Dakota Gold (DC) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated interim financial statements and management's discussion and analysis for the company Item 1. Financial Statements (Unaudited) This section presents Dakota Gold Corp.'s unaudited condensed consolidated interim financial statements, including balance sheets, operations, cash flows, and equity changes, with accompanying notes Condensed Consolidated Interim Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific interim dates Condensed Consolidated Interim Balance Sheets | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------------- | :------------------ | | Cash and cash equivalents | $12,755,451 | $23,911,722 | | Total current assets | $13,423,909 | $24,637,991 | | Mineral rights and properties | $79,149,401 | $78,737,287 | | Total assets | $94,966,832 | $105,022,719 | | Total current liabilities | $2,203,061 | $2,514,863 | | Total liabilities | $2,788,517 | $3,846,981 | | Total stockholders' equity | $92,178,315 | $101,175,738 | - The company's cash and cash equivalents decreased by approximately $11.16 million from December 31, 2022, to September 30, 2023[10] - Total assets decreased by approximately $10.06 million, while total liabilities decreased by approximately $1.06 million over the nine-month period[10] Condensed Consolidated Interim Statements of Operations This section details the company's financial performance, including exploration expenses, general and administrative costs, and net loss for interim periods Condensed Consolidated Interim Statements of Operations (3 months ended Sep 30) | Metric (3 months ended Sep 30) | 2023 | 2022 | | :----------------------------- | :------------ | :------------ | | Exploration expenses | $6,944,976 | $4,677,900 | | General and administrative | $1,915,041 | $2,396,284 | | Loss from operations | $(8,860,017) | $(7,074,184) | | Net loss | $(8,542,662) | $(6,575,955) | | Basic and diluted loss per share | $(0.11) | $(0.09) | Condensed Consolidated Interim Statements of Operations (9 months ended Sep 30) | Metric (9 months ended Sep 30) | 2023 | 2022 | | :----------------------------- | :------------- | :------------- | | Exploration expenses | $21,381,844 | $9,666,629 | | General and administrative | $7,231,744 | $12,125,899 | | Loss from operations | $(28,613,588) | $(21,792,528) | | Net loss | $(27,631,453) | $(14,578,975) | | Basic and diluted loss per share | $(0.36) | $(0.16) | - For the three months ended September 30, 2023, exploration expenses increased by 48.4% year-over-year, while general and administrative expenses decreased by 20.1%, with net loss increasing by 29.9% to $8.54 million[13] - For the nine months ended September 30, 2023, exploration expenses more than doubled, increasing by 121.2% year-over-year, and the net loss increased by 89.5% to $27.63 million[13] Condensed Consolidated Interim Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for interim periods Condensed Consolidated Interim Statements of Cash Flows (9 months ended Sep 30) | Cash Flow Activity (9 months ended Sep 30) | 2023 | 2022 | | :----------------------------------------- | :------------- | :------------- | | Net cash used in operating activities | $(25,205,121) | $(15,096,060) | | Net cash used in investing activities | $(1,219,827) | $(3,645,428) | | Cash provided by financing activities | $15,268,677 | $19,503 | | Net change in cash and cash equivalents | $(11,156,271) | $(18,721,985) | | Cash and cash equivalents, end of period | $12,755,451 | $28,068,497 | - Cash used in operating activities increased significantly by 67% for the nine months ended September 30, 2023, compared to the same period in 2022[16] - Cash provided by financing activities saw a substantial increase from $19,503 in 2022 to $15.27 million in 2023, primarily driven by the ATM program[16] Condensed Consolidated Interim Statements of Changes in Stockholders' Equity This section details the changes in the company's stockholders' equity, reflecting net loss, capital raises, and stock-based compensation Condensed Consolidated Interim Statements of Changes in Stockholders' Equity (9 months ended Sep 30, 2023) | Metric (9 months ended Sep 30, 2023) | Amount ($) | | :----------------------------------- | :--------- | | Balance, December 31, 2022 | 101,175,738 | | Common stock issued for ATM program | 4,862,874 | | Stock-based compensation expense | 3,450,101 | | Net loss | (27,631,453) | | Balance, September 30, 2023 | 92,178,315 | - Total stockholders' equity decreased from $101.18 million at December 31, 2022, to $92.18 million at September 30, 2023, primarily due to net loss, partially offset by capital raised and stock-based compensation[17] Note 1 - Organization and Nature of Business This note describes Dakota Gold Corp.'s business focus on mineral property exploration and development, its corporate structure, and recent financial position - Dakota Gold Corp. focuses on the acquisition, exploration, and development of mineral properties in the United States[21] - The DTRC Merger was completed on March 31, 2022, resulting in Dakota Gold Corp. owning 100% of