, payment obligations under the Settlement Agreement and other corporate expenses, we do not expect the Company will have sufficient assets to discharge its liabilities as they become due for at least 12 months from the date hereof.

Absent additional financing, the Company would no longer be able to meet its ongoing obligations or progress critical permitting efforts.

The Company continues to explore various funding opportunities, which may include the issuance of additional equity, new debt, or project specific debt;

government funding;

and/or other financing opportunities.

See “— Liquidity and Capital Resources ” for more information.

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 Factors ” sections.

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Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Years ended December 31,

Corporate salaries and benefits

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Environmental liability expense

CWA settlement expense

General and administration

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Change in fair value of warrant derivative

Change in fair value of convertible note derivative

Finance costs

Foreign exchange loss

Foreign exchange loss (income)

Interest income

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Net loss for the year ended December 31, 2023, was $18.8 million compared with a net loss of $28.7 million for 2022.

This $7.2 million decrease for the year was primarily attributable to a $7.6 million decrease in environmental liability expense, a $3.6 million decrease in exploration costs, a $0.8 million decrease in foreign exchange loss, and a $0.7 million decrease in general and administration expense.

These reductions were partially offset by a $5.7 million decrease in the gain recognized on the change in fair value of convertible note derivative as all notes were converted in 2021 and a $0.7 million decrease in the gain on the change in fair value of warrant derivative.

This $9.9 million decrease for the year was primarily attributable to a $21.0 million increase in grant income, a $3.7 million decrease in environmental liability expense, and a $0.7 million decrease in professional fees.

These changes were offset by a $10.8 million increase in exploration costs and a $5.0 million charge for the CWA settlement expense.

As noted above, for the year ended December 31, 2023, the Corporation’s main focus was the continued evaluation and advancement of the Stibnite Gold Project.

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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 year ended December 31, 2022 were $1.9 million, or 7.0%, lower than the previous year due to severance payments made to corporate employees in 2021 and lower share-based compensation expense in 2022.

Salaries and benefits for the year ended December 31, 2023 were $0.1 million, or 7.0%, lower than the previous year due to a higher corporate salary allocation in the previous year.

Directors’ Fees

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This expense relates to all exploration and evaluation expenditures related to the Stibnite Gold Project, including labor, drilling, field office costs, engineering, permitting, environmental and legal and sustainability costs.

The Corporation’s exploration expenses of $19.1 million during the year ended December 31, 2022 are $3.6 million, or 16%, lower than the previous year primarily due to a $1.7 million decrease in permitting, a $1.7 million decrease in consulting and labor costs, and a $0.6 million decrease in environmental and reclamation partially offset by a $0.8 million increase in legal and sustainability.

Permitting expenses for the year ended December 31, 2022 were lower than the previous year due to a decrease in technical support and analysis required as requests for additional information to support the preparation of the SDEIS was substantially complete by the second quarter of 2022.

The Company’s exploration expenses of $29.9 million during the year ended December 31, 2023 are $10.8 million, or 57%, higher than the previous year primarily due to a $9.0 million increase in engineering, a $1.0 million increase in consulting and labor costs, a $0.9 million increase in permitting, and a $0.6 million increase in field office and drilling support partially offset by a $0.6 million decrease in legal and sustainability.

Engineering expenses for the year ended December 31, 2023 were higher than the previous year due to advancing construction readiness engineering and planning.

Additional details of expenditures incurred are as follows:

Years ended December 31

Consulting and labor cost

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Legal and sustainability

Total Exploration

Environmental Liability Expense

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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 year ended December 31, 2022, the total cost estimate to complete Phase 1 early cleanup actions increased $4.6 million driven by scope changes, inflation and higher fuel costs.

In the year ended December 31, 2023, the total cost estimate to complete Phase 1 early cleanup actions decreased $3.7 million over the same period in 2022 driven by a lower estimated increase in the current period for the remaining work to be performed.

As of December 31, 2023, the estimate for the remaining environmental liability was $0.8 million.

CWA Settlement Expense

This expense relates to the settlement with the Nez Perce Tribe to resolve the CWA litigation.

The Settlement Agreement provides for total payments of $5.0 million by Perpetua over a four-year period.

The Company recognized $5.0 million in 2023 for this settlement.

$2.0 million of the settlement is payable in 2024.

