PERPETUA RESOURCES CORP. [PPTA] Filings

10-Q 1 ppta-20230930x10q.htm FORM-10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39918

Perpetua Resources Corp.

(Exact Name of Registrant as Specified in its Charter)

British Columbia, Canada

(State or other jurisdiction of
incorporation or organization)

N/A

(I.R.S. Employer
Identification No.)

405 S. 8th Street, Ste 201

Boise, Idaho

(Address of principal executive offices)

83702

(Zip Code)

(208) 901-3060

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, without par value	PPTA	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, an emerging growth company, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the eﬀectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2023, the registrant had 63,267,783 common shares outstanding.

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PERPETUA RESOURCES CORP.

TABLE OF CONTENTS


		Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		2

PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and “forward-looking information” within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project,” “outlook,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Forward-looking statements are based on certain estimates, beliefs, expectations and assumptions made in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that may be appropriate.

Forward-looking statements necessarily involve unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed or implied in such statements. Due to the risks, uncertainties and assumptions inherent in forward-looking information, you should not place undue reliance on forward-looking statements. Factors that could have a material adverse effect on our business, financial condition, results of operations and growth prospects can be found in Item 1A, Risk Factors, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report and in Item 1A, Risk Factors and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022. These factors include, but are not limited to, the following:

●

planned expenditures and budgets and the execution thereof, including the ability of the Company to discharge its liabilities as they become due and to continue as a going concern;

●

access to capital and suitable financing sources to fund the exploration, permitting, development and construction of the Project;

●

permitting timelines and requirements, including with respect to the timing and outcome of the Final Environmental Impact Statement (“FEIS”), the draft Record of Decision, the Final Record of Decision and other permitting processes;

●

the intended environmental and other outcomes of the Fund (as defined below) related to the Nez Perce Tribe’s Clean Water Act (“CWA”) lawsuit, good faith discussions between the Company and the Nez Perce Tribe with respect to future permitting and activities at the Project and the anticipated source of funding of the Company’s payments required under the Settlement Agreement (as defined below);

●

regulatory and legal changes, requirements for additional capital, requirements for additional water rights and the potential effect of proposed notices of environmental conditions relating to mineral claims;

●

analyses and other information based on expectations of future performance and planned work programs;

●

possible events, conditions or financial performance that are based on assumptions about future economic conditions and courses of action;

●

assumptions and analysis underlying our mineral reserve estimates and plans for mineral resource exploration and development;

●

timing, costs and potential success of future activities on the Company’s properties, including but not limited to development and operating costs in the event that a production decision is made;

●

potential results of exploration, development and environmental protection and remediation activities;

●

future outlook and goals;

●

current or future litigation or environmental liability;

●

global economic, political and social conditions and financial markets;

●

inflation levels, particularly the recent rise to historically high levels, and government efforts to reduce inflation, including increased interest rates;

●

changes in gold and antimony commodity prices;

●

our ability to implement our strategic plan and to maintain and manage growth effectively;

●

loss of our key executives;

●

labor shortages and disruptions;

●

cyber-attacks and other security breaches of our information and technology systems; and

●

other factors and risks described under the heading “Risk Factors” in Item 1A of this Quarterly Report.

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Statements concerning mineral resource and mineral reserve estimates may also be deemed to constitute forward-looking information to the extent that such statements involve estimates of the mineralization that may be encountered if a property is developed.

With respect to forward-looking information contained herein, the Company has applied several material factors or assumptions including, but not limited to, certain assumptions as to production rates, operating cost, recovery and metal costs; that any additional financing needed will be available when needed on reasonable terms; that the current exploration, development, environmental and other objectives concerning the Company’s Stibnite Gold Project (the “Project” or “Stibnite Gold Project”) can be achieved and that the Company’s other corporate activities will proceed as expected; that the formal review process under the National Environmental Policy Act (“NEPA”) (including a joint review process involving the United States Forest Service (“USFS” or “Forest Service”), the State of Idaho and other agencies and regulatory bodies) as well as the environmental impact statements will proceed in a timely manner and as expected; payment and other settlement conditions under the final Settlement Agreement filed on August 8, 2023 and approved by the United States District Court for the District of Idaho on October 2, 2023 to resolve the CWA litigation (the “Settlement Agreement”) will proceed on the anticipated timeline and terms, the parties will engage in good faith discussions regarding the Project and the Fund (as defined below), that the Project will receive necessary permits and approvals, that Perpetua will be able to successfully obtain financing for the Project, and that all requisite information will be available in a timely manner; that the current price and demand for gold and other metals will be sustained or will improve; that general business and economic conditions will not change in a materially adverse manner and that all necessary governmental approvals for the planned exploration, development and environmental protection activities on the Project will be obtained in a timely manner and on acceptable terms; and that the continuity of economic and political conditions and operations of the Company will be sustained.

