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PZG > SEC Filings for PZG > Form 10-Q on 7-Nov-2013All Recent SEC Filings

Show all filings for PARAMOUNT GOLD & SILVER CORP.

Form 10-Q for PARAMOUNT GOLD & SILVER CORP.


7-Nov-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes (included elsewhere in this report) and (ii) our consolidated financial statements, related notes and management's discussion and analysis of financial condition and results of operations included in our June 30, 2013 annual report filed on Form 10-K with the Securities and Exchange Commission on September 9, 2013.

We are an exploratory stage mining company that currently has mining concessions in Mexico and mining claims in Nevada, USA. We have no proven reserves at our San Miguel project in Mexico or at our Sleeper Gold project in Nevada but are currently exploring both projects. The following discussion updates our planned operations for this fiscal year. It also analyzes our financial condition and summarizes the results of operations for the three month period ended September 30, 2013 and compares those results to the three month period ended September 30, 2012.

Plan of Operation:

Exploration

Mexico

Our plan at the San Miguel Project is to conduct exploration drilling by testing new areas or expanding on known mineralized zones with infill drilling. Over fifty drill holes have been completed since our last material estimate. The Company plans to update this estimate in the second half of 2013. The Company also intends to evaluate silver metallurgical recovery alternatives for the Don Ese Zone.

The Company's exploration plan and budget for the San Miguel Project will be managed by its in-house technical staff. It will be funded by the Company's cash on hand, and we have budgeted approximately $2.2 million for the next twelve months.

Nevada

Our plan for our current fiscal year is to continue focusing on our Sleeper Gold Project. Our budget for this period is approximately $2.8 million. The budget activities will include drilling, modeling and metallurgical testing. The drill plans include drilling to obtain metallurgical samples, infill drilling to increase confidence in mineralized material and exploration drilling in the south Sleeper zone.

We plan to update our mineralized material model with drill hole data that was not included. This will allow us, along with a newly created geo-metallurgical model, to update our Preliminary Economic Assessment (the "PEA") which we completed in 2012.

Our work at both the San Miguel Project and Sleeper Gold Project is consistent with Paramount's strategy of expanding and upgrading known, large-scale precious metal occurrences in established mining camps, defining their economic potential and then partnering them with nearby producers.


Index
Highlights from Q1 - July 1, 2013 to September 30, 2013

At our Sleeper Gold Project in Nevada, we undertook an extensive database review and as a result a total of 473 core and RC holes have been re-logged and new cross-sections were generated. We completed a re-interpreted lithological and structural model which will allow us to plan a new drill program and to update our mineralized material estimate model.

We commissioned SRK Consulting to update the Sleeper Gold Project's material estimate which will incorporate the data from 44 new drill holes totaling over 49,000 ft. completed since the resource estimation used in last year's PEA.

At our San Miguel project in Mexico, our geologists identified a new mineralized zone called San Isidro from surface mapping, rock sampling and alteration analysis. The new structure runs parallel to, and west of Paramount's previously identified Guazapares Megastructure.

In July 2013, we sold 6 million common shares of Valor Gold Corporation in a private transaction and received net proceeds of $450,000. In August 2013, we made an investment in Pershing Gold Corporation in the amount of $499,950.

Liquidity and Capital Resources

At September 30, 2013, we had cash and cash equivalents of $9,513,802 compared to $11,524,051 as at June 30, 2013. The decrease of $2,010,249 was the result of the funding of our exploration programs and corporate overhead.

At September 30, 2013, we had a net working capital of $11,646,872. We anticipate our cash expenditures to fund exploration programs and general corporate expenses to be approximately $0.5 million per month for three month period ending December 31, 2013. Anticipated cash outlays will be funded by our available cash reserves.

At September 30, 2013, the amounts receivable amount of $1,016,308 primarily consisted of value added tax due from the Mexican government.

During the three month period ended September 30, 2013, we sold marketable securities and received $450,000. This was offset by our investment in a junior exploration company in the amount of $499,950.

