Vista Gold Corp. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018. Amounts are U.S. dollars in thousands unless stated otherwise. Vista is an exploration-stage gold company with no mining revenue; its flagship project is the 100%-owned Mt Todd project in Australia.
Financial performance and position
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Net loss | $1,923 | $2,682 | $2,871 | $5,529 |
| Net loss per share | $0.02 | $0.03 | $0.03 | $0.06 |
| Operating expenses | $1,955 | $2,232 | $5,151 | $4,816 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $4,995 | $4,039 |
No operating margins are meaningful because the company reported no revenue. The six-month loss improved year over year, principally reflecting a $2,028 gain from the increase in fair value of Midas Gold shares, versus a $780 loss in 2017. Excluding this investment mark, operating costs and cash use remain central to performance.
- Liquidity at June 30: Cash and cash equivalents of $2,598; short-term investments of $8,978; and Midas Gold shares valued at $5,774. Cash plus short-term investments totaled $11,576. Net working capital was $16,942.
- Cash flows, six months: Operating activities used $4,995; investing activities provided $6,185, primarily from net disposition of short-term investments; financing activities used $23. Cash increased by $1,167 to $2,598.
- Balance sheet: Total assets were $27,522, down from $31,141 at year-end 2017. Total liabilities were $749, all current; the filing reports no debt. Shareholders’ equity was $26,773.
- Other assets: Mineral properties were $2,471; plant and equipment, including used mill equipment valued at $6,500, was $7,360.
Changes versus prior comparable periods
- Q2 net loss narrowed by $759; six-month net loss narrowed by $2,658. The six-month comparison benefited substantially from the Midas Gold investment gain and, in 2017, a $358 gain on the Long Valley claims sale.
- Six-month exploration, property evaluation and holding costs fell to $2,600 from $3,060, as discretionary program spending was lower. Corporate administration increased to $2,311 from $1,796, mainly due to Mt Todd PFS-related, investor-relations, regulatory, compensation and insurance costs.
- Six-month operating cash use rose to $4,995 from $4,039, primarily because accounts payable and accrued liabilities declined after being unusually high at 2017 year-end.
- Cash and short-term investments declined to $11,576 from $16,575 at December 31, 2017. The Midas Gold share value rose to $5,774 from $3,746.
Outlook, projects and risks
- Management believes existing working capital, together with potential non-dilutive sources, can fund currently planned fixed costs and discretionary programs into 2020. Potential sources include selling used mill equipment, future Guadalupe de los Reyes option payments, or some or all of the Midas Gold shares. Funding adequacy and asset-sale proceeds are not assured; the company says long-term viability depends on future funding and eventual profits or asset sales.
- Management expects 2018 fixed Mt Todd costs, in Australian dollars, to be 20%–25% above 2017 (approximately A$650–A$800), partly due to permit-related monitoring and added site employees. Discretionary costs are expected to be 45%–50% lower (approximately A$2,000–A$2,250). Corporate fixed costs are expected to rise approximately 15%–20% ($450–$600) from 2017.
- The January 2018 Mt Todd PFS reported a Base Case at $1,300/oz gold: 50,000 tonnes per day, 13-year mine life, initial capital of $839 million, after-tax NPV at 5% of $679 million, after-tax IRR of 20.5%, and after-tax payback of 3.2 production years. These are study estimates, not operating results or company guidance; stated assumptions include a US$0.80/A$1.00 exchange rate, certain tax deferrals and equipment salvage values.
- Vista received the final major environmental authorization for Mt Todd in January 2018. Further metallurgical testing, definition drilling at Quigleys and exploration work were planned. Management is pursuing strategic alternatives for Mt Todd.
- Under the Guadalupe de los Reyes option, Minera Alamos may earn 100% by making total payments of $6,000, including the $1,500 already paid, and meeting other obligations. Future payments, royalties and transfer of the project are contingent; no further option payment had been recorded in the period.
- Key risks include continued losses and lack of operating cash flow; ability to obtain financing or realize value from non-core assets; gold-price and currency movements; project economics and estimates; permitting, water supply, environmental and reclamation obligations; and reliance on counterparties. Vista does not hedge currency, credit or price exposures and expects to remain a U.S. passive foreign investment company (PFIC).
Investor verification priorities
- Confirm cash burn, available funding runway and whether anticipated non-dilutive financing or asset sales materialize.
- Review Mt Todd PFS assumptions and sensitivities, particularly gold price, Australian-dollar exchange rate, capital costs, recovery, permitting and water availability.
- Track results of additional ore-sorting and grinding tests and whether they support the PFS economics.
- Verify timing and receipt of Guadalupe de los Reyes option payments and satisfaction of the agreement’s conditions.
- Assess the volatility and concentration represented by the $5,774 Midas Gold investment and its effect on reported earnings.
The filing reports no material contractual obligations, no material pending or threatened litigation known to the company, and no material changes to the risk factors in its 2017 Form 10-K.