General and Administration

This expense is predominantly insurance policies for the U.S.

offices and is $0.7 million, or 49%, lower for the year ended December 31, 2022, than the previous year primarily due to lower insurance premiums and the previous year included consulting work to support various corporate activities including the share consolidation and listing on the NASDAQ.

Gain on Disposal of Buildings and Equipment

This item relates to the gain on the sale of buildings and equipment and is $40,215 for the year ended December 31, 2022, compared to nil for the previous year primarily due selling equipment with no carrying value for gross proceeds of $49,173 offset by writing off the carrying value of equipment no longer owned in 2022.

offices and is $0.1 million, or 19%, lower for the year ended December 31, 2023 than the previous year primarily due to lower insurance premiums.

Professional Fees

This expense relates to the legal, accounting and consulting costs of the Corporation.

The expense for the year ended December 31, 2022 were $1.8 million, or 26%, higher than the previous year primarily due to legal and consulting work related to new filings required as a U.S.

domestic issuer and the associated costs.

Accounting expense for the year ended December 31, 2022 were higher due to accounting fees related to the change in the basis of accounting for the Company’s consolidated financial statements from international standards to U.S.

The expense for the year ended December 31, 2023 is $0.7 million, or 36%, lower than the previous year primarily due to legal and consulting work related to new filings required as a U.S.

domestic issuer and the associated costs in 2022.

Accounting expenses for the year ended December 31, 2022 were higher due to accounting fees related to the change in the basis of accounting for the Company’s consolidated financial statements from international standards to U.S.

Shareholder and Regulatory

This expense relates to marketing, licenses and fees, and shareholder communications.

The expense for the year ended December 31, 2022 is $0.6 million, or 16%, higher than the previous year primarily due to higher fees related to being listed on the NASDAQ and filing fees associated with being a U.S.

domestic issuer.

The expense for the year ended December 31, 2023 is $0.2 million, or 24%, lower than the previous year primarily due to a larger number of public filings and fees incurred during 2022.

Change in Fair Value of Warrant Derivative

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The gain on the change in fair value of warrants decreased $0.1 million or 98% in 2023 compared to 2022.

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 Corporation 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.

During the year ended December 31, 2021, the change in fair value related to this derivative was $5.7 million.

There was no similar amount during the year ended December 31, 2022 because all Convertible Notes were converted in 2021.

Finance Costs

Finance costs for the Corporation include accretion and interest expense related to the Convertible Notes described above, and transaction costs related to the conversion of the Convertible Notes.

These costs for the year ended December 31, 2022, are $nil compared to $0.4 million recognized in 2021 because the remainder of the Convertible Notes converted in 2021.

The warrants expired unexercised in 2023.

Foreign Exchange Loss

Changes in foreign exchange are driven by the change in value of the Canadian Dollar compared to the U.S.

The $0.8 million loss for the year ended December 31, 2021 was a result of the translation of the Corporation’s Canadian dollar denominated balances primarily on the Convertible Notes and the convertible note derivatives before their conversion in 2021.

In 2022, the loss decreased to $41,179 as all of the Convertible Notes were converted in 2021.

This income is from the DOD funding to domestic production of military-grade antimony trisulfide.

Grant income increased $0.1 million in the year ended December 31, 2022, compared the previous year as the grants were awarded in September 2022.

Dollar and the impact the change has on transactions associated with the Corporation’s Canadian dollar denominated balances.

The impact was less during the year ended December 31, 2023 compared to the same period of 2022 primarily due to less cash being held in Canadian currency during the 2023 period.

This income is from funding grants awarded to the Company from the DOD to study the domestic production of military-grade antimony trisulfide and to complete environmental and engineering studies necessary to obtain a FEIS, a ROD, and other ancillary permits to sustain the domestic production of antimony trisulfide capability for defense energetic materials.

During the year ended December 31, 2023, grant income increased $21.0 million as a result of two new larger grants received during the year (see Note 11 in the Consolidated Financial Statements).

Interest Income

This income results from interest received on the Corporation’s cash balances.

Interest income increased $0.4 million in the year ended December 31, 2022, compared to the previous year due to higher interest rates throughout the year and higher average cash balances in 2022.

There was no significant change in interest income recognized from 2022 to 2023.

Liquidity and Capital Resources

Capital resources of Perpetua Resources consist primarily of cash and liquid short-term investments.

As of December 31, 2022, Perpetua Resources had cash and cash equivalents totaling approximately $22.7 million, approximately $0.9 million in other current assets and $2.7 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.

