Vista Gold Corp. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2019; financial amounts are in U.S. dollars, generally in thousands unless otherwise noted. Vista is an exploration-stage gold company with no mining revenue. Its principal asset is the 100%-owned Mt Todd project in Australia.
Financial results and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Operating expenses | $2,280 | $1,941 | $6,413 | $7,092 |
| Net loss | $2,498 | $2,062 | $8,194 | $4,933 |
| Net loss per share | $0.02 | $0.02 | $0.08 | $0.05 |
| Net cash used in operations | — | $5,190 | $6,347 |
- At September 30, cash and cash equivalents were $1.384 million, short-term investments $3.111 million, and Midas Gold shares valued at $3.511 million. Working capital was $7.179 million, compared with $13.198 million at December 31, 2018. The company reported no debt.
- Total assets were $16.110 million and shareholders’ equity $13.665 million. The nine-month loss increased largely because the Midas Gold investment generated a $1.951 million fair-value loss, versus a $1.754 million gain in the comparable 2018 period.
- Nine-month investing cash flow was $5.513 million, including $3.886 million net proceeds from short-term investment dispositions and $1.667 million from the Los Reyes option agreement. Cash increased by $313,000 over the period.
Changes and material developments
- Q3 exploration, evaluation and holding costs rose to $1.401 million from $960,000, principally reflecting costs to complete the Mt Todd 2019 preliminary feasibility study (PFS). For the nine months, those costs fell to $3.294 million from $3.560 million, partly due to lower water discharge and a weaker Australian dollar.
- Nine-month corporate administration costs declined to $3.079 million from $3.280 million; depreciation and amortization fell to $40,000 from $252,000, as most fixed assets were fully depreciated by year-end 2018.
- Vista adopted lease accounting in January 2019. At quarter-end it reported right-of-use assets of $113,000 and lease liabilities of $113,000.
- All 6.5 million outstanding warrants expired unexercised in August 2019. Common shares outstanding were 100.661 million at September 30.
Outlook, project economics and risks
- Management said existing working capital was expected to fund planned corporate costs, project holding costs and discretionary programs for more than 12 months. It identified potential additional non-dilutive funds from asset sales, future Los Reyes option payments and royalty interests, and has an at-the-market facility permitting up to $10 million in share sales through August 31, 2020. The company may need equity financing to advance major programs and is dependent on maintaining low expenditures and realizing asset value.
- The September 2019 Mt Todd PFS evaluated a 50,000-tonne-per-day base case with a 13-year mine life. At assumed gold of $1,350/oz and an exchange rate of US$0.70 per A$1, it estimated initial capital of $826 million, after-tax NPV at 5% of $823 million, after-tax IRR of 23.4%, and after-tax payback of 2.9 production years. Estimated life-of-mine output was 5.305 million payable ounces, with 91.9% recovery and $746/oz AISC. These are study estimates, not operating results or company guidance; the project is not producing and requires development funding and a partner.
- Vista reported the major environmental approvals for Mt Todd had been obtained, while noting that further permitting, including approval of the Mine Management Plan, remained relevant. Management intended to continue de-risking the project and seek a development partner.
- Los Reyes option payments total $6 million if all conditions are met. Vista received the third $1.5 million payment in October 2019, after quarter-end; it said this would be recorded as deferred option gain. Future payments and royalties are not assured, and potential royalty revenue has not been recognized. The agreement also includes a potential underground back-in right.
- Key risks include feasibility and reserve estimate uncertainty, gold and currency price changes, project financing and partner availability, permits and water supply, environmental and reclamation obligations, and the company’s history of operating losses. The filing states Mt Todd has no known mineral reserves under SEC Industry Guide 7; the PFS reserve disclosure uses Canadian standards and is not directly comparable to SEC Guide 7.
- Management reported no material changes to the prior annual report’s risk factors, no material pending or threatened litigation known to it, no material contractual obligations, and no off-balance-sheet arrangements. Disclosure controls were considered effective, with no material change in internal control over financial reporting reported.
Important facts for investors to verify
- Whether Vista can secure a development partner and the substantial capital required for Mt Todd, and how PFS assumptions compare with updated costs, gold prices and exchange rates.
- Cash runway and liquidity, including the marketability and value volatility of Midas Gold shares and the availability and potential dilution from the ATM facility.
- Receipt and accounting for the October 2019 Los Reyes payment, and whether Prime Mining meets remaining option obligations.
- Permitting status, water supply, environmental requirements and the basis and limitations of Mt Todd’s Canadian-standard reserve and economic estimates.