Vista Gold Corp. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2020. Dollar amounts are U.S. dollars in thousands unless otherwise noted. Vista is an exploration-stage gold company and does not generate cash flow from mining operations.
Business context and operating position
Vista’s principal asset is its wholly owned Mt Todd gold project in Australia. The company is advancing project optimization and permitting while seeking a development partner. Its non-core assets include interests in Mexico and Indonesia, Midas Gold and Nusantara shares, and mill equipment for sale.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Net income/(loss) | $1,902 | ($3,044) | ($1,598) | ($5,696) |
| Basic earnings/(loss) per share | $0.01 | ($0.03) | ($0.02) | ($0.06) |
| Net cash used in operating activities | Not reported quarterly | Not reported quarterly | ($3,266) | ($3,391) |
- Q2 operating results included a $2,568 gain from partial cancellation of Awak Mas royalty interests. Q2 also recorded a $1,099 gain on other investments, mainly reflecting valuation changes and realized gains.
- At June 30, cash and cash equivalents were $2,209; short-term investments were $3,294; and other investments were $2,692. Total current assets were $8,510 and current liabilities were $3,664, including a $2,960 deferred option gain. Reported working capital was $4,846; management noted that the deferred gain will be recognized as income and will not use current assets.
- Total assets were $16,296, total liabilities $3,909, and shareholders’ equity $12,387. Vista reported no debt.
- Six-month investing cash inflows included $2,400 from Awak Mas and $954 from Midas Gold share sales. Financing provided $747 net, including $807 of ATM share-sale proceeds. Cash increased by $801 during the six months.
- Operating margins are not meaningful because Vista reported no revenue or mining operations. Mt Todd’s 2019 PFS estimated life-of-mine cash costs of $645 per ounce and AISC of $746 per ounce; these are project estimates, not reported operating results.
Material changes versus comparable periods
- Q2 moved from a $3,044 loss in 2019 to $1,902 net income in 2020, principally due to the Awak Mas gain and improved investment valuation results.
- The six-month net loss narrowed to $1,598 from $5,696. Operating cash use was slightly lower year over year, while cash rose to $2,209 from $1,408 at year-end 2019.
- Vista sold 2,214,500 Midas Gold shares in the first half for $954 net proceeds and issued 1,031,819 shares through its ATM program for $807 net proceeds. Shares outstanding were 102,096,256 at June 30, versus 100,698,124 at year-end 2019.
- Other investments declined to $2,692 from $3,676 at year-end 2019, despite a Q2 valuation recovery.
Outlook, risks and unusual items
- Management believes existing working capital and potential non-dilutive funding sources can fund planned corporate expenses, project holding costs and discretionary programs for more than 12 months. This outlook depends on maintaining low spending and realizing value from non-core assets; additional equity or other financing may be needed if planned funding is unavailable or delayed.
- In June, Vista amended the Los Reyes agreement. It received the final $1,500 purchase payment in July 2020 and transferred control; it expects to recognize the previously deferred $2,892 gain in Q3 2020. Additional payments of $1,100 in January 2021 and $1,000 in July 2021 are due in lieu of royalty and back-in rights. Vista expects to remit about $800 of the final purchase payment as VAT and expects recovery in the normal course.
- The Awak Mas counterparty may pay an additional $2,500 by April 30, 2021 to cancel remaining royalty interests. If it does not, Vista retains those interests.
- COVID-19 had caused delays to corporate objectives, including finding a Mt Todd development partner, and may affect liquidity, asset monetization and access to capital. Vista reported limited direct effects to date and a healthy workforce, but warned that prolonged disruption could materially harm its financial position and results.
- The Mt Todd 2019 PFS Base Case estimated initial capital of $826 million, after-tax NPV at 5% of $823 million and after-tax IRR of 23.4%, using $1,350/oz gold and a specified exchange-rate assumption. Development is not assured; estimates depend on assumptions, permitting, financing, costs, commodity prices and other risks. The reserve estimates cited are not reserves under SEC Industry Guide 7.
- Vista disclosed no material contractual obligations, no off-balance-sheet arrangements and no material pending or threatened litigation known to it. It expects to remain a passive foreign investment company (PFIC) for U.S. tax purposes.
Important facts for investors to verify
- Whether the Los Reyes and Awak Mas scheduled payments are received, and the timing and accounting recognition of related gains.
- Vista’s cash runway against continuing operating cash use, including whether non-dilutive asset sales or ATM equity financing will be required.
- Progress on Mt Todd permitting, optimization and securing a development partner, and the funding required to develop the project.
- Key 2019 PFS assumptions and estimates, including capital costs, gold price, foreign exchange, recoveries and reserve disclosures.
- The ongoing financial and operational effects of COVID-19 and changes in the fair value of Vista’s marketable investments.