Vista Gold Corp. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Unaudited financial figures are in U.S. dollars, in thousands, except per-share data and where otherwise noted. Vista is an exploration-stage gold company; it reported no revenue and generates no cash flow from mining operations. Its flagship asset is the 100%-owned Mt Todd project in Australia.
Financial results and position
| Metric | Q1 2020 / March 31, 2020 | Prior comparable / December 31, 2019 |
|---|---|---|
| Revenue | None | None in Q1 2019 |
| Operating expenses | $2,336 | $2,105 in Q1 2019 |
| Net loss | $3,500; $0.03 per share | $2,652; $0.03 per share in Q1 2019 |
| Operating cash used | $1,743 | $1,758 in Q1 2019 |
| Investing cash provided | $2,599 | $1,045 in Q1 2019 |
| Cash and cash equivalents | $2,264 | $1,408 |
| Short-term investments | $961 | $3,260 |
| Working capital | $4,922 | $7,756 |
| Total assets | $13,628 | $16,684 |
| Total liabilities | $4,092 | $4,038 |
Vista had no debt. It reported no operating margin because it had no revenue. Loss increased year over year, primarily reflecting a larger fair-value loss on equity investments and higher corporate administration costs. The $1,129 loss on other investments compared with $624 in Q1 2019; corporate administration was $1,376 versus $1,147. Exploration, evaluation and holding costs were broadly unchanged at $948 versus $946.
Cash and short-term investments totaled $3,225 at quarter-end, down from $4,668 at year-end. Cash rose by $856 during the quarter, mainly as investment maturities and sales exceeded purchases; operating activities used $1,743. Cash used in operations was nearly flat year over year, while investing inflows included $300 from the sale of Midas Gold shares. The fair value of other investments fell to $2,247 from $3,676, principally reflecting the decline in Midas Gold shares during market disruption associated with COVID-19.
Material changes and developments
- Net loss rose by $848 from Q1 2019. Non-cash stock-based compensation increased to $390 from $51, contributing to higher operating expenses.
- Vista sold 642,000 Midas Gold shares for net proceeds of $300 and recorded a $15 realized loss on the sale; the broader investment portfolio recorded a $1,129 fair-value loss.
- Share-based compensation increased equity by $390, while the quarterly net loss reduced it by $3,500; shareholders’ equity was $9,536 at March 31, 2020.
- The $240 environmental reclamation provision was reclassified from current to non-current liabilities; total provision remained $240.
- After quarter-end, Vista reported selling 200,000 shares under its at-the-market program through April 20, 2020, at an average $0.63 per share for approximately $127 in proceeds.
Outlook, risks and contingencies
Management stated that available working capital at March 31, together with potential future non-dilutive funding, was expected to fund currently planned activities for more than 12 months. This is conditional: longer-term viability depends on maintaining low spending, monetizing non-core assets, securing a Mt Todd development partner, and potentially raising additional capital. If asset sales or other funding do not materialize, Vista may need to issue equity or seek other financing. The $10 million ATM program was available through August 31, 2020; no shares had been sold under it by March 31.
COVID-19 had caused investment value declines and delays to corporate objectives. Vista said corporate work continued remotely and Mt Todd operated under a COVID-19 mitigation plan, with minimal direct implementation costs and no reported workforce illness at the filing date. Management cautioned that travel restrictions, operational disruption, economic weakness and difficulty raising capital could materially adversely affect liquidity and results; the ultimate impact was not estimable.
Mt Todd’s 2019 preliminary feasibility study (PFS) describes a proposed 50,000-tonne-per-day base case with an estimated 13-year mine life, 5.305 million payable ounces, $826 million initial capital, $823 million after-tax NPV at 5%, and 23.4% after-tax IRR. These are project-study estimates, not current operating results or company guidance; the study assumes $1,350 gold per ounce and a $0.70:A$1.00 exchange rate. The filing cautions that Mt Todd has no known mineral reserves under SEC Industry Guide 7 and that Canadian reserve classifications and study economics may not be comparable to SEC standards. Vista was pursuing cost-effective project de-risking and a development partner.
Vista held an option-related interest in Los Reyes, Mexico; Prime Mining had a final $1,500 payment due by October 2021. On April 29, 2020, the Awak Mas royalty counterparty gave notice of an option exercise requiring a $2,400 payment by May 8, 2020 to cancel part of the royalty; if paid, a further $2,500 cancellation option could be exercised by April 30, 2021. These payments were not reported as received in the quarter. Vista retained the full royalty if the initial payment was not made. The filing also describes environmental compliance uncertainty, a $240 reclamation provision, and the Jawoyn Association agreement, which includes a production-linked royalty and a minimum annual payment.
There were no material pending or threatened legal proceedings reported, no material contractual obligations, and no off-balance-sheet arrangements. Vista said it expected continued losses and no dividends for the foreseeable future. It also expected to remain a passive foreign investment company (PFIC) for U.S. tax purposes.
Key facts for investors to verify
- Whether the company maintains liquidity beyond the stated more-than-12-month plan, including the status of ATM share sales and any need for further financing.
- Whether the $2,400 Awak Mas payment was received by May 8, 2020 and whether any subsequent royalty-cancellation option was exercised.
- Prime Mining’s progress toward the final $1,500 Los Reyes option payment due by October 2021.
- Updated market value and sale plans for Midas Gold shares, mill equipment and other non-core assets.
- Any changes to Mt Todd development-partner prospects, project costs, schedule, permitting or PFS assumptions; the PFS economics are estimates and not realized results.
- The continuing effects of COVID-19 on operations, investment values, project timelines and access to capital.