Dakota Territory Resource Corp. (DTRC)[22][29] - The company's fiscal year end changed from March 31 to December 31, effective January 1, 2023[31] - As of September 30, 2023, the company had a cash balance of approximately $12.76 million and working capital of $11.22 million, with an additional $19.55 million raised subsequently, including a $17 million investment from Orion Mine Finance[25][27] Note 2 - Summary of Accounting Policies This note outlines the key accounting principles and policies used in preparing the unaudited interim financial statements - The interim financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim statements, and are unaudited[33] - The consolidated financial statements include the accounts of Dakota Gold Corp. and its 100%-owned subsidiaries[35] Note 3 - Mineral Rights and Properties This note describes the company's mineral properties, including the Black Hills Property, and its current status regarding gold reserve establishment - The Black Hills Property consists of 1,950 unpatented mining claims, the Homestake Option area, the Richmond Hill Option area, and additional lands, totaling 46,384 acres[38] Carrying Cost of Mineral Properties | Metric | September 30, 2023 | December 31, 2022 | | :-------------------------- | :------------------- | :------------------ | | Carrying cost of mineral properties | $79,149,401 | $78,737,287 | - The company has not yet established proven or probable gold reserves under Subpart 1300 of Regulation S-K[38] Note 4 - Property and Equipment This note details the company's property and equipment, including land, buildings, furniture, and depreciation expenses for interim periods Property and Equipment, Net | Category | September 30, 2023 | December 31, 2022 | | :-------------------------- | :------------------- | :------------------ | | Land | $418,884 | $70,000 | | Building | $1,087,089 | $768,338 | | Furniture and equipment | $799,300 | $754,969 | | Operating lease assets | $260,465 | - | | Less accumulated depreciation | $(563,866) | $(326,517) | | Property and equipment, net | $2,001,872 | $1,266,790 | - Net property and equipment increased by approximately $735,000 from December 31, 2022, to September 30, 2023[41] Depreciation Expense | Depreciation Expense | 3 months ended Sep 30, 2023 | 3 months ended Sep 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | | Amount | $113,364 | $53,432 | | Depreciation Expense | 9 months ended Sep 30, 2023 | 9 months ended Sep 30, 2022 | | :------------------- | :-------------------------- | :-------------------------- | | Amount | $237,349 | $132,243 | Note 5 - Accounts Payable and Accrued Liabilities This note provides a breakdown of the company's accounts payable and accrued liabilities at specific interim dates Accounts Payable and Accrued Liabilities | Category | September 30, 2023 | December 31, 2022 | | :-------------------------- | :------------------- | :------------------ | | Trade payables | $1,051,005 | $1,752,312 | | Accrued liabilities | $983,863 | $634,953 | | Other | $35,043 | $127,598 | | Total | $2,069,911 | $2,514,863 | - Total accounts payable and accrued liabilities decreased by approximately $445,000 from December 31, 2022, to September 30, 2023[42] Note 6 - Stockholders' Equity This note details changes in stockholders' equity, including authorized shares, capital raised through the ATM program, stock-based compensation, and outstanding warrants - The authorized shares of common stock were increased to 300,000,000 on May 18, 2023[45] - During the nine months ended September 30, 2023, the company raised approximately $15.79 million in gross proceeds by issuing 5,470,564 shares through its At-The-Market (ATM) program[46] Stock-based Compensation Expense | Stock-based Compensation Expense | 3 months ended Sep 30, 2023 | 3 months ended Sep 30, 2022 | | :------------------------------- | :-------------------------- | :-------------------------- | | Exploration | $162,042 | $188,816 | | General and administrative | $738,827 | $499,536 | | Total | $900,869 | $688,352 | | Stock-based Compensation Expense | 9 months ended Sep 30, 2023 | 9 months ended Sep 30, 2022 | | :------------------------------- | :-------------------------- | :-------------------------- | | Exploration | $572,886 | $1,039,628 | | General and administrative | $2,877,215 | $4,810,583 | | Total | $3,450,101 | $5,850,211 | - As of September 30, 2023, unrecognized compensation cost related to unvested stock options was $783,284, to be recognized over 1.39 years[57] - As of September 30, 2023, unrecognized compensation cost related to unvested RSUs and PSUs was $2,504,433, to be recognized over 1.50 years[61] - As of September 30, 2023, there were 7,603,093 warrants outstanding with an exercise price of $2.08, expiring on March 15, 2026[63] Note 7 - Commitments and Contingencies This note addresses potential legal actions and tax audits, stating no anticipated material adverse effect on the company's financial position - The company may be party to various legal actions and is subject to tax audits, but does not anticipate a material adverse effect on