Vista Gold Corp. — Q3 2016 Form 10-Q
Reporting period: Three and nine months ended September 30, 2016. Unaudited figures are in U.S. dollars, generally in thousands, unless otherwise stated. Vista is an exploration-stage company with no revenue; its principal asset is the Mt Todd gold project in Australia.
Financial results and position
- Revenue: None reported in Q3 or the first nine months of 2016 or 2015.
- Net loss: Q3 2016 loss of $2.083 million, or $0.02 per share, versus net income of $536,000, or $0.01 per share, in Q3 2015. Nine-month 2016 loss was $1.160 million, or $0.01 per share, versus income of $3.178 million, or $0.04 per share, in 2015.
- Operating costs: Q3 operating expenses were $1.893 million, down from $2.873 million. Nine-month expenses were $5.579 million, compared with $5.084 million. No operating margin is meaningful because the company reported no revenue.
- Cash flow: Operating activities used $4.124 million in the first nine months, versus providing $4.741 million in 2015. Investing activities used $11.371 million, principally for net purchases of short-term investments. Financing provided $15.898 million, primarily from the August equity offering. Cash increased by $403,000 to $1.305 million.
- Liquidity and assets: Cash and short-term investments totaled $24.781 million at September 30, up from $12.892 million at year-end 2015. Net working capital was $30.076 million, versus $14.399 million. Total assets were $42.953 million; current liabilities and total liabilities were $603,000. The filing reports no debt.
- Other assets: Midas Gold shares were valued at $5.384 million, up from $1.798 million at year-end, generating a $3.586 million nine-month fair-value gain. Mineral properties were $3.874 million and plant and equipment, net, was $8.400 million.
Changes versus prior period and notable items
- The year-to-date result shifted from 2015 income to a 2016 loss. The comparison reflects materially lower Australian R&D tax incentive grants ($744,000 versus $10.220 million) and a fair-value gain on Midas Gold shares in 2016 versus a loss in 2015. Q3 2016 had no grant income, while Q3 2015 included $4.357 million.
- Exploration, evaluation and holding costs declined to $2.979 million for nine months from $3.265 million; corporate administration fell to $2.319 million from $2.674 million, largely due to lower non-cash stock compensation.
- In August, Vista issued 12,362,500 units for reported net proceeds of $15.883 million in the financial-statement note. Each unit included one share and half a warrant; 6,514,625 warrants were issued, exercisable at $1.92 per share for 36 months. Shares outstanding increased to 97,786,608 from 82,883,562 at year-end.
- Vista sold Utah mining claims for $150,000 and a 2% net smelter return royalty. Great Panther terminated its Guadalupe de los Reyes option; Vista retained the project and $996,000 previously paid.
Outlook, risks and contingencies
- Management said the August financing left Vista well funded to continue selected Mt Todd optimization work and pursue critical milestones, including permitting, toward a development decision. Such a decision depends principally on gold prices, the AUD/USD exchange rate, a positive feasibility study and available financing.
- Management expects fixed cash costs of approximately $1.4–$1.6 million per quarter and plans continued cost control. Future R&D grants, if any, are expected to be significantly lower; the Australian government may review qualifying programs and expenditures for four years.
- Mt Todd work included process-flow-sheet and power-generation optimization, with studies expected substantially complete by year-end 2016. The company was seeking final environmental authorization and responding to a further request for information concerning potential dust impacts on the Gouldian Finch.
- Management cautioned that long-term viability depends on additional financing and eventual operating profits. Risks include permitting and feasibility outcomes, gold and currency-price volatility, environmental and water issues, project costs, and the ability to raise capital or monetize assets. Vista stated it does not hedge currency exposure and expects to continue incurring losses and pay no dividends for the foreseeable future.
- The filing reports no material pending or threatened litigation and no off-balance-sheet arrangements. The Mt Todd agreement provides the Jawoyn Association an opportunity for a 10% joint-venture interest and specified production-linked payments if applicable.
Important facts for investors to verify
- Reconcile the financing proceeds: the equity note reports $15.883 million net offering proceeds, while MD&A describes $15.898 million as offering proceeds; the cash-flow statement reports $15.898 million of total financing, including $15,000 from option exercises.
- Track Mt Todd optimization-study results, the updated preliminary feasibility study, environmental authorization and remaining permitting milestones.
- Assess whether available liquidity can fund planned work given ongoing cash burn and the expected reduction in R&D grants.
- Monitor Midas Gold share-price exposure and the potential dilution from the 6.515 million warrants.
- Review the status and potential recoverability of the R&D incentive claims subject to government review.