Historically, we have funded our exploration and development activities through equity financing arrangements. We continue to assess our needs for additional capital to ensure sufficient financial resources are available to fund our exploration and working capital needs. We believe that our access to additional capital, together with our existing cash resources will be sufficient to meet our needs for the next twelve months. If, however, we are unable to obtain additional capital or financing, our exploration and development activities will be significantly affected.

Comparison of Operating Results for the three month period ended September 30, 2013 to the three month period ended September 30, 2012.

Net Loss

Our net loss before other items for the three month period ended September 30, 2013 was $1,964,926 compared to a loss of $4,327,343 in the comparable period in the prior year. The decrease in net loss of $2,362,417 or 55% mainly reflects lower exploration expenditures at both the Sleeper Gold Project and the San Miguel Project. We will continue to incur losses for the foreseeable future as we continue with our planned explorations programs at both projects.

Expenses

Our exploration expenses for the three month period ended September 30, 2013 compared to the comparable prior period decreased by 65% or by $2,260,213. This decrease was driven by not conducting exploration drilling at either our Sleeper Gold Project or our San Miguel Project. Exploration efforts for both projects focused on planning, geological modelling, mapping, interpretation and metallurgical testing and analysis.


Index
The following table summarizes our drilling activities at both projects for the three month period ended September 30, 2013 and 2012:

                                                  Three month period ended                Three month period ended
                                                     September 30, 2013                      September 30, 2012
                                                                    Cumulative                            Cumulative
                                              Holes               Length in Feet         Holes          Length in Feet
San Miguel Project, Mexico                            -                         -              17                19,414
Sleeper Gold Project, USA                             -                         -              14                16,357
Total                                                 -                         -              31                35,771

Our general corporate expenses which include professional fees, corporate communications, consulting fees and office and administration totaled $482,564 for the three month period ended September 30, 2013. This is a 4.8% decrease over the comparable three month period in the 2012.

Critical Accounting Policies

Management considers the following policies to be most critical in understanding the judgments that are involved in preparing the Company's consolidated financial statements and the uncertainties that could impact the results of operations, financial condition and cash flows. Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. Management believes the Company's critical accounting policies are those related to mineral property acquisition costs, exploration and development cost, stock based compensation, derivative accounting and foreign currency translation.

Estimates

The Company prepares its consolidated financial statements and notes in conformity to U.S. GAAP and requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates these estimates, including those related to allowances for doubtful accounts receivable and long-lived assets. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Mineral property acquisition costs

The Company capitalizes the cost of acquiring mineral properties and will amortize these costs over the useful life of a property following the commencement of production or expense if it is determined that the mineral property has no future economic value or the properties are sold or abandoned.
Costs include cash consideration and the fair market value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts of the specific mineral property at the time the payments are made.

The amounts recorded as mineral properties reflect actual costs incurred to acquire the properties and do not indicate any present or future value of economically recoverable reserves.


Index
Exploration expenses

The company expenses exploration costs as incurred. When it is determined that precious metal resource deposit can be economically and legally extracted or produced based on established proven and probable reserves, further exploration expenses related to such reserves incurred after such a determination will be capitalized. To date, the Company has not established any proven or probable reserves and will continue to expense exploration expenses as incurred.

Foreign Currency Translation

The functional currency of the Company is the U.S. dollar. Transactions involving foreign currencies for items included in operations are translated into U.S. dollars using the exchange rate prevailing at the date of transaction and monetary assets and liabilities are translated at the exchange rate prevailing at the consolidated balance sheet date and all other consolidated balance sheet items are translated at historical rates applicable to the transactions that comprise the amounts. Translation gains and losses are included in the determination of other comprehensive loss and gains in the Statement of Operations.

Reclassification

Certain comparative figures have been reclassified to conform to the current quarter presentation.

Off-Balance Sheet Arrangements

We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital resources.

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