These risks are not exhaustive. Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this Quarterly Report. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the effects of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under applicable securities laws. We qualify all of our forward-looking statements by these cautionary statements.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Perpetua Resources Corp.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


	September 30,		December 31,
	2023		2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	7,104,937	$	22,667,047
Receivables		1,978,508		280,150
Prepaid expenses		1,353,327		614,930
		10,436,772		23,562,127
NON-CURRENT ASSETS
Buildings and equipment, net		389,252		294,980
Right-of-use assets		54,836		68,675
Environmental reclamation bond (Note 5)		3,000,000		3,000,000
Mineral properties and interest (Note 3)		72,795,365		72,519,373
TOTAL ASSETS	$	86,676,225	$	99,445,155

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade and other payables	$	5,535,730	$	2,741,516
Lease liabilities		55,279		70,449
CWA settlement payable (Note 6)		500,000		—
Environmental reclamation liabilities (Note 5)		2,297,523		9,590,766
		8,388,532		12,402,731
NON-CURRENT LIABILITIES
Warrant derivative		—		1,732
CWA settlement payable (Note 6)		4,500,000		—
Environmental reclamation liabilities (Note 5)		456,744		1,210,170
TOTAL LIABILITIES		13,345,276		13,614,633

COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS’ EQUITY (Note 4)
Common shares, no par value, unlimited shares authorized, 63,202,408 and 63,011,777 shares outstanding, respectively		616,330,139		615,553,448
Additional paid-in capital		33,830,533		32,203,858
Accumulated deficit		(576,829,723)		(561,926,784)
TOTAL SHAREHOLDERS’ EQUITY		73,330,949		85,830,522

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	86,676,225	$	99,445,155

See accompanying notes to the unaudited condensed consolidated financial statements.

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Perpetua Resources Corp.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
EXPENSES
Corporate salaries and benefits	$	393,656	$	453,330	$	1,205,824	$	1,281,617
Depreciation		23,846		15,318		59,548		41,654
Directors’ fees		30,158		92,874		310,268		445,348
Exploration		8,664,205		4,589,966		20,683,257		13,456,304
Environmental liability expense		22,285		232,776		604,222		898,146
CWA settlement expense (Note 6)		—		—		5,000,000		—
General and administration		160,264		187,733		454,543		570,355
Professional fees		230,243		223,160		875,327		1,474,356
Shareholder and regulatory		91,177		142,984		388,307		418,050
OPERATING LOSS		9,615,834		5,938,141		29,581,296		18,585,830

OTHER EXPENSES (INCOME)
Change in fair value of warrant derivative		—		(6,021)		(1,732)		(100,766)
Foreign exchange loss (income)		12,571		(7,136)		15,193		26,210
Grant income		(6,905,691)		—		(14,273,148)		—
Interest income		(92,620)		(170,658)		(418,670)		(254,683)
Total other loss (income)		(6,985,740)		(183,815)		(14,678,357)		(329,239)

NET LOSS	$	2,630,094	$	5,754,326	$	14,902,939	$	18,256,591

NET LOSS PER SHARE, BASIC AND DILUTED	$	0.04	$	0.09	$	0.24	$	0.29

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED		63,176,063		62,987,859		63,120,580		62,982,688

See accompanying notes to the unaudited condensed consolidated financial statements.

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Perpetua Resources Corp.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the three and nine months ended September 30, 2023 and 2022


	Common Shares			Additional Paid		Accumulated
	Shares	Amount		in Capital		Deficit		Total
BALANCE, December 31, 2021	62,971,859	$	615,359,152	$	29,454,696	$	(533,213,253)	$	111,600,595
Share based compensation	—		—		676,249		—		676,249
Restricted and performance shares units distributed	1,667		12,378		(12,378)		—		—
Net loss for the period	—		—		—		(6,244,894)		(6,244,894)
BALANCE, March 31, 2022	62,973,526		615,371,530		30,118,567		(539,458,147)		106,031,950
Share based compensation	—		—		826,400		—		826,400
Restricted and performance shares units distributed	14,333		54,930		(54,930)		—		—
Net loss for the period	—		—		—		(6,257,371)		(6,257,371)
BALANCE, June 30,2022	62,987,859		615,426,460		30,890,037		(545,715,518)		100,600,979
Share based compensation	—		—		732,236		—		732,236
Net loss for the period	—		—		—		(5,754,326)		(5,754,326)
BALANCE, September 30, 2022	62,987,859	$	615,426,460	$	31,622,273	$	(551,469,844)	$	95,578,889

BALANCE, December 31, 2022	63,011,777	$	615,553,448	$	32,203,858	$	(561,926,784)	$	85,830,522
Share based compensation	—		—		840,827		—		840,827
Restricted and performance shares units distributed	115,256		449,909		(449,909)		—		—
Exercise of share purchase options	12,500		64,687		(24,015)		—		40,672
Net loss for the period	—		—		—		(4,600,093)		(4,600,093)
BALANCE, March 31, 2023	63,139,533		616,068,044		32,570,761		(566,526,877)		82,111,928
Share based compensation	—		—		784,282		—		784,282
Restricted and performance shares units distributed	13,334		54,936		(54,936)		—		—
Exercise of share purchase options	12,500		66,034		(24,515)				41,519
Net loss for the period	—		—		—		(7,672,752)		(7,672,752)
BALANCE, June 30, 2023	63,165,367		616,189,014		33,275,592		(574,199,629)		75,264,977
Share based compensation	—		—		696,066		—		696,066
Restricted and performance shares units distributed	5,475		22,064		(22,064)		—		—
Deferred share units distributed	31,566		119,061		(119,061)		—		—
Net loss for the period	—		—		—		(2,630,094)		(2,630,094)
BALANCE, September 30, 2023	63,202,408	$	616,330,139	$	33,830,533	$	(576,829,723)	$	73,330,949

See accompanying notes to the unaudited condensed consolidated financial statements.

