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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-05-07 · 73 added, 73 removed, 69 unchanged (68% of the section changed)

12 unchanged sentences

The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

We are an emerging growth company engaged in the business of acquiring, exploring and developing precious metal projects in the United States of America.

Cautionary Note to U.S.

Paramount is subject to the reporting requirements of the Exchange Act and this filing and other U.S.

reporting requirements are governed by the SEC Industry Guide 7.

Additionally, Paramount is subject to certain reporting requirements under applicable Canadian securities laws with respect to our material mineral properties under National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) We caution investors that certain terms used under Canadian reporting requirements and definitions of NI 43-101 to describe mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.

Therefore, investors are cautioned not to assume that all or any part of the mineralized material contained at any of our material projects will ever be converted to Industry Guide 7 compliant reserves.

We are a company engaged in the business of acquiring, exploring and developing precious metal projects in the United States of America.

Paramount owns advanced stage exploration projects in the states of Nevada and Oregon.

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The following discussion updates our outlook and plan of operations for the foreseeable future.

It also analyzes our financial condition and summarizes the results of our operations for the three and nine-month periods ended March 31, 2020 and compares these results to the results of the prior year three and nine-month periods ended March 31, 2019.

It also analyzes our financial condition and summarizes the results of our operations for the three-month period ended September 30, 2020 and compares these results to the results of the prior year three-month period ended September 30, 2019.

Operating Highlights:

During the three-month period ended March 31, 2020, the Company submitted a revised Plan of Operation (the ”Plan”) to the Federal Bureau of Land Management (“ BLM ”) outlining the Company’s plans to build and operate the proposed Grassy Mountain underground gold mine located in Malheur County, eastern Oregon.

The BLM will review the Plan for completeness, which is expected to take 30 days, and will subsequently provide the Company with comments, if any.

The BLM has previously reviewed 19 of the baseline data reports (“BDRs”) and their requests for clarifications have all been addressed.

The BLM will register a Notice of Intent (the ”Notice”) in the Federal Register once the application is deemed complete.

The Notice initiates the Environmental Impact Statement (“ EIS ”) process under the National Environmental Policy Act.

During the nine-month period ended March 31, 2020, Paramount submitted its Consolidated Permit Application (“Application”) to the Oregon Department of Geology and Mineral Industries (“DOGAMI”) to enable the Company to build and operate its proposed, high grade underground gold mine located in Malheur County of eastern Oregon.

The Application was reviewed by the DOGAMI and cooperating agencies for completeness.

As part of this process, the permitting agencies have provided Paramount with a list of supplemental information and recommendations required to submit a modified CPA.

Paramount, the DOGAMI and the permitting agencies will continue to work together to discuss the additional information requested, ensuring the submission of a complete modified CPA which will trigger the 225 day maximum permit evaluation process, upon which draft permits are issued.

The NI 43-101 Feasibility Study for the Grassy Mountain Project is well underway and being led by Ausenco Engineering Canada Inc.

with expected completion in mid-2020.

On June 25, 2019, the Company issued 1,096,791 shares of common stock to Ausenco Engineering USA South Inc.

(“Ausenco”) in exchange for services to complete a feasibility study at its Grassy Mountain Project.

The shares will be held in escrow until Ausenco delivers a feasibility study to the Company which is expected to be completed in mid-2020.

On September 10, 2019, the Company entered into agreements with accredited investors and issued convertible notes in a private transaction (the “Private Placement”).

Under the terms of the Private Placement, Paramount sold an aggregat e of 5,478 notes at $975 per $1000 face amount with a four-year maturity for aggregate proceeds of $5.34 million.

Each convertible note bears an interest rate of 7.5% per annum, payable semi-annually.

The principle amount of the convertible notes is conv ertible at a price of $1.00 per share of Paramount common stock.

At any point after the second anniversary of the issuance of the convertible notes, Paramount may force conversion if the share price of its common stock remains above $1.75 for 20 consecuti ve trading days.

