Vista Gold Corp. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Unless noted otherwise, financial amounts below are U.S. dollars in thousands. Vista is an exploration-stage company with no mining revenue; its flagship asset is the 100%-owned Mt Todd gold project in Australia.
Financial performance and position
| Metric | Q1 2019 / March 31, 2019 | Comparable period / December 31, 2018 |
|---|---|---|
| Revenue | None | None in Q1 2018 |
| Net loss | $2,652; $0.03 per share | $948; $0.01 per share in Q1 2018 |
| Operating expenses | $2,105 | $3,196 in Q1 2018 |
| Cash used in operating activities | $1,758 | $3,203 in Q1 2018 |
| Cash and cash equivalents | $378 | $1,071 |
| Short-term investments | $6,012 | $6,997 |
| Working capital | $10,689 | $13,198 |
| Total assets | $19,745 | $22,126 |
| Total liabilities / debt | $1,072 / no debt | $872 |
Vista held Midas Gold shares worth $4,838 at quarter-end, down $624 in the quarter. Cash plus short-term investments totaled $6,390. Net cash from investing activities was $1,045, principally from net dispositions of short-term investments; financing activities provided $20. The company reported no material contractual obligations or off-balance-sheet arrangements.
Changes versus Q1 2018
- Net loss increased to $2,652 from $948, notwithstanding lower operating expenses. The main adverse swing was the Midas investment valuation: a $624 loss versus a $2,028 gain in Q1 2018.
- Exploration, property evaluation and holding costs fell to $946 from $1,545; corporate administration declined to $1,147 from $1,423. Management attributed lower costs partly to reduced Mt Todd water discharge and monitoring needs, lower discretionary spending, a weaker Australian dollar, and the absence of some 2018 PFS-related corporate costs. It expects some holding-cost offsets later in 2019 and full-year discretionary spending, in Australian dollars, broadly similar to 2018.
- Operating cash use decreased to $1,758 from $3,203. Management noted lower cash costs and a non-recurring 2018 working-capital movement as factors in the comparison.
Outlook, projects and risks
- Vista plans to complete Mt Todd metallurgical testing and update the 2018 preliminary feasibility study (PFS) in the coming months, incorporating test results and updated supplier cost estimates. Management expects potential improvements in gold recovery and process-plant operating costs; these remain estimates pending further work.
- The 2018 PFS Base Case, at $1,300/oz gold and an assumed US$0.80/A$1.00 exchange rate, estimated initial capital of $839 million, after-tax NPV of $679 million, after-tax IRR of 20.5%, and a 13-year mine life. These are project-study estimates, not company guidance or a construction decision. Vista states Mt Todd has no known mineral reserves under SEC Industry Guide 7.
- Management said existing working capital, together with potential non-dilutive funding, should fund planned corporate and project costs for more than 12 months. Potential sources include asset sales, future Guadalupe de los Reyes option payments and sales of Midas shares. An ATM facility permits, but does not require, up to $10 million of share sales through August 31, 2020.
- Minera Alamos paid the deferred $1,500 Guadalupe de los Reyes option installment on April 23, 2019, after quarter-end, plus $67 interest. Further payments depend on the buyer meeting its agreement obligations; the agreement also provides potential royalty interests and an underground back-in right.
- Key risks include future financing needs, gold-price and foreign-exchange movements, project feasibility and cost estimates, permitting and water supply, environmental and reclamation liabilities, and reliance on counterparties. Vista expects continued losses and no dividends for the foreseeable future, and expects to remain a U.S. passive foreign investment company (PFIC).
- Major environmental approvals for Mt Todd had been obtained. The company reported no material pending or threatened litigation and no material change to the risk factors in its 2018 Form 10-K. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Whether the planned Mt Todd PFS update is completed, and how test results and revised capital and operating estimates compare with the 2018 study.
- Cash runway and funding assumptions, including the availability and timing of asset-sale proceeds, future option payments, or ATM share issuance.
- Whether the $1,500 option payment received after quarter-end is followed by timely performance of the remaining Guadalupe de los Reyes agreement obligations.
- The value and liquidity of the Midas Gold investment and the potential dilution from outstanding securities; at March 31, 6,514,625 warrants remained outstanding at a $1.92 exercise price and were scheduled to expire in August 2019.
- The assumptions and limitations underlying PFS economics, including gold price, exchange rate, capital costs, permits, water supply, and the distinction between Canadian resource/reserve disclosure and SEC reserve standards.