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Perpetua Resources Corp.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	For the nine months ended September 30,
	2023		2022
OPERATING ACTIVITIES:
Net loss	$	(14,902,939)	$	(18,256,591)
Adjustments to reconcile net loss to net cash used in operating activities:
Share based compensation (Note 4)		2,321,175		2,234,885
Depreciation		59,548		41,654
Change in fair value of warrant derivative		(1,732)		(100,766)
Environmental liability expense (Note 5)		604,222		898,146
Unrealized foreign exchange loss (gain)		(160)		4,286
Gain on sale of equipment		(25,000)		(49,173)
Changes in:
Receivables		(1,698,358)		159,186
Prepaid expenses		(738,397)		(11,768)
Trade and other payables		2,792,882		(116,024)
CWA settlement payable		5,000,000		—
Environmental reclamation liabilities		(8,650,891)		(2,920,780)
Net cash used in operating activities		(15,239,650)		(18,116,945)

INVESTING ACTIVITIES:
Investment in mineral properties and interest		(275,992)		(290,039)
Purchase of building and equipment		(153,820)		(98,125)
Proceeds from sale of equipment		25,000		49,173
Net cash used in investing activities		(404,812)		(338,991)

FINANCING ACTIVITIES:
Proceeds from exercise of share purchase options		82,191		—
Net cash provided by financing activities		82,191		—

Effect of foreign exchange on cash and cash equivalents		161		(4,286)

Net increase (decrease) in cash and cash equivalents		(15,562,110)		(18,460,222)
Cash and cash equivalents, beginning of period		22,667,047		47,852,846
Cash and cash equivalents, end of period	$	7,104,937	$	29,392,624

NONCASH INVESTING AND FINANCING ACTIVITIES
Recognition of operating lease liability and right-of-use asset	$	65,061	$	142,487

CASH AND CASH EQUIVALENTS
Cash	$	3,104,628	$	6,153,131
Investment savings accounts		4,000,309		17,131,902
GICs and term deposits		—		6,107,591
Total cash and cash equivalents	$	7,104,937	$	29,392,624

See accompanying notes to the unaudited condensed consolidated financial statements.

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Perpetua Resources Corp.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.Nature of Operations and Basis of Presentation

Perpetua Resources Corp. (the “Corporation”, the “Company”, “Perpetua Resources” or “Perpetua”) was incorporated on February 22, 2011 under the Business Corporation Act (British Columbia). The Company was organized to hold shares in wholly owned subsidiaries that locate, acquire, develop and restore mineral properties located principally in the Stibnite – Yellow Pine mining district in Valley County, Idaho, USA. The Company’s principal asset is 100% ownership in subsidiaries that control the Stibnite Gold Project (“Stibnite Gold Project” or the “Project”). The Company currently operates in one segment, mineral exploration in the United States.

The unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Perpetua Resources Corp. and its wholly owned subsidiaries, Perpetua Resources Idaho, Inc. and Idaho Gold Resource Company, LLC. Intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial statements do not include all disclosures required of annual consolidated financial statements and, accordingly, should be read in conjunction with our annual financial statements for the year ended December 31, 2022. Operating results for the nine months ended September 30, 2023 may not be indicative of results expected for the full year ending December 31, 2023. Management estimates that the Company’s 2023 effective tax rate will be 0% due to the Company’s cumulative loss position, historical net operating losses (“NOLs”), and other available evidence related to the Company’s ability to generate taxable income. Accordingly, there is no income tax provision or benefit for the nine month period ended September 30, 2023.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results for the interim periods reported.

The Company’s latest liquidity forecast indicates that available cash resources and other sources of liquidity are expected to be exhausted in the first quarter of 2024. In addition, the Company’s payment obligations under the Settlement Agreement will commence in the first half of 2024. The Company intends to fund these payments from cash on hand or funds expected to be raised in connection with construction of the Project. Although the Company’s current capital resources and liquidity include $24.8 million in funding awarded under the Technology Investment Agreement (“TIA”) pursuant to Title III of the Defense Production Act (“DPA”), 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 pursuant to its Administrative Settlement and Order on Consent (“ASAOC”) obligations, and certain corporate expenses. 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 million. 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 funds under the program, at acceptable share prices or at all. As of September 30, 2023, $20 million remains available under the program.

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 significant 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 unaudited condensed consolidated financial statements are issued.

These 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.

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Loss per share

Basic loss per share is computed by dividing the net loss by the weighted average number of shares outstanding during the reporting period. Diluted loss per share is computed similar to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of share purchase options and warrants, if dilutive. The Company’s potential dilutive common shares include outstanding share purchase options, restricted share units, performance share units, deferred share units and warrants. Potentially dilutive shares as of September 30, 2023 and 2022, are as follows:


	September 30
	2023	2022
Share purchase options	1,673,750	1,960,150
Share units	1,375,820	791,440
Warrants	—	200,000
Balance	3,049,570	2,951,590

All potentially dilutive shares were excluded from the calculation of diluted loss per share as their exercise and conversion would be anti-dilutive.

2.Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a material impact on the Company’s consolidated financial statements upon adoption.

3.Mineral Properties and Interest

The Company’s mineral properties and interest at the Stibnite Gold Project totaled $72,795,365 and $72,519,373 as of September 30, 2023 and December 31, 2022, respectively.

The Company’s subsidiaries acquired mineral rights to the Stibnite Gold Project through several transactions. All mineral and surface rights, where applicable, are held by the Company’s subsidiaries through patented and unpatented lode mining claims and mill sites, except the Cinnabar option claims which are held under an option to purchase, and all of the Stibnite Gold Project is subject to a 1.7% net smelter returns royalty upon the sale of project-related gold production.

Included in mineral properties and interest are annual payments made under option agreements, where the Company is entitled to continue to make annual option payments or, ultimately, purchase certain properties. Annual payments due under option agreements during 2023 are $180,000.

As of September 30, 2023, it has not yet been determined that the Project’s mining deposits can be economically and legally extracted or produced because the Project’s estimated reserves do not yet meet the definition of proven reserves under the United States Securities and Exchange Commission (“SEC”) Regulation S-K 1300.

Accordingly, development costs related to such reserves will not be capitalized unless they are incurred after such determination. Upon commencement of commercial production, capitalized costs will be amortized over their estimated useful lives or units of production, whichever is a more reliable measure.

Although the Company has taken steps to review and verify mineral rights to the properties in which it has an interest, in accordance with industry standards for properties in the exploration stage, these procedures do not guarantee the Company’s title and interests. Mineral title may be subject to unregistered prior agreements and noncompliance with regulatory requirements.

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4.Shareholders’ Equity

Authorized

●

Unlimited number of common shares without par value.

●

Unlimited number of first preferred shares without par value.

●

Unlimited number of second preferred shares without par value.

ATM Offering

On May 12, 2023, the Company entered into the Sales Agreement providing for the sale by the Company, from time to time, of the Company’s common shares having an aggregate gross offering price of up to $20 million (the “ATM Offering”). The Company expects to raise relatively small amounts of capital from time to time through the ATM Offering for general corporate purposes, which may include, among other things, general corporate, legal and ASAOC expenses. As of September 30, 2023, no common shares have been sold under this agreement.

Share based compensation

Share based compensation was recognized in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 as follows:


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Exploration	$	400,306	$	366,150	$	1,215,542	$	998,789
Corporate salaries and benefits		266,349		278,381		795,925		791,399
Directors’ fees		29,411		87,705		309,708		444,697
Total	$	696,066	$	732,236	$	2,321,175	$	2,234,885

Share purchase options

A summary of share purchase option activity within the Company’s share-based compensation plan (the “Plan”) for the year ended December 31, 2022 and nine months ended September 30, 2023 is as follows:


	Number of	Weighted Average
	Options	Exercise Price (C$)
Balance December 31, 2021	2,497,150	$	9.15
Options expired	(305,000)		8.71
Options cancelled or forfeited	(246,500)		9.11
Balance December 31, 2022	1,945,650	$	9.23
Options exercised	(25,000)		4.40
Options cancelled or forfeited	(35,500)		11.48
Options expired	(211,400)		6.97
Balance September 30, 2023	1,673,750	$	9.54

During the three and nine months ended September 30, 2023 and 2022, the Company’s total share based compensation from options was $49,628 (2022: $273,155) and $213,670 (2022: $822,415), respectively. No options were granted during the nine months ended September 30, 2023 nor 2022. During the three and nine months ended September 30, 2023, the intrinsic value of share purchase options exercised was $nil and $30,594, respectively.

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An analysis of outstanding share purchase options as of September 30, 2023 is as follows:


	Options Outstanding				Options Exercisable
Range of Exercise				Remaining				Remaining
Prices (C$)	Number	Price (C$)¹		Life²	Number	Price (C$)¹		Life²
$3.50 - $5.90	45,000		3.50	1.47	45,000		3.50	1.42
$5.91 - $7.20	428,875		6.26	1.21	428,875		6.26	1.21
$7.21 - $9.70	457,875		9.54	0.89	357,875		9.65	0.45
$9.71 - $11.80	742,000		11.80	2.31	556,500		11.80	2.31
$3.50 - $11.80	1,673,750		9.54	1.62	1,388,250		9.27	1.46

Weighted Average Exercise Price (C$)

Weighted Average Remaining Contractual Life (Years)

As of September 30, 2023, all unvested options are expected to vest and unvested compensation of $78,611 will be recognized. The weighted average remaining amortization period of vested options is 0.25 years. As of September 30, 2023, the intrinsic value of outstanding and exercisable share purchase options is $30,742 and $30,742, respectively.

Restricted Share Units

The following table summarizes activity for restricted share units (“RSUs”) awarded under the Plan that vest over the required service period of the participant.