The convertible notes are secured by a lien on all assets of the Company and, pursuant to the terms of the convertible notes, the Company is required to maintain a working capital balance of $250,000.

During the nine-month period ended March 31, 2020, Paramount received from the State of Nevada’s Division of Minerals, the Excellence in Mine Reclamation Award for the Company’s reclamation efforts at the Sleeper Project.

The award was based on an assessment from representatives from the US Forest Service, the Nevada Department of Environmental Protection, the Nevada Division of Minerals, the Nevada Department of Wildlife, and the Bureau of Land Management who visited and reviewed the reclamation of the Sleeper Pit and our management of surface and underground water.

During the three-month period ended September 30, 2020, the Company announced that the Oregon Water Resource Department (“OWRD”) had reviewed and approved the plans and specifications for the tailings dam proposed for the Grassy Mountain mine and stated that from a safety perspective the plans are construction ready.

The OWRD reviewed the data within the Consolidated Permit Application which Paramount submitted in November 2019 and which included all tailings design drawings, safety analysis, field data collected and laboratory testing.

The OWRD and its engineering team are required to review and evaluate the data and design, classify the hazard level (high, significant, or low hazard rating) and evaluate readiness for construction from a dam safety perspective.

Considering the project’s remote geographic location, low population density, arid nature with no rivers or permanent streams in close proximity, seismic analysis and all other data compiled, OWRD has rated the dam as low hazard, its lowest risk level.

The approval for construction is valid for 5 years with extensions possible on request.

In September 2020, we press released the results of a Canadian NI 43-101 Feasibility Study (“FS”) for our Grassy Mountain Project in Oregon.

The FS was completed by a group of industry leading consulting firms led by Ausenco Engineering Canada Inc.

(“Ausenco”) who managed the overall study and were responsible for processing and infrastructure design and oversaw metallurgical testing;

Development Associates (“MDA”) who updated the mineral resource estimate and com pleted the mine planning and reserves estimation;

Golder Associates designed the tailings storage facility and EM strategies who oversaw the environmental aspects of the FS.

This mining scenario in the FS results in an average annual production of 47,000 ounces of gold and 55,000 ounces of silver for eight years.

The metal prices used for the economic analysis includes $1,472 per ounce of gold sold and $16.96 per ounce of silver sold.

The life of mine average cash operating are estimated to be $583 per gold ounce including silver revenues as credit produced and the total initial capital requirements are estimated to be $97.5 million resulting in a net present value of $105 million using a 5% discount rate.

Outlook and Plan of Operation:

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We ensure we have sufficient cash on hand to meet our annual land holding costs as the maintenance of mining claims and leases are essential to preserve the value of our mineral property assets.

Paramount has been closely monitoring the evolution of the COVID-19 pandemic and continues to evaluate its business activities and plans.

Since March 2020, all of the Company’s employees have been working from home.

Paramount believes that completion of the NI-43-101 Feasibility Study for the proposed high-grade Grassy Mountain underground gold mine in eastern Oregon is not likely to face disruption or delays and its completion remains on track for mid-2020.

As previously reported, Ausenco, the lead consultant of the study, agreed to accept a fixed number of Paramount shares in lieu of cash to complete the study.

This allows the Company to reduce cash expenses in the current challenging environment.

Comparison of Operating Results for the three and nine-months ended March 31, 2020 and 2019

As reported in our Annual Report on Form 10-K for the year ended June 30, 2020 the Company expects to undertake the following activities:

Grassy Mountain Project:

Paramount expects to receive the Feasibility Study report from Ausenco in its second quarter of the current fiscal year and to focus its efforts on continued state and federal mining permitting for the fiscal year ending June 30, 2021.

As a follow up to submitting the Consolidated Permit Application (“CPA”) in November 2019, Paramount will respond to the State of Oregon’s CPA completeness review (“Review”) received in February 2019.

The Review provided included proposed resolutions and additional information required by the Company and will assist the Company in submitting a revised CPA.

