Vista Gold Corp. — Q1 2013 Form 10-Q
Business context and period. Unaudited quarter ended March 31, 2013; U.S. dollars in thousands unless stated otherwise. Vista is an exploration-stage gold company with no operating revenue. Its principal 2013 focus is advancing the Mt. Todd project in Australia; other holdings include projects in Mexico, California, and Indonesia and an approximately 28% interest in Midas Gold Corp.
Financial results and position
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Revenue | None | None |
| Net loss | $27,406; $0.34 per share | $11,226; $0.16 per share |
| Exploration, evaluation and holding costs | $7,130 | $5,707 |
| Net cash used in operating activities | $9,546 | $7,049 |
| Net cash used in investing activities | $2,078 | Net cash provided: $3,276 |
| Net cash provided by financing activities | $9,637 | $733 |
With no revenue, operating margins are not meaningful. The increased quarterly loss was primarily driven by a $28,781 unrealized loss on Midas Gold shares, compared with $7,365 in Q1 2012. A $10,963 deferred tax benefit partly offset the loss. The investment’s reported fair value fell to $40,707 from $69,489 at year-end 2012.
At March 31, cash and cash equivalents were $16,294; working capital was $31,685, down $28,657 from year-end, mainly due to the decline in the Midas Gold investment. Total assets were $104,623, versus $133,065 at December 31, 2012; shareholders’ equity was $74,852, versus $101,343. The company recorded $9,764 of current debt from a March credit facility. It bears 8% annual interest, matures March 28, 2014, and is secured by a general security agreement, with Mt. Todd and mill equipment excluded. Total liabilities were $29,771. No operating cash flow or revenue was generated.
Material changes and operating developments
- Mt. Todd exploration and evaluation spending rose, partly due to water treatment work, pre-feasibility activities and permitting; capital spending also increased, primarily for the project’s water-treatment facility.
- March’s updated Batman deposit estimate reported 7.40 million ounces of measured and indicated resources and 1.73 million inferred ounces. The company said measured and indicated ounces rose 5% from the September 2012 estimate. These are Canadian NI 43-101 resource estimates, not SEC-proven reserves; conversion and economic viability are uncertain.
- A March preliminary economic assessment for Guadalupe de los Reyes modeled a 1,500-tonne-per-day operation. At its $1,480 gold/$28 silver base case, estimated after-tax NPV at 8% was $57.3 million, IRR 21%, and payback 3.6 years; estimated total capital was $124.3 million including contingency. The assessment is preliminary, includes inferred resources, and does not establish that the project will be economic.
- Shares outstanding increased from 81,563,498 at year-end to 81,721,960 at March 31, including 125,798 issued in connection with the credit facility.
Outlook, risks and contingencies
Management planned to complete a Mt. Todd final resource estimate, pre-feasibility study and development-permitting work in 2013, while deferring significant development commitments until market conditions improve. The feasibility study was deferred. Management stated that cash was expected to fund the remainder of 2013, but this is an estimate, not a guarantee. Potential additional cash sources were a marketed mill-equipment sale estimated at $10 million and a possible $20 million payment if Invecture completes its Los Cardones earn-in; neither was assured.
In April, after quarter-end, Mt. Todd received Northern Territory Major Project Status and a draft environmental impact statement was submitted for review. The company anticipated filing the final EIS later in Q2 and believed permits might be received around year-end; timing and approval remain uncertain. Management cited difficult equity markets and increasing difficulty raising capital on acceptable terms. Key risks include financing, permitting, gold and investment-market price volatility, foreign-currency fluctuations without hedging, project economics and resource-estimate uncertainty, and possible impairment of mineral properties. Mineral-property recoverability depends on permitting, financing, development and commercial production or sale. No material pending or threatened litigation was reported; environmental compliance expenditures cannot be predicted. A $635 land-acquisition obligation is due upon specified milestones.
Important facts for investors to verify
- Cash runway and funding needs against planned Mt. Todd study and permitting costs, including the debt maturity and any extension terms.
- Whether the mill equipment sale or Los Cardones earn-in payment occurs, and the timing and net proceeds of either.
- Mt. Todd EIS review, permitting schedule, study milestones and resource assumptions; distinguish reported resources from SEC-compliant reserves.
- Changes in the market value and liquidity of the Midas Gold investment, which materially affected the quarter’s loss and working capital.
- Assumptions and limitations in the Guadalupe de los Reyes preliminary assessment, particularly metal prices, inferred resources, capital estimates and projected returns.
- Management’s forward-looking estimates, which are subject to substantial financing, market, operational and regulatory risks.