		Weighted Average
	Share	Grant Date
	Units	Fair Value
Unvested, December 31, 2021	42,334	$	5.66
Granted	370,098		4.04
Distributed (vested)	(36,168)		5.00
Cancelled	(4,308)		4.03
Unvested, December 31, 2022	371,956	$	4.13
Granted	370,039		3.42
Distributed (vested)	(121,340)		4.04
Cancelled	(4,453)		3.77
Unvested, September 30, 2023	616,202	$	3.72

During the nine months ended September 30, 2023, the Company awarded 370,039 RSUs (2022: 370,098 RSUs) with a weighted average grant date fair value of $3.42 per RSU (2022: $4.04) or approximately $1.3 million in total (2022: $1.5 million).

During the three and nine months ended September 30, 2023 and 2022, the Company has recognized $306,265 (2022: $268,238)and $956,684 (2022: $700,494), respectively, in compensation expense related to RSUs and expects to record an additional $1.1 million in compensation expense over the next 1.44 years. The unvested units of September 30, 2023 are scheduled to vest as follows:


Remainder of 2023		21,166
2024		243,658
2025		228,660
2026		122,718
Total		616,202

Unvested units will be forfeited by participants upon termination of employment in advance of vesting, with the exception of termination due to retirement if certain criteria are met.

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Performance Share Units

The following table summarizes activity for performance share units (“PSUs”) and market-based performance share units (“MPSUs”) awarded under the Plan:


		Weighted Average
	Share	Grant Date
	Units	Fair Value
Unvested, December 31, 2021	10,750	$	5.66
Granted	267,451		6.73
Distributed	(3,750)		3.42
Cancelled	(11,185)		5.83
Unvested, December 31, 2022	263,266	$	6.77
Granted	301,035		5.80
Distributed	(12,725)		2.74
Cancelled	(3,644)		4.99
Unvested, September 30, 2023	547,932	$	6.34

During the three and nine months ended September 30, 2023 and 2022, the Company has recognized $292,971 (2022: $143,640) and $801,108 (2022: $360,626), respectively, in compensation expense related to PSUs and MPSUs and expects to record an additional $2.2 million in compensation expense over the next 2.0 years. The unvested units of September 30, 2023 are scheduled to vest as follows:


Remainder of 2023		—
2024		3,500
2025		257,524
2026		276,908
2027		10,000
Total		547,932

PSUs: These PSUs vest upon completion of the performance period and specific performance conditions set forth for each individual grant for individually defined reporting and operating measurement objectives. The Company determines the factor to be applied to that target number of PSUs, with such percentage based on level of achievement of the performance conditions. Upon the achievement of the conditions, any unvested PSUs become fully vested. During the nine months ended September 30, 2023, the Company awarded 23,500 PSUs (2022: 17,500 PSUs) that had a weighted average grant date fair value of $3.67 (2022: $2.97), or $86,165 (2022: $52,048) in total.

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Market-based PSUs: During the nine months ended September 30, 2023 and 2022, the Company granted MPSUs where vesting is based on the Company’s cumulative total shareholder return (“TSR”) as compared to the constituents that comprise the VanEck Junior Gold Miners ETF (“GDXJ Index”) a group of similar junior gold mining companies, over a three year period (the “Performance Period”). The ultimate number of MPSUs that vest may range from 0% to 200% of the original target number of shares depending on the relative achievement of the TSR performance measure at the end of the Performance Period. Because the number of MPSUs that are earned will be based on the Company’s TSR over the Performance Period, the MPSUs are considered subject to a market condition. Compensation cost is recognized ratably over the Performance Period regardless as to whether the market condition is actually satisfied; however, the compensation cost will reverse if an employee terminates prior to satisfying the requisite service period.

During the nine months ended September 30, 2023, the Company awarded 277,535 MPSUs (2022: 249,951 MPSUs) that had a weighted grant date fair value of $5.98 (2022: $6.99) per MPSU or approximately $1.65 million (2022: $1.75 million) in total. The grant date fair value of MPSUs was estimated using a Monte Carlo simulation model. Assumptions and estimates utilized in the model include expected volatilities of the Corporation’s share price and the GDXJ Index, the Company’s risk-free interest rate and expected dividends. The probabilities of the actual number of MPSUs expected to vest and resultant actual number of common shares expected to be awarded are reflected in the grant date fair values of the various MPSU awards. The per MPSU grant date fair value for the market condition was based on the following variables:


		2023			2022
Grant date fair value	$	5.98		$	6.99
Risk-free interest rate		4.15	%		1.61	%
Expected term (in years)		3.0			3.0
Expected share price volatility		65.74	%		63.35	%
Expected dividend yield		—			—

The expected volatility utilized is based on the historical volatilities of the Corporation’s common shares and the GDXJ Index in order to model the stock price movements. The volatility used was calculated over the most recent three year period. The risk-free interest rates used are based on the implied yield available on a U.S. Treasury zero-coupon bill with a term equivalent to the Performance Period. The expected dividend yield of zero was used since it is the mathematical equivalent to reinvesting dividends in each issuing entity over the Performance Period.

Deferred Share Units

The following table summarizes activity for deferred share units (“DSUs”) awarded under the Plan:


		Weighted Average
	Share	Grant Date
	Units	Fair Value
Outstanding, December 31, 2021	29,213	$	5.39
Granted	116,462		3.42
Outstanding, December 31, 2022	145,675		3.82
Granted	97,577		3.58
Distributed	(31,566)		3.77
Outstanding, September 30, 2023	211,686	$	3.72

Under the Plan, the Company may issue DSUs to non-employee directors. During the three and nine months ended September 30, 2023, 14,479 (2022: 23,368) and 97,577 (2022: 100,298) share units, respectively with a fair value of $47,202 (2022: $47,203) and $349,713 (2022: $351,350) were granted to the non-employee directors and the related compensation expense was charged to directors’ fees in the unaudited condensed consolidated statements of operations.

Warrants

There was a total of 200,000 warrants outstanding as of December 31, 2022 that expired on May 9, 2023.

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5.Environmental Reclamation Liability

On January 15, 2021, the Company agreed to an ASAOC. The Company has accounted for its obligation under the ASAOC as an environmental reclamation liability. The aggregate cost of the obligation was estimated to be approximately $7,473,805. Upon the signing of the ASAOC, the Company recorded an immediate expense of $7,473,805 and a corresponding environmental reclamation liability. The provision for the liability associated with the terms of the ASAOC is based on cost estimates developed with the use of engineering consultants, independent contractor quotes and the Company’s internal development team. The timing of cash flows is based on the latest schedule for early action items. The estimated environmental reclamation liability may be subject to change based on changes to cost estimates and is adjusted for actual work performed. On April 13, 2023, after conducting a competitive bidding process, the Company announced it selected Iron Woman Construction and Environmental Services to conduct certain environmental improvements pursuant to the Company’s obligations under the ASAOC. The contract terms, together with scope changes, inflation and increased estimates for fuel usage related to the restoration activities, resulted in an increase to the Company’s forecasted amounts for ASAOC restoration activities and are additions during the nine -month period ended September 30, 2023. During the nine-month period ended September 30, 2023, the Company spent $8.7 million expecting to improve water quality which included moving more than 300,000 tons of legacy mine waste and tailings away from sensitive waterways on site and relocating it to areas where it can be more safely stored. Perpetua anticipates completing the majority of the early action restoration work at site by the end of 2023.

Movements in the environmental reclamation liability during the nine months ended September 30, 2023 and 2022 are as follows:


	Nine months ended September 30,
	2023		2022
Balance at beginning of period	$	10,800,936	$	9,888,200
Additions		604,222		898,146
Work performed on early action items		(8,650,891)		(2,920,780)
Balance at end of period	$	2,754,267	$	7,865,566

Current portion	$	2,297,523	$	5,756,965
Non-current portion		456,744		2,108,601
Balance at end of period	$	2,754,267	$	7,865,566

In 2021, the Company provided $7.5 million in financial assurance for Phase 1 projects under the ASAOC. The Company paid $3.0 million in cash collateral for a surety bond related to the ASAOC statement of work in early 2021.

6.Commitments and Contingencies

a.Mining Claim Assessments

The Company currently holds mining claims and mill sites for which it has an annual assessment obligation of $275,992 to maintain the claims in good standing. The Company is committed to these payments indefinitely. Related to the mining claims assessments is a $335,000 bond related to the Company’s exploration activities.

Stibnite Foundation

Upon formation of the Stibnite Foundation on February 26, 2019, the Company became contractually liable for certain future payments to the Stibnite Foundation based on several triggering events, including receipt of a Final Record of Decision issued by the USFS, receipt of all permits and approvals necessary for commencement of construction, commercial production, and of the final reclamation phase. These payments could begin as early as the first half of 2024 based on the current permitting schedule and range from $0.1 million to $1 million (upon commencement of final reclamation phase) in cash and 150,000 common shares of the Company. During commercial production, the Company will make payments to the Stibnite Foundation equal to 1% of Total Comprehensive Income less debt repayments, or a minimum of $0.5 million each year.

The Stibnite Foundation will support projects that benefit the communities surrounding the Stibnite Gold Project and was created through the establishment of the Community Agreement between Perpetua Resources Idaho, Inc. and eight communities and counties throughout the West Central Mountains region of Idaho.

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Option Payments on Other Properties

The Company is obligated to make option payments on mineral properties in order to maintain an option to purchase these properties. As of September 30, 2023, the option payments due on these properties in 2023 are $180,000, which will be paid this year. The agreements include options to extend.

Off Balance Sheet Arrangements

The Company has no off-balance sheet arrangements as of September 30, 2023 and the date of this report.

e.Legal Update

The Corporation and its subsidiaries have been parties to an ongoing legal proceeding with the Nez Perce Tribe for alleged violations of the Clean Water Act (“CWA”) related to historical mining activities. In August 2019, the Nez Perce Tribe filed suit in the United States District Court for the District of Idaho. The Corporation promptly filed a motion to dismiss and, in the alternative, a motion to stay the litigation. Both motions were denied. Subsequently, the Corporation filed an answer denying liability and later, the court allowed the Corporation to amend and file a third-party complaint against the Forest Service. The Corporation also filed a separate CWA citizen suit against the United States Forest Service (“USFS” or “Forest Service”) alleging that several of the point source discharges, as alleged by the Nez Perce Tribe in its complaint, were occurring on lands owned and controlled by the United States. Pursuant to the terms of the voluntary ASAOC executed in January 2021 with the U.S. Environmental Protection Agency (“U.S. EPA”) and the United States Department of Agriculture, the Corporation agreed to dismiss its pending actions against the Forest Service without prejudice. The remaining parties to the ongoing legal proceeding agreed to stay the litigation and explore Alternative Dispute Resolution options through court-ordered mediation.

On August 8, 2023, the Company and the Nez Perce Tribe filed a final Settlement Agreement (the “Settlement Agreement”) to resolve the CWA litigation. The parties jointly asked the court to approve the Settlement Agreement and dismiss the case without prejudice. The Settlement Agreement provides for total payments of $5 million by Perpetua over a four-year period. This includes $4 million of contributions by Perpetua to a South Fork Salmon Water Quality Enhancement Fund (the “Fund”) to be used by the Nez Perce Tribe to support water quality improvement projects in the South Fork Salmon River watershed and $1 million of reimbursements to the Nez Perce Tribe for legal expenses. Following a 45-day review period by the United States Justice Department and 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. Once Perpetua has satisfied its payment obligations under the Settlement Agreement, the parties will submit a Stipulation of Dismissal with Prejudice to the court. The Company recognized an expense of $5 million during the second quarter of 2023. At September 30, 2023, CWA settlement payable current portion is $500,000 with the remaining $4,500,000 classified as long-term.

The voluntary CERCLA ASAOC entered into by the Corporation, the U.S. EPA, and the United States Department of Agriculture requires numerous early cleanup actions to occur over the next several years at the Stibnite Gold Project site (the “Stibnite Site”). Perpetua Resources Idaho, Inc. is presently developing and executing the Phase 1 early cleanup actions (known under CERCLA as “time critical removal actions”) that, after final work plan approval by the federal agencies, are designated to efficiently improve water quality in a number of areas on the Stibnite Site. Construction of time critical removal actions began in the summer of 2022, and significant progress was achieved to complete the voluntary Phase 1 Stibnite Site cleanup during the limited work season. During the nine-month period ended September 30, 2023, the Company spent $8.7 million expecting to improve water quality which included moving more than 300,000 tons of legacy mine waste and tailings away from sensitive waterways on site and relocating it to areas where it can be more safely stored. Perpetua anticipates completing the majority of the early action restoration work at site by the end of 2023.Other longer-term proposed actions relating to Project operations are being evaluated through the NEPA process.

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7.Government Grants

Small Business Innovation Research (“SBIR”) Grant: In September 2022, the Company was awarded two separate funding grants from the U.S. Department of Defense (“DOD”) Defense Logistics Agency (“DLA”) totaling $200,000 to study the domestic production of military-grade antimony trisulfide. During the three and nine months ended September 30, 2023, $24,999 and $124,997, respectively, was recognized as grant income for these grants. The programs were complete in September 2023 so no additional grant income is anticipated under the program.

Defense Production Act (“DPA”) Grant: On December 16, 2022, the Company entered into an undefinitized Technology Investment Agreement (“TIA”) with the DOD - Air Force Research Laboratory for an award of up to $24,800,000 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 $24,812,062. The definitized TIA did not change any other material terms of the undefinitized TIA. The funding objective of the TIA is to complete environmental and engineering studies necessary to obtain a Final Environmental Impact Statement, a Final Record of Decision, and other ancillary permits to sustain the domestic production of antimony trisulfide capability for defense energetic materials at the Stibnite Gold Project. Proceeds from the grant will be used primarily to reimburse the Company for certain costs incurred over the next 24 months related to environmental baseline data monitoring, environmental and technical studies and other activities related to advancing the Company’s construction readiness and the permitting process for the Stibnite Gold Project. During the three and nine months ended September 30, 2023, $4,655,183 and $11,922,642, respectively, was recognized as grant income related to the TIA. The Company anticipates recognizing approximately $4,400,000 of additional grant income for the three months ended December 31, 2023. During the three and nine months ended September 30, 2023, the Company was reimbursed $6,185,455 and $10,430,060 for certain costs incurred.

DOD Ordnance Technology Consortium (“DOTC”) Grant: 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 DOTC. 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 three and nine months ended September 30, 2023, $2,225,509 and $2,225,509, respectively, were recognized as grant income within other income (expense) on the unaudited condensed consolidated statement of operations. No grant income was recognized during the same period in 2022. As of September 30, 2023 and December 31, 2022, grant receivable was $418,795 and $nil, respectively, and is included in receivables on the unaudited condensed consolidated balance sheets. The Company anticipates recognizing approximately $3,450,000 of additional grant income for the next three months ended December 31, 2023.

Accounting for these DOD grants does not fall under ASC 606, Revenue from Contracts with Customers, as the DOD does not meet the definition of a customer under this standard. The DOD grant proceeds, which will be used to reimburse expenses incurred, meet the definition of grants related to expenses as the primary purpose for the payments is to fund research and development on trisulfides and the advancement of the Company’s Stibnite Gold Project.

A total of $6,905,691 and $14,273,148 grant income was recognized within other income (expense) on the unaudited condensed consolidated statement of operations during the three and nine months ended September 30, 2023, respectively. No grant income was recognized during the same period in 2022. At September 30, 2023 and December 31, 2022, grant receivable was $1,919,706 and $50,000, respectively, and is included in receivables on the unaudited condensed consolidated balance sheets.