The Company expects the revised CPA to address all the comments and requests for additional information with the objective of submitting a complete revised CPA that allows the State of Oregon to determine whether to issue a state mining permit for the Grassy Mountain Project.

In addition to the State of Oregon permitting activities, Paramount expects to respond to BLM comments it received on its POO.

Once all the comments have been addressed, the BLM will register a Notice in the Federal Register once the application is deemed complete.

The Notice initiates the EIS process under the National Environmental Policy Act.

To complete these activities Paramount will engage specialized mining consulting firms, work with State and Federal contracted thirds parties and work directly with both state and federal permitting agencies.

Sleeper Gold Project:

Paramount is planning to initiate several programs during the upcoming fiscal year that it believes will enhance the value of the Sleeper Gold Project.

The programs planned include:

1) A review of all geological, geochemical and geophysical data for the purposes of generating targets for exploration drilling to locate additional higher-grade mineralization in the close proximity of the original Sleeper pit or in the large mining claim package owned by the Company.;

(2) Evaluate the various successful metallurgical tests, previously conducted on the sulfide bearing mineralized material in order to optimize the best economic alternatives and increase the number of gold ounces produced in a proposed mining scenario.

This could include bio or alkaline oxidation in a heap leach scenario, flotation and oxidation and gold recoveries from concentrates.;

and (3) Update the resource estimation and preliminary economic assessment with the best alternatives identified for the project.

Frost Project:

The Company will implement an initial reverse circulation drill program to test historical drill results and additional selective targets.

COVID-19 Update

Paramount continues to monitor the evolution of the COVID-19 pandemic and continues to evaluate its business activities and plans.

Our priority is to ensure the health and safety of our employee and consultants.

We continue to perform the majority of our activities remotely with a limited amount of on-site or in-office attendance only when required.

Video conferencing has replaced in-person participation in conferences, permitting and other corporate activities that typically required corporate travel.

Comparison of Operating Results for the three - months ended September 30 , 2020 and 2019

Results of Operations

We did not earn any revenue from mining operations for the three and nine-months ended March 31, 2020 and 2019.

During the nine-month period ended March 31, 2020, we submitted a consolidated mining permit application with the State of Oregon for our Grassy Mountain Project.

In addition, Ausenco continued with activities related to completing a feasibility study on the Grassy Mountain Project.

Our net loss before income taxes for the three-months ended March 31, 2020 was $1,440,372 compared to a net loss before income taxes of $1,173,413 in the previous year.

We did not earn any revenue from mining operations for the three-months ended September 30, 2020 and 2019.

During the three-month period ended September 30, 2020, we continued with activities related to completing a feasibility study on the Grassy Mountain Project and released a summary of results from the comprehensive study in which a complete report is expected in our second quarter.

Our net loss before income taxes for the three-months ended September 30, 2020 was $1,331,508 compared to a net loss before income taxes of $1,006,499 in the previous year.

The drivers of the increase in net loss before income taxes of 32% are fully described below.

Our net loss before income taxes for the nine-months ended March 31, 2020 was $4,789,388 compared to a net loss before income taxes of $3,662,629 in the previous year.

The drivers of the increase of $1,126,759 or 31% in net loss before income taxes are fully described below.

The Company expects to incur losses for the foreseeable future as we continue with our planned exploration programs.

The Company expects to incur losses for the foreseeable future as we continue with our planned exploration and development programs.

Exploration and Land Holding Costs

For the three-month period ended March 31, 2020, exploration expenses were $1,068,021 compared to $712,623 in the prior year comparable period.

For the three-month period ended September 30, 2020, exploration expenses were $636,027 compared to $458,572 in the prior year comparable period.

This represents an increase of 39% or $177,455.

During the three-month period ended March 31, 2020, the Company focused its efforts on preparing and submitting a revised plan of operations to the BLM for its Grassy Mountain Project.

It also continued to work on its previously announced feasibility study for the Grassy Mountain project.