In December 2022, the Corporation was awarded a TIA of up to $24.8 million under Title III of the DPA.

The TIA is subject to negotiation of a definitized agreement with the DOD.

Until the agreement is definitized, the maximum funding available under the TIA is capped at $18.6 million, 75% of the not-to-exceed amount.

Perpetua Resources expects to enter into a definitized agreement in the first half of 2023.

Under the funding agreement, Perpetua Resources may request reimbursement for certain costs incurred over 24 months related to environmental baseline data monitoring, environmental and technical studies and other activities related to advancing Perpetua’s construction readiness and permitting process for the Stibnite Gold Project.

As a result of the DPA funding, we reduced our planned use of the proceeds from the public offering for permitting and engineering and design work and reallocated those funds to general corporate purposes and restoration work pursuant to the ASAOC.

Perpetua Resources expects that current cash resources, combined with the full $24.8 million of potential DPA funding under the TIA, is expected to provide the Company with sufficient liquidity to complete permitting and early restoration activities on the current timeline as well as additional liquidity to begin advancing construction readiness into 2024.

Perpetua Resources plans to:

As of December 31, 2023, Perpetua Resources had cash and cash equivalents totaling approximately $3.2 million, approximately $3.2 million in receivables, principally from DOD grants, $0.4 million in prepaid assets, and $5.0 million in trade and other payables.

In December 2022, the Company was awarded an undefinitized TIA of up to $24.8 million under Title III of the DPA.

On July 25, 2023, the TIA was definitized with the DOD, establishing the full not-to-exceed amount of $24.8 million.

During the year ended December 31, 2023, $15.6 million was recognized as grant income related to the TIA.

year ended December 31, 2023, the Company was reimbursed $14.4 million for certain costs incurred, and received reimbursement of an additional $1.2 million in February 2024 under the TIA with respect to expenses incurred in the year ended December 31, 2023.

On February 12, 2024, the Company announced a conditional award of up to $34.6 million in additional funding under the TIA.

The amendment will not change any other material terms of the definitized TIA.

The modification is anticipated to be completed in the first quarter of 2024.

On March 21, 2024, the Company granted a 100% silver net smelter return royalty on future payable silver production from the Project properties to Franco-Nevada in return for a cash payment of $8.5 million, which was paid at closing on March 21, 2024.

Perpetua Resources’ current liquidity needs relate to its plans to:

● Continue to advance the regulatory process for the restoration and redevelopment of the Project;

● 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;

● 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, combined with the full DPA funding under the TIA, that the Corporation will have sufficient assets to discharge its liabilities as they become due, to continue to advance the Stibnite Gold Project beyond 2023, 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, government funding 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 2023 are approximately $33.6 million, which are expected to be funded from cash on hand and the DPA funding reimbursements.

These expenditures include an estimated $10.1 million to fund permitting of the Stibnite Gold Project, $9.1 million for general corporate purposes and administrative costs, $2.9 million for engineering and design work and $11.5 million to advance early restoration under the ASAOC and continue field operations.

These costs are subject to change due to cost over-runs, delays or other unbudgeted events.

See section Item 1A, Risk Factors – Risks Related to Our Business .

● Advance construction readiness for the Project.

Although the Company’s current capital resources and liquidity include up to $24.8 million in funding awarded under the TIA pursuant to Title III of the DPA ($59.4 million upon modification of the TIA to effect an additional conditional award of $34.6 million), such funding is available only for the specified costs described above and is not available to fund the Company’s costs under its ASAOC obligations and certain corporate expenses, including payments under the Settlement Agreement.

Although we expect the DPA funding to provide the Company with sufficient liquidity to complete permitting on the current timeline as well as additional liquidity to begin advancing construction readiness in 2024, due to costs of the ASAOC restoration obligations, payments under the Settlement Agreement and other corporate expenses, we do not expect the Company will have sufficient assets to discharge its liabilities as they become due for at least 12 months from the date hereof.

The Company’s latest liquidity forecast after giving effect to the silver royalty payment indicates that available cash resources for expenses not eligible for reimbursement under the DPA funding are expected to be exhausted in the fourth quarter of 2024.

Absent additional financing, the Company would no longer be able to meet its ongoing obligations or progress critical permitting efforts.

The Company continues to explore various funding opportunities, which may include the issuance of additional equity, new debt, or project specific debt;

government funding;

and/or other financing opportunities.

