Vista Gold Corp. — Q2 2012 Form 10-Q
Reporting period: Three and six months ended June 30, 2012. Amounts are U.S. dollars in thousands except per-share data and where noted. Vista is an exploration-stage gold company; it reported no revenue in either 2012 or the comparable 2011 periods.
Financial results and position
| Metric | Q2 2012 | Q2 2011 | Six months 2012 | Six months 2011 |
|---|---|---|---|---|
| Exploration, evaluation and holding costs | $6,758 | $4,854 | $12,465 | $7,803 |
| Corporate administration and investor relations | $2,003 | $1,658 | $4,077 | $2,757 |
| Net income/(loss) | $(30,504) | $47,764 | $(41,728) | $43,887 |
| Basic loss/income per share | $(0.42) | $0.69 | $(0.58) | $0.67 |
| Net cash used in operating activities | Not stated by quarter | Not stated by quarter | $(15,205) | $(9,991) |
Q2 2012 included a $34,951 unrealized loss on Vista’s Midas Gold investment and a $13,210 deferred tax benefit. For the first half, the investment loss was $42,316, partly offset by a $16,201 deferred tax benefit. These noncash valuation and tax items materially affected reported earnings.
At June 30, cash and cash equivalents were $7,503, down from $17,873 at December 31, 2011. Working capital was $7,121, versus $16,947. Total assets were $126,048 and shareholders’ equity was $103,094. Current liabilities were $2,999; total liabilities were $22,954, including a $19,320 deferred tax liability. The filing reports no outstanding borrowings at period end. No operating margin is meaningful because Vista had no revenue.
Midas Gold shares, Vista’s principal long-term investment, were valued at $77,535 at June 30, compared with $119,871 at year-end; Vista held approximately 27.8% of Midas Gold’s outstanding shares. Marketable securities were $809.
Changes versus the comparable period
- Vista moved from net income to net loss in both Q2 and the first half. The 2011 periods included a $77,807 gain on the Midas Gold combination, while 2012 recognized substantial unrealized losses on the Midas Gold share price.
- First-half exploration and holding costs increased $4,662, mainly from Mt. Todd feasibility-study and permitting work. Corporate costs rose $1,320, principally due to legal and professional fees and stock-based compensation.
- Operating cash use increased by $5,214 year over year. Investing activities provided $3,002 in the first half, including proceeds under the Awak Mas and Concordia agreements; financing activities provided $1,833, mainly from warrant and compensation-option exercises.
- Cash declined by $10,370 during the first half. The Midas Gold investment’s fair-value decrease was the main driver of the reduction in total assets.
Outlook, projects and risks
- Management planned to complete a new Mt. Todd resource estimate and updated feasibility study, advance permitting, and complete a preliminary economic assessment for Guadalupe de los Reyes. Mt. Todd study and permitting costs were increasing.
- Under the Concordia earn-in agreement, Invecture paid $2,000 for the right to earn a 62.5% interest; Vista’s interest became 37.5% effective May 1, 2012. Exercise depends, among other conditions, on permits, an updated feasibility report, project funding and an additional $20,000 payment. The right expires February 7, 2014, subject to possible extension.
- After quarter-end, Vista closed a private placement of 5,000,000 units for $15,000 gross proceeds. Each unit included one share and one-half warrant. The company paid a $500 cash commission; proceeds were intended for Mt. Todd technical work, drilling, water treatment and general corporate purposes.
- Key risks include obtaining permits, feasibility and resource-estimate uncertainty, gold-price and investment-market volatility, access to additional capital, project development costs, foreign-exchange exposure and political/regulatory risks. Vista disclosed no material change to its previously reported risk factors, no material pending or threatened litigation, and no off-balance-sheet arrangements. Management reported disclosure controls were effective and no material change in internal controls during the quarter.
Important facts for investors to verify
- Reconcile the reported Midas Gold fair value and related unrealized loss and deferred-tax effects; these drove much of the period’s reported loss.
- Track cash use, working capital and the use of July’s financing against planned Mt. Todd expenditures and future funding needs.
- Confirm progress on Mt. Todd feasibility work and permits, and on Concordia’s permitting and Invecture earn-in conditions.
- Note the share-count timing: 72,207,144 shares were outstanding at June 30; the cover reports 77,207,144 at July 31, consistent with the subsequent 5,000,000-unit offering’s share component.
- Assess the assumptions supporting mineral-property recoverability and the $4,813 Amayapampa interest valuation; Republic had suspended operations and intended to sell its interest, and no payments were yet due to Vista.