Vista Gold Corp. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. The interim financial statements are unaudited; amounts below are in U.S. dollars, generally in thousands unless stated otherwise.
Business context
Vista is an exploration-stage gold company with no mining revenue or operating cash flows. Its flagship asset is the 100%-owned Mt Todd project in Australia. The company also holds Midas Gold shares, the Guadalupe de los Reyes project in Mexico, royalty interests, and used mill equipment. Vista reported no revenue in either Q1 2018 or Q1 2017.
Financial results and position
| Metric | Q1 2018 / March 31, 2018 | Comparable / prior period |
|---|---|---|
| Net loss | $948; $0.01 per share | Q1 2017: $2,847; $0.03 per share |
| Operating expenses | $3,196 | Q1 2017: $2,584 |
| Exploration, evaluation and holding costs | $1,545 | Q1 2017: $1,752 |
| Corporate administration | $1,423 | Q1 2017: $1,021 |
| Gain/(loss) on Midas Gold investment | $2,028 gain | Q1 2017: $312 loss |
| Cash used in operating activities | $3,203 | Q1 2017: $2,393 |
| Cash and cash equivalents | $415 | Dec. 31, 2017: $1,431 |
| Short-term investments | $12,918 | Dec. 31, 2017: $15,144 |
| Total assets / liabilities / shareholders’ equity | $29,530 / $1,096 / $28,434 | Dec. 31, 2017: $31,141 / $2,058 / $29,083 |
Cash plus short-term investments were $13,333 at quarter-end, versus $16,575 at year-end. Net working capital was $18,636, down from $19,057. The filing reports no debt, no material contractual obligations, and no off-balance-sheet arrangements. No operating margin is meaningful because the company had no revenue.
Material changes and notable items
- Net loss narrowed by $1,899 year over year, principally reflecting the swing to a $2,028 unrealized fair-value gain on Midas Gold shares from a $312 loss in Q1 2017. Q1 2017 also included a $358 gain from selling the Long Valley claims.
- Operating expenses increased despite lower exploration costs: corporate administration rose, partly due to the Mt Todd PFS update and increased investor-relations, regulatory and compensation costs. Depreciation and amortization was $228 versus $169.
- Operating cash use increased as accounts payable and accrued liabilities were paid down after being elevated at year-end. Investing activities provided $2,226, mainly from net dispositions of short-term investments.
- The company adopted the new revenue-recognition standard effective January 1, 2018; it reported no opening cumulative adjustment.
Outlook, projects and risks
- Management believes existing working capital, together with potential non-dilutive financing, can fund planned fixed costs and discretionary programs well into 2019. Potential sources include selling mill equipment or Midas Gold shares and future Guadalupe de los Reyes option payments. This is an estimate, not a guarantee; continued viability depends on financing or eventual profits/asset sales.
- Management expects 2018 fixed Mt Todd costs, in Australian-dollar terms, to be 20%–25% above 2017 levels, and corporate fixed costs to be approximately 15%–20% higher. No formal production or earnings guidance is provided.
- The January 2018 Mt Todd PFS evaluated two development cases at $1,300/oz gold. The 50,000-tonne-per-day Base Case estimates initial capital of $839 million, after-tax NPV at 5% of $679 million, after-tax IRR of 20.5%, and a 3.2-year after-tax payback. The 33,000-tonne-per-day Alternate Case estimates $641 million initial capital, $418 million after-tax NPV at 5%, 17.8% after-tax IRR, and a 3.6-year after-tax payback. These are study estimates, not operating results, and rely on stated assumptions including a US$0.80/A$1.00 exchange rate and specified tax deferrals and equipment salvage values.
- Vista received the major EPBC environmental authorization for Mt Todd in January 2018. Additional ore-sorting and grinding tests and planned drilling remained underway or anticipated.
- Under the Guadalupe de los Reyes option, Minera Alamos may earn 100% by making total payments of $6 million and meeting other obligations; future payments are optional and the agreement can terminate for non-performance. Vista would receive royalties and may have an underground back-in right, subject to the agreement’s terms.
- Key risks include project development and funding needs, gold and foreign-exchange volatility, environmental and reclamation obligations, water supply, permitting, and uncertainty in technical and economic estimates. Vista said it does not hedge currency, credit or price exposures; Midas shares are carried at quoted market value. It also expects to remain a PFIC for U.S. tax purposes.
Important facts for investors to verify
- Whether liquidity and potential asset sales can support planned spending through 2019, given Q1 operating cash use and the large capital requirement estimated for Mt Todd.
- The sensitivity and assumptions behind the Mt Todd PFS economics, including gold price, exchange rate, capital costs, permitting, and technical test results; mineral-reserve and resource terminology also differs between Canadian and SEC standards.
- The market value and liquidity of the Midas Gold holding, which materially affected reported quarterly earnings.
- Whether Minera Alamos makes future Guadalupe de los Reyes payments and fulfills the option agreement’s conditions.
- Potential dilution: 99,539,949 common shares were outstanding at March 31, 2018, with 6,514,625 warrants outstanding at a weighted-average exercise price of $1.92.