During the three-month period ended September 30, 2020, the Company focused its efforts on completing its previously announced feasibility study for the Grassy Mountain project.

Included were expenses related to the Company’s reclamation activities at the Sleeper Project.

Total exploration expenses at the Grassy Mountain Project during the current three-month period were $352,764.

For the three-month pe riod ended March 31, 2020, land holding costs were $131,633 compared to $130,550 in the prior year comparable period.

For the nine-month period ended March 31, 2020, exploration expenses were $3,335,221 compared to $2,019,837 in the prior year comparable period.

This represents an increase of 65% or $1,315,384.

During the current nine-month period, the Company submitted the consolidated mining permit application and a revised Plan for its Grassy Mountain Project and completed the reclamation of two ponds at its Sleeper Project in Nevada.

For the nine-month period ended March 31, 2020, land holding costs decreased by $38,122 from the prior year comparable period.

The decrease is primarily due to not incurring lease costs for non-essential mining claims leased from third parties.

For the three-month period ended September 30, 2020, land holding costs were $131,183 compared to $137,577 in the prior year comparable period.

The decrease of land holding costs from the prior year comparable period was due to the expiry of a lease term on non material BLM mining claims owned by a third party.

Salaries and Benefits

For the three-month period ended March 31, 2020, salary and benefits increased by 6% or by $12,222 to $228,680 from the prior year’s three-month period ended March 31, 2019.

For the three-month period ended September 30, 2020, salary and benefits increased by 23% or by $48,174 to $255,941 from the prior year’s three-month period ended September 30, 2019.

Salary and benefits is comprised of cash and stock based compensation of the Company’s executive and corporate administration teams.

The increase primarily reflects changes to stock-based compensation incurred during the three-month period ended March 31, 2020 compared to the three-month period ended March 31, 2019.

Included in the salary and benefits expense amount for the three-month period ended March 31, 2020 and 2019 was a non-cash stock-based compensation of $23,361 and $43,409, respectively.

For the nine-month period ended March 31, 2020, salary and benefits increased by 5% or by $38,356 to $740,369 from the prior year’s nine-month period ended March 31, 2019.

The increase in expenses was due to bonuses awarded to the Company’s employee’s and stock-based compensation incurred for new option grants.

Included in the salary and benefits expense amount for the nine-month period ended March 31, 2020 and 2019 was a non-cash stock-based compensation of $34,970 and $86,817.

The increase primarily reflects changes to salary and stock-based compensation incurred during the three-month period ended September 30, 2020 compared to the three-month period ended September 30, 2019.

Included in the salary and benefits expense amount for the three-month period ended September 30, 2020 and 2019 was a non-cash stock-based compensation of $58,929 and $43,409, respectively.

Directors’ Compensation

For the three-month period ended March 31, 2020, directors’ compensation decreased by 51% or by $28,412 from the prior year’s three-month period ended March 31, 2019.

For the three-month period ended September 30, 2020, directors’ compensation increased by 26% or by $6,355 from the prior year’s three-month period ended September 30, 2019.

Directors’ compensation consists of cash and stock-based compensation of the Company’s board of directors.

The decrease reflects the reduction in stock-based compensation recorded in the current quarter compared to the prior year’s comparable period.

For the nine-month period ended March 31, 2020, directors’ compensation decreased by 40% or by $42,746 from the prior year’s nine-months ended March 31, 2019.

The decrease reflects the reduction in stock-based compensation recorded in the current nine-month period compared to the prior year’s comparable period.

The increase reflects the additional cash compensation recorded in the current quarter compared to the prior year’s comparable period.

Professional Fees and General and Administration

For the three-month period ended March 31, 2020, professional fees were $35,477 compared to $24,654 in the prior year’s comparable period.

For the three-month period ended September 30, 2020, professional fees were $44,452 compared to $23,636 in the prior year’s comparable period.

This represents an increase of 88% or $20,816.