its financial position, results of operations, or liquidity from these matters[64] Note 8 - Income Taxes This note provides details on deferred income tax benefits and the company's effective tax rates for interim periods Deferred Income Tax Benefit | Income Tax Metric | 3 months ended Sep 30, 2023 | 3 months ended Sep 30, 2022 | | :---------------- | :-------------------------- | :-------------------------- | | Deferred income tax benefit | $(284,884) | $(1,218,724) | | Income Tax Metric | 9 months ended Sep 30, 2023 | 9 months ended Sep 30, 2022 | | :---------------- | :-------------------------- | :-------------------------- | | Deferred income tax benefit | $(873,977) | $(6,522,467) | - The effective tax rates for the three and nine months ended September 30, 2023, were 3.24% and 3.07%, respectively, which are less than the statutory rate due to the company not expecting to realize a benefit from a portion of incurred losses[65] Note 9 - Subsequent Events This note discloses significant events occurring after September 30, 2023, including additional capital raises and a strategic investment - Subsequent to September 30, 2023, the company raised an additional $2.55 million in gross proceeds through its ATM program[66] - On October 20, 2023, the company completed the Orion Equity Investment, where Orion Mine Finance purchased 6,666,667 shares for $17 million, resulting in Orion owning approximately 7.78% of the company's outstanding common stock[66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, detailing exploration, liquidity, and performance for interim periods Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various known and unknown risks and uncertainties inherent in mining and exploration - The report contains forward-looking statements regarding future operations, exploration plans, and financial expectations, which are subject to various known and unknown risks and uncertainties[69][70][71] - Key risks include the potential lack of defined mineral resources, need for additional financing, limited operating history, and the inherent dangers and market forces in mining and exploration[71] Overview This section outlines Dakota Gold Corp.'s strategic goal to create stockholder value through gold property acquisition, exploration, and development in the Homestake District - Dakota Gold Corp.'s goal is to create stockholder value through the acquisition, responsible exploration, and future development of high-caliber gold properties in the Homestake District of South Dakota[75] - The Homestake District has historically produced approximately 44.6 million ounces of gold but is considered underexplored outside the main mine area[77] - The company's strategy involves expanding its portfolio of brownfield properties within the Homestake District, leveraging proprietary data, and new geophysical surveys[78] Drill Programs and Results This section summarizes the company's core drilling activities and significant gold discoveries across its projects during the nine months ended September 30, 2023 - The company completed 105,256 feet (31,896 meters) of core drilling across three projects (Maitland, Richmond Hill, Cambrian Unconformity) during the nine months ended September 30, 2023[80] - Significant discoveries include the Unionville Zone (February 2023) and the JB Gold Zone at the Maitland Gold Project (May 2023, extended August 2023)[81][82][84] - Infill and validation drilling at Richmond Hill was completed, with final assays pending for preliminary metallurgical test work and a new geologic model for resource estimation[83][85] Planned Activities This section outlines the company's planned fiscal 2023 activities, focusing on infill drilling at Maitland and resource estimation at Richmond Hill, along with anticipated expenditures - Fiscal 2023 activities will focus on infill drilling at the Maitland project and completing the preliminary metallurgical program and model development for an S-K 1300 mineral resource estimate at Richmond Hill[87] - Anticipated expenditures for fiscal year 2023 are approximately $35 million, with about $26 million spent by September 30, 2023[89] Liquidity and Capital Resources This section discusses the company's financial liquidity, its reliance on common stock issuance for funding, and recent capital-raising activities - As an exploration-stage company, Dakota Gold Corp. does not generate revenues and relies on common stock issuance for financing operations and property acquisitions[91] Liquidity and Capital Resources | Metric | September 30, 2023 | | :----------------- | :------------------- | | Working capital | $11.22 million | | Accumulated deficit | $(33.85) million | - During the nine months ended September 30, 2023, the company raised approximately $15.35 million net from its ATM program, $0.72 million from stock option exercises, and $0.02 million from warrant exercises[93] - Subsequent to September 30, 2023, the company secured an additional $2.55 million from its ATM program and a $17 million Orion Equity Investment[94] Results of Operations This section provides a detailed analysis of the