Vista Gold Corp. — Form 10-Q summary
Reporting period: Quarter and nine months ended September 30, 2013. Amounts are U.S. dollars in thousands unless stated otherwise. Vista is an exploration-stage gold company and reported no revenue.
Financial performance and position
| Metric | Q3 2013 / September 30, 2013 | Comparable period / December 31, 2012 |
|---|---|---|
| Net income (loss) | Q3: $(3,027); nine months: $(51,448) | Q3 2012: $12,269; nine months 2012: $(29,459) |
| Basic loss per share | Q3: $(0.04); nine months: $(0.63) | Q3 2012 income per share: $0.16; nine months 2012: $(0.40) |
| Cash and cash equivalents | $4,329 | $18,281 |
| Working capital | $12,373 | $60,342 |
| Total assets | $72,375 | $133,065 |
| Total liabilities / debt | Liabilities: $21,329; current debt: $9,698 | Liabilities: $31,722; no debt reported |
| Shareholders’ equity | $51,046 | $101,343 |
| Operating cash flow | Nine months: $(21,476) | Nine months 2012: $(23,195) |
- There was no operating revenue, so revenue-based margins are not applicable.
- Nine-month operating expenses fell to $20,207 from $23,032. Exploration, evaluation and holding costs declined to $15,220 from $18,759; corporate administration declined to $4,195 from $5,816.
- The nine-month net loss includes a $42,775 unrealized loss on the Midas Gold investment, partly offset by a $15,373 deferred tax benefit. In Q3, the Midas holding recorded a $4,547 unrealized gain.
- Vista recorded a $3,500 impairment of mill equipment held for sale. Its carrying value fell to $6,500 from $10,000.
- Investing cash outflow was $2,113 and financing cash inflow was $9,637 for the nine months. Financing inflow came from the March 2013 loan facility.
Material changes and significant developments
- Working capital fell by $47,969 from year-end, mainly reflecting the decline in the fair value of Midas Gold shares, cash used in operations, and the new debt facility. The Midas investment was valued at $26,714 at September 30, versus $69,489 at December 31, 2012.
- In March, Vista borrowed C$10 million (reported as $9,698), at 8% interest, with an original March 2014 maturity. The facility is secured by a general security agreement and subject to repayment provisions for certain asset sales or financings.
- After quarter-end, Vista sold its Los Cardones interests for $13 million: $7 million was received in October, and a further $6 million is due in January 2014, subject to the purchasers’ option not to pay. If they do not pay, Vista keeps the $7 million and regains the project. Vista used $3 million of proceeds to repay facility debt.
- Vista and the lender agreed, subject to conditions, to extend the facility maturity to March 2015. Vista agreed to pledge its Midas Gold shares and issue 486,382 common shares as an extension fee.
- Vista’s September 30 share count was 81,788,835. The company continued a strategic review focused on Mt. Todd and engaged Endeavour Financial to assess asset value and liquidity strategies.
Outlook, risks and contingencies
- Management forecast cash burn of approximately $3,250 in Q4 2013 and $2,500–$3,000 per quarter in 2014, assuming a normal wet season in the Northern Territory. Management estimated funding through Q3 2014 based on available cash and Los Cardones proceeds, conditional on the $6 million payment. If it is not paid, management estimated funding through Q2 2014.
- Management said it would continue cost reductions, defer or eliminate discretionary programs including exploration, and seek non-dilutive funding through asset sales. It also said liquidating some or all of its Midas investment could provide financing, but cautioned that asset sales and capital raising are uncertain.
- The filing states that continuing operations depend on obtaining sufficient funding and generating future profits; it warns that additional funding may not be available on acceptable terms and that asset values and recoverability depend on future cash flows. The statements are prepared on a going-concern basis without adjustments that could be required if the company cannot continue as a going concern.
- Mt. Todd’s May 2013 prefeasibility study described a 50,000-tonne-per-day base case with estimated initial capital of $1.046 billion, after-tax NPV at 5% of $591.3 million at $1,450/oz gold, and a 13-year mine life. A smaller alternative was estimated at $761 million initial capital and $440.2 million after-tax NPV at the same gold price. These are study estimates, not realized results; the filing refers to the alternative inconsistently as both 30,000 and 33,000 tonnes per day.
- Management expected Mt. Todd permits around the end of 2013 and continued work on environmental approvals. Actual permitting, project costs, gold prices, exchange rates and financing may differ materially from assumptions.
- Other key exposures include gold-price and foreign-exchange fluctuations; Vista said it does not hedge currency risk. It also identified environmental, permitting, operational, title, political, funding and third-party performance risks. The $6 million Los Cardones payment and the ability to meet debt obligations are specifically highlighted risks.
- The company reported no material pending or threatened litigation and no disclosed off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the purchasers make the conditional $6 million Los Cardones payment, and the resulting project ownership, cash position and debt balance.
- Whether the debt extension conditions are completed, including the Midas share pledge and issuance of 486,382 shares, and whether the facility remains in covenant compliance.
- Actual cash burn and available funding relative to management’s stated runway, including proceeds and timing from any asset sales.
- The market value and liquidity of Vista’s Midas Gold holding, which drove a substantial portion of the period’s loss and working-capital decline.
- Mt. Todd permitting progress, capital requirements and study assumptions; the filing cautions that its Canadian NI 43-101 reserve and resource disclosures are not SEC Industry Guide 7-compliant reserve estimates.