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

You should read the following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2023 and 2022 with our consolidated financial statements and related notes and other financial information appearing in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, operations, and product candidates, includes forward-looking statements that involve risks and uncertainties. You should review the sections of this Quarterly Report captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Perpetua Resources (formerly Midas Gold Corp.) was incorporated on February 22, 2011 under the Business Corporations Act (British Columbia) (the “BCBCA”). The Corporation was organized to hold shares in wholly owned subsidiaries that locate, acquire, develop and restore mineral properties located principally in the Stibnite – Yellow Pine mining district in Valley County, Idaho, USA. The Corporation’s principal asset is 100% ownership in subsidiaries that control the Stibnite Gold Project. The Corporation currently operates in one segment, mineral exploration in the United States. The registered office of the Perpetua Resources is Suite 1008-550 Burrard St, Vancouver, BC, V6C 2B5, Canada and the corporate head office is located at 201-405 S 8th St, Boise, ID 83702, USA.

Recent Key Developments

2023 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 (“NEPA”) process. The NEPA process is intended to ensure that federal agencies and the public are informed of a proposed action’s potential environmental impacts before a final decision is made by the agency regarding the action.

Third Quarter 2023 Highlights

●

Zero lost time incidents or reportable environmental spills.

●

Signed definitized TIA for DOD critical minerals award of $24.8 million under DPA.

●

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.

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 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 another action alternative utilizing 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 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, 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 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 each of the alternatives analyzed in the SDEIS when developing the Final Environmental Impact Statement.

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The SDEIS public review period closed on January 10, 2023. Following completion of the comment period and analysis, the USFS updated the permitting schedule for the Project with a FEIS and draft Record of Decision expected by the end of 2023 and a Final Record of Decision anticipated in early 2024. 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 which are being progressed in parallel with the NEPA process. Recent updates include:

●

Submitted the 404 Wetlands & Compensatory Mitigation Plan application to the U.S. Army Corps of Engineers (“USACE”) in April 2023 and USACE provided a 404 permit application completeness determination in July 2023.

●

Submitted the formal request to begin the 401 Water Quality Certification process to Idaho Department of Environmental Quality (“IDEQ”) in May 2023.

●

Submitted 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.

●

Submitted cyanidation permit application in August 2023 to IDEQ. IDEQ issued a letter of incompleteness in September 2023 and the Company expects to resubmit an updated permit application in the fourth quarter of 2023.

●

A 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 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 each for both 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. 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. During the three and nine months ended September 30, 2023, $24,999 and $124,997, 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 a 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 definitized TIA did not change any other material terms of the undefinitized TIA. 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. 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. 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. The DPA funding does not interrupt the ongoing NEPA review process. 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. During the three and nine months ended September 30, 2023, $4,655,183 and $11,992,642 respectively, was recognized as grant income related to the TIA. The Company anticipates recognizing approximately $4,400,000 of additional grant

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income over the next three months. During the nine months ended September 30, 2023, the Company was reimbursed $10,430,060 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 three and nine months ended September 30, 2023, $2,225,509 and $2,225,509, respectively, was recognized as grant income related to the OTIA. The Company anticipates recognizing approximately $3,450,000 of additional grant income over the next three months.

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. In the third quarter of 2023, Perpetua:

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

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Continued project execution planning and scheduling;

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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; and,

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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.

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 million by Perpetua over a four-year period, which includes $4 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 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 6(e) to the Interim Financial Statements for the three and nine months ended September 30, 2023 for more information regarding the CWA lawsuit and the terms of the settlement.

Inflation

The U.S. inflation rate increased throughout 2022 and into 2023 but has begun to stabilize in 2023. 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. In particular, on April 13, 2023, after conducting a competitive bidding process, the Company announced it selected Iron Woman Construction and Environmental Services to conduct certain environmental improvements pursuant to the Company’s obligations under the ASAOC. The bid, together with scope changes, inflation and increased estimates for fuel usage related to the restoration activities, resulted in an increase to the Company’s forecasted amounts for ASAOC restoration activities in the nine months ended September 30, 2023. Sustained levels of high inflation have likewise caused the U.S. Federal Reserve and other central banks to increase interest rates,

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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.

Liquidity

The Company’s latest liquidity forecast indicates that available cash resources are expected to be exhausted in the first quarter of 2024. Although the Company’s current capital resources and liquidity include $24.8 million in funding awarded under the TIA pursuant to Title III of the DPA, 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 into 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” section.

Results of Operations

Three and nine months ended September 30, 2023 compared to three and nine months ended September 30, 2022


	For the three months ended September 30,				For the nine months ended September 30,
	2023		2022		2023		2022
EXPENSES
Corporate salaries and benefits	$	393,656	$	453,330	$	1,205,824	$	1,281,617
Depreciation		23,846		15,318		59,548		41,654
Directors’ fees		30,158		92,874		310,268		445,348
Exploration		8,664,205		4,589,966		20,683,257		13,456,304
Environmental liability expense		22,285		232,776		604,222		898,146
CWA settlement expense		—		—		5,000,000		—
General and administration