company's financial performance, including changes in exploration, general and administrative expenses, and cash flows for interim periods - For the three months ended September 30, 2023, exploration expenses increased to $6.94 million from $4.68 million in 2022, primarily due to higher drilling activity and increased assaying for resource definition[96] - General and administrative expenses decreased to $1.92 million from $2.40 million for the three months ended September 30, 2023, mainly due to reduced support costs, investor relations, and consulting expenses, partially offset by increased stock-based compensation and professional fees[97][98] - For the nine months ended September 30, 2023, exploration expenses rose to $21.38 million from $9.67 million in 2022, driven by having four active drills for the entire period[102] - General and administrative expenses for the nine months decreased to $7.23 million from $12.13 million in 2022, primarily due to lower stock-based compensation, reduced support costs, consulting, investor relations, and professional fees[103] - Cash used in operating activities increased to $25.21 million for the nine months ended September 30, 2023, from $15.10 million in 2022, reflecting the consistent operation of four drill rigs throughout the period[106] - Cash used in investing activities decreased to $1.22 million for the nine months ended September 30, 2023, from $3.65 million in 2022, as the majority of planned strategic property acquisitions were completed by June 2022[107] - Cash flows from financing activities significantly increased to $15.27 million for the nine months ended September 30, 2023, from $0.02 million in 2022, primarily due to net proceeds from the ATM program and exercises of stock options and warrants[109] Critical Accounting Estimates This section identifies the critical accounting estimates, including the valuation of stock options and performance share units using specific pricing models - Critical accounting estimates include the valuation of options granted to directors and officers using the Black-Scholes option pricing model and the valuation of PSUs granted to officers using Monte Carlo simulation[110] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - The company has no applicable quantitative and qualitative disclosures about market risk[111] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes to internal controls over financial reporting during the quarter Disclosure Controls and Procedures This section confirms that the CEO and CFO concluded the company's disclosure controls and procedures were effective as of September 30, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[112] Changes to Internal Controls and Procedures over Financial Reporting This section reports that management found no material changes to internal control over financial reporting during the three months ended September 30, 2023 - Management, with CEO and CFO participation, concluded there were no material changes to internal control over financial reporting during the three months ended September 30, 2023[113] PART II - OTHER INFORMATION This section covers other required information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 1. Legal Proceedings This section states that there are no legal proceedings to report - There are no legal proceedings to report[115] Item 1A. Risk Factors This section indicates no material changes to the risk factors previously disclosed in the company's Transition Report on Form 10-KT - There have been no material changes from the risk factors previously disclosed in the company's Transition Report on Form 10-KT for the nine months ended December 31, 2022[116] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that the company did not sell any unregistered equity securities during the nine months ended September 30, 2023 - During the nine months ended September 30, 2023, the company did not sell any equity securities that were not registered under the Securities Act of 1933[117] Item 3. Defaults Upon Senior Securities This section states that there are no defaults upon senior securities to report - This item is not applicable[118] Item 4. Mine Safety Disclosure This section clarifies that the company's exploration properties were not subject to Federal Mine Safety and Health Administration regulation during the reporting period - During the three months ended September 30, 2023, the company's exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration[119] Item 5. Other Information This section indicates that there is no other information to report - There is no other information to report[120] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including articles of incorporation, certifications, and XBRL documents - The exhibits include Articles of Incorporation, various certifications (CEO, CFO), and Inline XBRL documents[121] Signatures This section contains the signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report - The report is signed by Jonathan Awde, Chief Executive Officer, and Shawn Campbell, Chief Financial Officer, on November 13, 2023[124]