On May 12, 2023, the Company entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”) providing for the sale by the Company, from time to time, of its common shares having an aggregate gross offering price of up to $20.0 million.

As of December 31, 2023, $17.2 million remained available under the program.

Future sales under the program are subject to certain conditions, including market conditions, and there is no assurance that the Company will be able to raise additional funds under the program, at acceptable share prices or at all.

We believe our plans outlined above to obtain sufficient funding will be successful although there is no certainty that these plans will result in needed liquidity for a reasonable period of time.

However, our expectation of incurring ASAOC costs, contributions due under the Settlement Agreement and other costs in the foreseeable future that are not eligible for DPA funding reimbursement and the need for additional funding to further support the development of our planned operations, raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date that these annual Consolidated Financial Statements are issued.

The future receipt of potential funding from equity, debt, pursuit of additional government funding opportunities and/or other means cannot be considered probable at this time because these plans are not entirely within our control as of the date hereof.

These Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

Our anticipated expenditures for the fiscal year 2024 are approximately $49.9 million, of which approximately $37.0 million are expected to be funded from the DPA reimbursements (assuming approval of the modified TIA) and the remainder from cash on hand.

These expenditures include an estimated $11.3 million to fund permitting of the Stibnite Gold Project, $14.3 million for general corporate purposes, project financing and administrative costs, $18.2 million for engineering and design work, $5.2 million for field

operations and approximately $0.9 million to advance early restoration under the ASAOC.

These costs are subject to change due to cost over-runs, delays or other unbudgeted events, such as effects of inflation.

Our long-term liquidity requirements will require project financing to fund the capital costs to develop the Project, which was estimated to be approximately $1,263 million as of the third quarter of 2020 according to the TRS.

Critical Accounting Estimates

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Where estimates of future net cash flows are not available and where other conditions suggest impairment, management assesses if the carrying value can be recovered.

For significant exploration and development projects, interest is capitalized as part of the historical cost of developing and constructing assets in accordance with ASC 835-20.

For significant exploration and development projects, interest is capitalized as part of the historical cost of developing and constructing assets in accordance with the Financial Accounting Standards Board Accounting Standards Codification 835-20.

Interest is capitalized until the asset is ready for service.

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We account for all share-based payments and awards under the fair value-based method.

Share-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable.

The fair value of share-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if we had paid cash instead of paying with or using equity-based instruments.

The cost of the share-based payments to non-employees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.

We account for the granting of stock options to employees using the fair value method whereby all awards to employees will be recorded at fair value on the date of the grant.

We account for the granting of stock options and stock awards using the fair value method whereby all awards to employees will be recorded at fair value on the date of the grant.

The fair value of all stock options is expensed over their vesting period with a corresponding increase to additional paid-in capital.

Compensation costs for share-based payments that do not include performance conditions are recognized on a straight-line basis.

Compensation cost associated with a share-based award having a performance condition is recognized on the probable outcome of that performance condition during the requisite service period.

Share-based awards with a performance condition are accrued on an award by award basis.

We use the Black-Scholes option valuation model to calculate the fair value of stock options at the date of the grant.

Option pricing models require the input of highly subjective assumptions, including the expected price volatility.

Changes in these assumptions can materially affect the fair value estimates.

We account for income taxes under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Under the asset and liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.

The fair value of stock options is determined using a Black-Scholes valuation model.

Option pricing models require the input of subjective assumptions including the length of time employees will retain their vested stock options before exercising them, expected share price volatility, and interest rate.

The fair value of share-based awards that do not contain market conditions is based on the valuation of the common stock on the date of grant.

The fair value of time-based awards that are ultimately expected to vest is recognized as an expense on a straight-line

basis over the requisite service period.

The fair value of performance-based awards is adjusted for the probability of achieving the performance conditions and is recognized on a straight line basis over the term of the award agreement.

The fair value of share-based awards with market conditions is estimated using a Monte Carlo simulation model.

Assumptions and estimates utilized in the model include expected share price volatilities and related indices, the interest rate, and the probability of awards expected to vest.

Changes in the input assumptions for options and share-based awards can materially affect the fair value estimate and the Company’s net loss.

Our deferred income tax assets include certain future tax benefits.

We record a valuation allowance against any portion of those deferred income tax assets when we believe, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

We review the likelihood that we will realize the benefit of our deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required.

In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with all other available positive and negative evidence.

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis