Vista Gold Corp. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Amounts are in U.S. dollars, thousands, unless stated otherwise. Vista is an exploration-stage gold company with no mining revenue; its flagship asset is the 100%-owned Mt Todd project in Australia.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Operating expenses | $2,028 | $1,955 | $4,133 | $5,151 |
| Net loss | $3,044 | $1,923 | $5,696 | $2,871 |
| Loss per share | $0.03 | $0.02 | $0.06 | $0.03 |
| Cash used in operations | Not presented quarterly | $3,391 | $4,995 |
- At June 30, 2019, cash was $1,315; short-term investments were $5,009; and Midas Gold shares were valued at $3,745. Working capital was $9,556, compared with $13,198 at year-end 2018.
- Total assets were $18,315 and total liabilities were $2,270. The company reported no debt. Shareholders’ equity was $16,045.
- Cash and short-term investments totaled $6,324, down from $8,068 at December 31, 2018. Cash was $1,315, versus $1,071 at year-end.
- Six-month investing cash inflow was $3,615, including $1,667 of proceeds under the Guadalupe de los Reyes option arrangement. Financing activities provided $20.
- Margins are not meaningful because Vista reported no revenue.
Changes versus the prior comparable period
- Q2 net loss increased to $3,044 from $1,923; the six-month loss increased to $5,696 from $2,871. A $1,093 Q2 and $1,717 six-month unrealized loss on Midas Gold shares was a principal driver; the comparable six-month 2018 period included a $2,028 gain.
- Six-month operating expenses decreased to $4,133 from $5,151, primarily reflecting lower exploration, property holding and evaluation costs and lower depreciation. Q2 corporate administration expense rose to $1,067 from $888, including $209 of expense from director deferred share units.
- Operating cash use improved to $3,391 from $4,995, mainly due to lower operating cash expenditures and less cash used for working-capital items.
Outlook, developments and risks
- Management said existing working capital was expected to fund planned corporate and project holding costs and discretionary programs for more than 12 months. It also identified possible non-dilutive funding from asset sales, future Guadalupe de los Reyes option payments and royalty monetization. An at-the-market facility permits, but does not require, sales of up to $10 million of shares.
- Vista planned to complete metallurgical optimization work and update the Mt Todd preliminary feasibility study in the coming months. May 2019 test results showed average gold recovery of 92.7% at an approximately 50-micron grind size; further testing was ongoing. These are test results, not operating results.
- The January 2018 Mt Todd PFS Base Case projected, at $1,300/oz gold, $839 million initial capital, after-tax NPV of $679 million, after-tax IRR of 20.5%, and a 3.2-year after-tax payback. These are study estimates subject to assumptions; the filing cautions that Mt Todd has no known mineral reserves under SEC Industry Guide 7.
- The Guadalupe de los Reyes option was assigned to ePower Metals in June, subject to conditions and possible reversion to Minera Alamos. The second $1.5 million option payment was received in April, with $67 interest; $1.392 million was recorded as a deferred option gain liability because control had not transferred for accounting purposes.
- Key risks include continued losses and dependence on capital or asset monetization, gold-price and foreign-exchange volatility, project permitting and development uncertainty, metallurgical and feasibility assumptions, environmental and water-related risks, and reliance on third parties. Vista stated it expected to remain a passive foreign investment company for U.S. tax purposes.
- No material litigation, material changes to previously disclosed risk factors, or material contractual obligations were reported. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting.
Key facts for investors to verify
- Liquidity runway and planned spending relative to the $9.556 million of working capital, including the market value and liquidity of Midas Gold shares.
- Progress, timing and results of the Mt Todd feasibility-study update, and whether metallurgical gains translate into viable project economics and funding.
- Completion and payment schedule of the assigned Guadalupe de los Reyes option, including remaining conditions and counterparty performance.
- Assumptions underlying the Mt Todd PFS estimates, especially gold price, exchange rate, capital costs, recovery, permits and the SEC reserve-status caveat.
- Potential dilution under the $10 million ATM and expiration of 6.5 million warrants in August 2019, with a $1.92 exercise price.