Legal costs and advisory fees related to permitting Grassy Mountain were the main factors for the increase in these expenses from the prior year comparable period.

For the three-month period ended March 31, 2020, general and administration expenses decreased by 9% to $160,868 from $176,972 in the prior year comparable period.

This decrease was a result of lower travel and marketing costs incurred by the Company.

For the nine-month period ended March 31, 2020, professional fees were $124,809 compared to $97,428 in the prior year’s comparable period.

This represents an increase of 28%.

Legal costs and advisory fees related to permitting Grassy Mountain were the main factors in the increase in these expenses from the prior year comparable period.

For the nine-month ended March 31, 2020, general and administration expenses decreased by 14% to $423,736 from $492,943 in the prior year comparable period.

This decrease was a result of lower travel and marketing costs incurred by the Company.

Advisory fees incurred related to the completion of our feasibility study were the main factors for the increase in these expenses from the prior year comparable period.

For the three-month period ended September 30, 2020, general and administration expenses increased by 2% to $114,123 from $112,124 in the prior year comparable period.

Although general and administration expenses did not change significantly from the previous year’s comparable period the Company did incur lower travel related expenses due to the COVID-19 related travel restriction.

The reduction in travel expenses were offset by additional costs to support remote working and the participation in additional industry related virtual investment conferences.

Liquidity and Capital Resources

As an exploration and development company, Paramount funds its operations, reclamation activities and discretionary exploration programs with its cash on hand.

At March 31, 2020, we had cash and cash equivalents of $1,414,308 compared to $463,690 as at June 30, 2019.

During the nine-months ended March 31, 2020, the Company issued 5,478 convertible notes for net proceeds of $5,201,807.

The main uses of cash for the nine-month period ending comprised of the following material amounts:

At September 30, 2020, we had cash and cash equivalents of $4,491,478 compared to $5,434,081 as at June 30, 2020.

In May 2020, the Company established an $8.0 million “at the market” equity offering with Cantor Fitzgerald & Co.

and Canaccord Genuity LLC to proactively increase its financial flexibility.

During the three-months ended September 30, 2020, the Company issued 595,281 shares for net proceeds of $770,514 under the program.

The main uses of cash for the three-month period ending comprised of the following material amounts:

Cash used in operating activities which included general and administration expenses, land holding costs, exploration programs at our Grassy Mountain and Sleeper Gold Projects and reclamation activities of $1,713,117

Due to COVID-19, we anticipate our operating expenditures for the remainder of the fiscal year ending June 30, 2020 to be reduced.

We anticipate our operating expenditures for the remainder of the fiscal year ending June 30, 2021 to be as follows:

$1.35 million on corporate administration expenses (expenses include executive management and employee salaries, legal, audit, marketing and other general and administrative expenses)

$0.1 million on the Sleeper Gold Project (expenses include reclamation costs, employee salary and benefits, and land holding costs)

$0.4 million on the Grassy Mountain Project (expenses include consulting fees, land holding costs and general and administration expenses, environmental impact statement preparation, State of Oregon permit application and evaluation activities and feasibility study costs)

$0.85 to $1.1 million on the Sleeper Gold Project (expenses include exploration programs, reclamation costs, employee salary and benefits, and land holding costs)

$2.0 million on the Grassy Mountain Project and Frost Project (expenses include consulting fees, land holding costs and general and administration expenses, environmental impact statement preparation, and costs associated with the State of Oregon permit revised CPA)

Our anticipated expenditures will be funded by our cash on hand and by other capital resources.

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For stock option grants with market conditions that affect vesting, the Company uses a lattice approach incorporating a Monte Carlo simulation to value stock option granted.

For stock option grants that have no market conditions that affect vesting, th e Company uses the Black-Scholes option valuation model to value stock options granted.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferab le.

For stock option grants that have no market conditions that affect vesting, the Company uses the Black-Scholes option valuation model to value stock options granted.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable.

The model requires management to make estimates which are subjective and may not be representative of actual results.

11 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis