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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 20002002
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9025
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VISTA GOLD CORP.
(Exact Name of Registrant as Specified in its Charter)
CONTINUED UNDER THE LAWS OF THE YUKON TERRITORY NONE
(State or other Jurisdiction of Incorporation or (IRS Employer
Incorporation or
Organization) Identification Number)
SUITE 5, 7961 SHAFFER PARKWAY
LITTLETON, COLORADO 80127
(Address of Principal Executive Offices) (Zip Code)
(720) 981-1185
(Registrant's Telephone Number, Including Area Code)
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B)12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common shares without par value American Stock Exchange
The Toronto Stock Exchange
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G)12(g) OF THE ACT:
None.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS); AND (2) HAS BEEN SUBJECT TO THE
FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES /X/ NO / /
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12B-2 OF THE ACT): Yes / / No /X/
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K: /X// /
AGGREGATE MARKET VALUE OF OUTSTANDING COMMON SHARES HELD BY NON-AFFILIATES:
As of March 26, 2001,June 28, 2002, being the last business day of the Registrant's most
recently completed second fiscal quarter, the aggregate market value of
outstanding Common Shares of the registrant held by non-affiliates was
approximately $8,164,354.$11,900,000.
OUTSTANDING COMMON SHARES: As of March 26, 2001, 90,715,04019, 2003, 12,411,725 Common Shares of the
registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: To the extent herein specifically
referenced in PartsPart III, and IV,portions of the Management
Information andregistrant's definitive Proxy CircularStatement
for the registrant's 20012003 Annual General Meeting.Meeting of Shareholders. See Parts III and IV.Part III.
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TABLE OF CONTENTS
PAGE
--------
GLOSSARY.............................. 1
CURRENCY.............................. 3
METRIC CONVERSION TABLE............... 3
UNCERTAINTY OF FORWARD-LOOKING
STATEMENTS.......................... 3
PART I
ITEM 1. BUSINESS...................... 4
Overview............................ 4
Segmented Financial Information..... 4
Corporate Organization Chart........ 5
Significant Developments in 2000.... 5
Refining and Marketing.............. 7
Exploration and Business
Development....................... 8
Property Interests and Mining
Claims............................ 9
Reclamation......................... 9
Government Regulation............... 9
Environmental Regulation............ 10
Competition......................... 10
Employees........................... 10
Risk Factors........................ 10
ITEM 2. PROPERTIES.................... 13
Operations.......................... 13
Hycroft Mine........................ 13
Amayapampa.......................... 17
Capa Circa.......................... 22
Exploration Properties.............. 22
2000 Exploration, Property
Evaluation and Holding
Expenditures...................... 23
2001 Exploration Plan............... 2312
ITEM 3. LEGAL PROCEEDINGS............. 2320
ITEM 4. SUBMISSION OF MATTERS TO VOTE
OF SECURITY
HOLDERS................. 23HOLDERS............................. 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS............................. 24
Price Range of Common Shares........ 24
Dividends........................... 24
Exchange Controls................... 24
Certain Canadian Income Tax
Considerations for Non-Residents
of Canada......................... 2421
ITEM 6. SELECTED FINANCIAL DATA....... 25
Selected Financial Data............. 25
United States$/Canadian$ Exchange
Rates............................. 26
PAGE
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23
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............... 26
Introduction........................ 26
Results of Operations............... 27
Going Concern....................... 32
Outlook............................. 32OPERATING RESULTS................... 23
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK....... 33
Commodity Price Risk................ 33
Interest Rate Risk.................. 33
Foreign Currency Exchange Rate
Risk.............................. 3426
PAGE
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ITEM 8. CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA................................ 34
Management's Responsibility for
Financial Information............. 34
Report of Independent Accountants... 35
Consolidated Financial Statements... 36
Notes to Consolidated Financial
Statements........................ 40DATA... 27
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE................ 54
PART III
ITEM 10. DIRECTORS AND OFFICERS OF
REGISTRANT.......................... 54
Directors........................... 54
Executive Officers.................. 55
Executive and Audit Committees...... 56
ITEM 11. COMPENSATION OF DIRECTORS AND
OFFICERS............................ 5654
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.... 5754
ITEM 13. CERTAIN RELATIONSHIP AND
RELATED TRANSACTIONS................ 5754
ITEM 14. CONTROLS AND PROCEDURES...... 54
PART IV
ITEM 14.15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K... 58
Documents Filed as Part of Report... 58
Reports on Form 8-K................. 61
SUPPLEMENTAL INFORMATION.............. 61
SIGNATURES............................ 6255
i
GLOSSARY
"ADIT" means a horizontal or nearly horizontal passage driven from the surface
for the working or dewatering of a mine.
"AMALGAMATION" means the amalgamation of Granges and Da Capo effective on
November 1, 1996.
"ASSAY" means to test ores or minerals by chemical or other methods for the
purpose of determining the amount of valuable metals contained.
"BRECCIA" means rock consisting of fragments, more or less angular, in a matrix
of finer-grained material or of cementing material.
"CLAIM" means a mining title giving its holder the right to prospect, explore
for and exploit minerals within a defined area.
"COMMON SHARES" means common shares without par value of Vista Gold.
"COMPUTERSHARE" means Vista Gold's registrar and transfer agent, Computershare
Trust Company of Canada (formerly Montreal Trust Company of Canada).
"CORPORATION" means the consolidated group consisting of Vista Gold Corp. and
its subsidiaries Hycroft Resources & Development, Inc., Hycroft Lewis
Mine, Inc., Vista Gold Holdings Inc., Vista Gold U.S. Inc., Vista Nevada Corp.,
Granges Inc., Vista Gold (Antigua) Corp., Minera Paredones Amarillos S.A. de
C.V., Compania Inversora Vista S.A., Minera Nueva Vista, S.A., Compania
Exploradora Vistex S.A., and Mineral Ridge Resources Inc.
"CUT-OFF GRADE" means the minimum grade ofbelow which mineralized material or ore used to establish reserves.
"DA CAPO" means Da Capo Resources Ltd., a predecessor of Vista Gold.will be
considered waste.
"DEPOSIT" means an informal term for an accumulation of mineral ores.
"DIAMOND DRILL" means a rotary type of rock drill that cuts a core of rock and
is recovered in long cylindrical sections, two centimeters or more in diameter.
"DORE" means unrefined gold and silver bullion consisting of approximately 90%
precious metals, which will be further refined to almost pure metal.
"FLOTATION""FAULT" means a process whereby value minerals are separated from waste by
attaching themfracture in rock along which there has been displacement of the
two sides parallel to air bubbles in a pulp by the use of small amounts of
chemicals.
"GRANGES" means Granges Inc., a predecessor of Vista Gold.fracture.
"HEAP LEACH" means a gold extraction method that percolates a cyanide solution
through ore heaped on an impervious pad or base.
"HYCROFT INC." means Hycroft Resources & Development, Inc., an indirect
wholly-owned subsidiary of Vista Gold.
"HYCROFT LEWIS" means Hycroft Lewis Mine, Inc., an indirect wholly-owned
subsidiary of Vista Gold.
"MERRILL-CROWE" means a process for recovering gold from solution by
precipitation with zinc dust.
"MINERALIZATION" means the concentration of metals within a body of rock.
"MINERALIZED MATERIAL" is a mineralized body which has been delineated by
appropriately spaced drilling and/or underground sampling to support a
sufficient tonnage and average grade of metal(s). Such a deposit does not
qualify as a reserve, until a comprehensive evaluation based upon unit cost,
grade, recoveries, and other material containing valuable minerals.
"MINERAL RIDGE INC." means Mineral Ridge Resources Inc., an indirect
wholly-owned subsidiary of Vista Gold.factors conclude legal and
economic feasibility.
"ORE" means material containing valuable minerals that can be economically extracted.
1
"OXIDE RESERVE" or "OXIDE RESOURCE""OXIDE" means mineralized rock in which some of the original minerals have been
oxidized.oxidized (I.E., combined with oxygen). Oxidation tends to make the ore more
porous and permits a more complete permeation of cyanide solutions so that
minute particles of gold in the interior of the minerals will be more
readily dissolved.
"PROBABLE RESERVES" means reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven reserves, but the
sites for inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower than
that for proven reserves, is high enough to assume continuity between points
of observation.
1
"PROVEN RESERVES" means reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth, and mineral content of
reserves are well-established.
"RECOVERY" means that portion of the metal contained in the ore that is
successfully extracted by processing, expressed as a percentage.
"RESERVES" or "ORE RESERVES" mean that part of a mineral deposit, which could be
economically and legally extracted or produced at the time of the reserve
determination.
"RESOURCE" or "MINERAL RESOURCE" means a deposit or concentration of minerals
for which there is sampling information and geologic understanding for an
estimate to be made of the contained minerals.
"RUN-OF-MINE" refers to mined ore of a size that can be processed without
further crushing.
"SAMPLING" means selecting a fractional, but representative, part of a mineral
deposit for analysis.
"STOPE""SEDIMENT" means an underground excavation that is madesolid material settled from suspension in a liquid.
"STOCKWORK" means a rock mass interpenetrated by removing ore from the
surrounding rock.small veins of mineralization.
"STRIKE", when used as a noun, means the direction, course or bearing of a vein
or rock formation measured on a level surface and, when used as a verb, means to
take such direction, course or bearing.
"STRIKE LENGTH" means the longest horizontal dimension of an orebody or zone
of mineralization.
"STRIPPING RATIO" means the ratio betweenof waste andto ore in an open pit mine.
"SULPHIDE" (or "SULFIDE") means a compound of sulfur and some other element.
"TAILINGS" means material rejected from a mill after most of the valuable
minerals have been extracted.
"TRENCHING" means prospecting in which subsurface strata are exposed by digging
pits across the strike of a lode.
"VEIN" means a fissure, fault or crack in a rock filled by minerals that have
traveled upwards from some deep source.
"VISTA GOLD" means Vista Gold Corp.
"VOLCANICLASTIC" means derived by ejection of volcanic material from a
volcanic vent.
"WASTE" means rock lacking sufficient grade and/or other characteristics
of ore.
"YAMIN" means Sociedad Industrial Yamin Limitada, until February 7, 2000, a
direct wholly-owned subsidiary of Vista Gold.
"ZAMORA" means Zamora Gold Corp.
2
CURRENCY
Unless otherwise specified, all dollar amounts in this report are expressed in
United States dollars.
The exchange rate at the end of each of the five years to December 31, 2000, and
the average, the high and the low rates of exchange for each year in that five
year period, are set forth in "Item 6. Selected Financial Data--United States
$/Canadian $ Exchange Rates". These exchange rates are expressed as the amount
of United States funds equivalent to one Canadian dollar, being the noon buying
rates in New York City for cable transfers in Canadian dollars, as certified for
customs purposes by the Federal Reserve Bank of New York. On March 26, 2001,
this noon buying rate was $1.5545 (Cdn.$1.00 equals U.S.$0.6433).
METRIC CONVERSION TABLE
TO CONVERT IMPERIAL MEASUREMENT UNITS TO METRIC MEASUREMENT UNITS MULTIPLY BY
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Acres................................... Hectares................................ 0.4047
Feet.................................... Meters.................................. 0.3048
Miles................................... Kilometers.............................. 1.6093
Tons (short)............................ Tonnes.................................. 0.9071
Gallons................................. Liters.................................. 3.7850
Ounces (troy)........................... Grams................................... 31.103
Ounces (troy) per ton (short)........... Grams per tonne......................... 34.286
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS
This document, including any documents that are incorporated by reference as set
forth on the face page under "Documents incorporated by reference", contains
forwarding-looking statements concerning, among other things, projected annual
gold production, mineral resources,mineralized material, proven or probable reserves and cash
operating costs. Such statements are typically punctuated by words or phrases
such as "anticipates", "estimates", "projects", "foresees", "management
believes", "believes" and words or phrases of similar import. Such statements
are subject to certain risks, uncertainties or assumptions. If one or more of
these risks or uncertainties materialize, or if underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. Important factors that could cause actual results to differ
materially from those in such forward-looking statements are identified in this
document under "Item 1. Business--Risk Factors". Vista Gold assumes no
obligation to update these forward-looking statements to reflect actual results,
changes in assumptions, or changes in other factors affecting such statements.
3
PART I
ITEM 1. BUSINESS.
OVERVIEW
Vista Gold Corp. (the "Corporation") is currently engaged in the evaluation,
acquisition, exploration and improvement of gold exploration and potential
development projects. The Corporation's approach to acquisitions of gold
projects has generally been to seek projects within political jurisdictions with
well established mining, land ownership and tax laws, which have adequate
drilling and geological data to support the completion of a third-party review
of the geological data and to complete an estimate of the mineralized material.
In addition, the Corporation looks for opportunities to improve the value of its
gold projects through exploration drilling, and/or introducing technological
innovations. The Corporation is engaged, directlyexpects that emphasis on gold project acquisition
and through joint ventures,improvement will continue in the exploration for and the acquisition, development and operation of mineral
properties in North and South America. Since 1971,future.
Currently the Corporation owns or controls six gold properties: the Maverick
Springs and its
predecessor companies have held participating interests in seven mines, four of
which were discovered by the Corporation. The Corporation has also operated five
of the seven mines.
During 2000, the Corporation's primary mining operation,Mountain View projects and the Hycroft mine, all in Nevada remained shut down pending improved gold prices. However,Nevada; the Hycroft
mine continued to beLong
Valley project in east central Califorina; the principal source of earnings because goldParedones Amarillos project in
Baja, Mexico; and by-product silver continued to be produced from ore previously placed on the heaps. SeeAmayapampa project in Bolivia. Additional information
about these projects is available in "Item 2. Properties--Hycroft Mine"Properties". In 1998, theThe Corporation acquired
100%also
owns several exploration claims in Canada and approximately 25% of the shares of
Mineral Ridge Inc.Zamora Gold Corp., the entity that owns the Mineral Ridge
mine, a company exploring for gold property located in Nevada. During 1999, Mineral Ridge Inc., sought
protection under the U.S. Bankruptcy Code in order to begin the process of a
permanent cessation of all mining activities. By the end of 2000, the court
appointed trustee had sold all the assets of Mineral Ridge Inc. and in
January 2001, the bankruptcy case was dismissed. See "Item 3. Legal
Proceedings".Ecuador.
The Corporation owns the Amayapampadoes not produce gold property in Bolivia for
which a feasibility study was completed in 1997commercial quantities and a revised feasibility study
was completed in the first quarter of 2000. The Corporation's Capa Circadoes not
currently generate operating earnings. Through fiscal 2002, funding to acquire
gold property in Bolivia was sold on February 7, 2000. See "Item 2.
Properties--Amayapampaproperties, explore and Capa Circa Properties". The Corporation has
approximately 12 additional mineral properties in North and South America
covering approximately 123,500 acres (50,000 hectares) in various stages of
evaluation. Vista Gold owns a 26% equity interest in Zamora, a Canadian mineral
exploration company with interests in mineral concessions in southern Ecuador.
See "Item 2. Properties--Exploration Properties--Ecuador". As at March 26, 2001,to operate the Corporation has 17 full-time employees.been acquired
through private placements of equity units consisting of the Corporation's
common shares and warrants to purchase common shares. The Corporation derives allexpects to
continue to raise capital through the exercise of its current revenues from the sale of gold
extracted from the Hycroft mine. In fiscal 1998, 1999warrants and 2000, revenues from
sales of gold were $37 million, $19 million and $4 million, respectively.
Vista Goldthrough
additional equity financings.
The Corporation was originally incorporated on November 28, 1983 under the name
"Granges Exploration Ltd.". In November 1983, Granges Exploration Ltd. acquired
all the mining interests of Granges AB in Canada. On June 28, 1985, Granges
Exploration Ltd. and Pecos Resources Ltd. amalgamated under the name "Granges
Exploration Ltd." and on June 9, 1989, Granges Exploration Ltd. changed its name
to "Granges Inc.". On May 1, 1995, Granges and Hycroft Resources & Development
Corporation were amalgamated under the name "Granges Inc.". Effective
November 1, 1996, Granges and Da Capo Resources Ltd. amalgamated under the name
"Vista Gold Corp.". Effective December 19, 1997, Vista Gold was continued from
British Columbia to the Yukon Territory, Canada under the BUSINESS CORPORATIONS
ACT (Yukon Territory).
The current addresses, telephone and facsimile numbers of the offices of Vista
Goldthe
Corporation are:
EXECUTIVE OFFICE REGISTERED AND RECORDS OFFICE
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Suite 5 - 7961 Shaffer Parkway 200 - 204 Lambert Street
Littleton, Colorado, USA 80127 Whitehorse, Yukon Territory, Canada
80127 Y1A 3T2
Telephone: (720) 981-1185 Telephone: (867) 667-7600
Facsimile: (720) 981-1186 Facsimile: (867) 667-7885
SEGMENTED FINANCIAL INFORMATION
The Corporation operates in the mining industry in Canada, the United States and
Latin America. For information on the Corporation's sales, earnings from
operations and identifiable assets by geographic
4
area see note 10 to the consolidated financial statements for the year ended
December 31, 2000 under "Item 8. Consolidated Financial Statements and
Supplementary Data--Notes to Consolidated Financial Statements".
CORPORATE ORGANIZATION CHART
The name, place of incorporation, continuance or organization, and percent of
voting securities owned or controlled by Vista Gold asEMPLOYEES
As of December 31, 2000 for
each subsidiary2002, the Corporation had 8 full-time employees, of Vista Gold is set out below.
[LOGO]
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(1)which
four were employed at the Hycroft mine and four were employed at the
Corporation's executive office in Littleton, Colorado. The Corporation uses
consultants with specific skills to assist with various aspects of its project
evaluation, due diligence and acquisition initiatives.
4
SEGMENT INFORMATION
Segment information is provided in the process of dissolving Mineral Ridge
Resources Inc.Consolidated Financial
Statements--Note 18.
SIGNIFICANT DEVELOPMENTS IN 2000
HYCROFT MINE2002
In 2000,2002, the Hycroft mine produced 13,493 ouncesCorporation completed $6.8 million in equity private placement
financings, with an additional equity private placement financing, for net
proceeds of $3.0 million, completed subsequent to December 31, 2002. See the
Consolidated Financial Statements--Notes 8 and 21(b).
On June 19, 2002, the Corporation effected a 1-for-20 consolidation of its
common shares. All references in this document to common shares and per-share
amounts are on a post-consolidation basis, unless otherwise indicated.
Through the use of cash and equity units, consisting of the Corporation's common
shares and warrants to purchase common shares, as consideration, the Corporation
began to build a portfolio of gold projects through a strategy that includes
evaluation, acquisition, exploration and 38,418 ounces of
silver. The Corporation suspended mining activities in December 1998 as a result
of low gold prices. Productionimprovement of gold from ore stockpiled onexploration and
potential development projects. As discussed under "Item 2. Properties", the
heap leach
pads during previous years is expectedCorporation acquired four gold projects in 2002 to continue in 2001. Gold production for
2001 is expectedadd to be in excess of 3,000 ounces.
During 1999 andits two existing
projects, as follows:
- On August 29, the early part of 2000, Vista Gold completed a new studyCorporation acquired 100% of the ore reservesParedones Amarillos
gold project in the Brimstone deposit,Mexican state of Baja California Sur from Viceroy
Resource Corporation (Viceroy). To acquire the largest ore resource atproject, the Hycroft
Mine. ProvenCorporation
paid cash of Cdn $1.0 million and probable minable reserves containedissued 303,030 equity units to Viceroy;
on August 29, 2003 the Corporation will pay Viceroy an additional Cdn
$0.5 million.
- On October 7, 2002, the Corporation completed the acquisition of a 100%
interest in the planned Brimstone
Pit contain 23,791,000 tons (21,581,000 tonnes) of ore with an average gold
content of 0.020 ounces per ton (0.69 grams per tonne). Ore reserve calculations
were based upon a gold price of US$300 per ounce and an economic cut-off grade
equivalent to 0.007 ounces of gold per ton of ore (0.24 grams per tonne).
Metallurgical recovery of gold from run-of-mine leaching of the Brimstone ore is
projected to be 57% and the planned pit would have a stripping ratio
of 1.2-to-1.
5
The planned pit contains an additional 2,349,000 tons (2,130,778 tonnes) of
material classified as inferred resource containing an estimated 41,535 ounces
of gold (average grade--0.018 ounces per ton (0.62 grams per tonne).
Ore reserves and resources were estimated under the direction of Mr. Warren
Bates, International Exploration Manager, and have been independently reviewed
by Mineral Resources Development, Inc. ("MRDI"). The definition of "ore reserve"
employed by Vista Gold is consistent with USGS Circular 831 and meets the
standard for "probable mining reserve" under National Instrument 43-101 of the
Canadian Securities Administrators. Stated inferred resources are equivalent to
"inferred mineral resources" under National Instrument 43-101 of the Canadian
Securities Administrators.
MINERAL RIDGE MINE
On December 10, 1999, Mineral Ridge Inc., the wholly-owned subsidiary of Vista
Gold, that holds the Corporation's investment in the Mineral Ridge Mine,
voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
Gold production at the Mineral Ridge mine failed to meet expectations.
Initially, mechanical difficulties inhibited production efforts, and as mining
operations continued in the latter half of the year, the grade of the ore mined
was less than that estimated in the ore reserve calculations. After reviewing
the reserves with Independent Mining Consultants, Inc., an independent
consultant, it was concluded that significant ore deficiencies in the future,
compared with the original reserve estimates, were probable. The reduced gold
production and ore reserves caused by the ore deficiencies together with low
gold prices, resulted in the mine failing to meet its required cash-flow targets
under Mineral Ridge Inc.'s loan agreement with Dresdner Bank AG. Although
alternatives were considered, none were considered to be viable, and a
protective bankruptcy filing was made.
Early in 2000, the court appointed a Chapter 11 trustee and later in 2000, the
trustee completed the court approved sale of the assets of Mineral Ridge Inc. In
January 2001, the Chapter 11 case for Mineral Ridge Inc. was dismissed and the
Corporation is in the process of dissolving Mineral Ridge Inc. in accordance
with the applicable state corporation's code.
AMAYAPAMPA AND CAPA CIRCA PROPERTIES
In early 2000, a new feasibility study was completed for the Amayapampa
property. The results of this study indicate that a gold price of $325 per ounce
will be required for construction and development to commence and at this price,
the project is expected to generate an after tax internal rate of return of 20%.
In February 2000, an agreement was signed between six ministries in the
government of Bolivia and the Corporation, which provides for the immediate
refund of value added taxes and custom duties that would be paid by the
Corporation during the construction period. These refunds are expected to total
approximately $2.0 million, and while the Corporation would be entitled to the
refunds over time anyway, the acceleration of these refunds would increase the
project cash flows during construction. With low gold prices continuing
throughout 2000, all the workers at Amayapampa were laid-off in April. However,
the Corporation continued to provide limited community assistance during 2000,
which included providing six teachers and a nurse and allowing restricted access
to the old underground workings to some of the ex-miners.
In February 2000, the Corporation sold Yamin, the company that owns the Capa
Circa mine, to a miners co-operative. The Corporation believes that
mineralization at Capa Circa is limited to narrow veins and that there are no
proven reserves. As a result, the Corporation believes that is better suited to
small scale underground mining.
EXPLORATION
Year 2000 exploration efforts were focused around the Corporation's Hycroft mine
property in Nevada. Planned drilling has been deferred due to the depressed gold
market, but a continuing program of
6
mapping, sampling and compilation of data collected during the mining of the
Brimstone deposit has generated a number of promising targets for new ore
development. These include the "Snyder zone", a silicified breccia zone with a
strike length of 2,000 feet (610 meters) containing anomalousMaverick Springs gold and silver values (0.004 to 0.031 gold ounces per ton), located immediately south-west of
the Brimstone pit.
Mapping in the South end of the Central Fault Pit has revealed that quartz
veins, carrying gold grades higher than typical ore grades from that pit, are
exposed in the current pit floor. Re-logging of the cuttings from holes drilled
in prior years has confirmed that two veins, with true widths varying from 5 to
25 feet (1.5 to 7.6 meters), extend over a strike length of at least 2,000 feet
(610 meters) in the hanging wall of the Central Fault.
REFINING AND MARKETING
The Hycroft mine produces dore, which is processed by Metalor USA Refining
Corporation in North Attleboro, Massachusetts. Gold and silver can be sold on
numerous markets throughout the world,project and the market price is readily
ascertainable. Alternate refiners for silverMountain
View gold project from Newmont Mining Corporation (Newmont), and gold produced fromits
wholly-owned subsidiary Newmont Capital Limited. To acquire the Hycroft
mine are available if necessary. As a resultMaverick
Springs project, the Corporation paid cash of $250,000 and issued of
141,243 equity units to Newmont and on October 7, 2003 the largeCorporation
will issue $500,000 in common shares to Newmont, together with an
equivalent number of available
gold and silver purchasers,two year warrants. To acquire the Mountain View
project the Corporation is not dependent upon the salepaid cash of $50,000 and issued 56,497 equity
units to any one customer of either its gold or silver.
GOLD AND SILVER SALES
The profitability of gold and silver mining is directly relatedNewmont Capital Limited.
- Pursuant to the market
price of the metal compared with the cost of production. The following is a brief description of factors affecting, and historical trendstransaction initiated in the market
prices of gold and silver, which account for most of the Corporation's revenue.
A description of the Corporation's hedging and forward sales philosophy also
follows.
The Corporation's results are dependent on the price of gold. Gold prices
fluctuate and are affected by numerous factors, including, but not limited to,
expectations with respect to the rate of inflation, exchange rates
(specifically, the U.S. dollar relative to other currencies), interest rates,
global and regional political and economic circumstances and governmental
policies, including those with respect to gold holdings by central banks. The
demand for and supply of gold affect gold prices, but not necessarily in the
same manner as demand and supply affect the prices of other commodities. The
supply of gold consists of a combination of new mine production and existing
stocks of bullion and fabricated gold held by governments, public and private
financial institutions, industrial organizations and private individuals. The
demand for gold primarily consists of jewelry and investments. Additionally,
hedging activities by producers, consumers, financial institutions and
individuals can affect gold supply and demand. Gold can be readily sold on
numerous markets throughout the world and its market value can be ascertained at
any particular time. As a result, the Corporation is not dependent upon any one
customer for the sale of its product.
The price of silver, while related somewhat to the price of and affected to some
extent by the same factors as gold, is more subject to normal supply and demand
factors than the price of gold. Silver has a wide range of industrial uses on
the demand side and is subject to both mine production and substantial secondary
supply from scrap and dishoarding on the supply side. Silver inventories held by
metal exchanges remained high during the 1980s and 1990s and lower industrial
and consumer demand and relatively high interest rates continued to depress the
price of silver during much of that period.
7
The following table sets out the annual high and low gold prices per troy ounce
in the London bullion market in United States dollars for the years indicated:
HIGH LOW
-------- --------
2000................................................... $313 $264
1999................................................... 326 253
1998................................................... 313 273
1997................................................... 367 283
1996................................................... 415 367
On December 28, 2000, the afternoon fixing price of gold on the London bullion
market was $274.45 per ounce.
The following table sets out the annual high and low silver price per ounce
(Handy & Harman New York Prices) in United States dollars for the years
indicated:
HIGH LOW
-------- --------
2000.................................................. $5.45 $4.57
1999.................................................. 5.77 4.91
1998.................................................. 7.31 4.72
1997.................................................. 6.21 4.18
1996.................................................. 5.79 4.67
On December 28, 2000, the Handy & Harman price for silver was
$4.595 per ounce.
HEDGING AND METAL SALES
The Corporation may from time to time protect against falling gold prices
through forward sales of future production. Under this hedging process, the sale
price of gold to be delivered at a future date is fixed at the time the forward
sale is made, thus eliminating the effect of any future gold price fluctuations.
Revenue from these forward sales is recognized when the gold is due to be
delivered. At December 31, 2000, the Corporation had no forward sales
commitments. Vista Gold's Board of Directors regularly reviews the Corporation's
forward sales arrangements. The level of future forward sales will depend in
part upon the Corporation's assessment of gold market conditions at the relevant
time.
EXPLORATION AND BUSINESS DEVELOPMENT
The Corporation's exploration and business development activities are focused on
gold. In the United States,November 2002, the Corporation has
an explorationoption to acquire 100% of the Long Valley project atfrom Standard
Industrial Minerals, Inc. ("Standard"). Under the Hycroft mine located in Nevada. In Bolivia,terms of the Amayapampa properties represent
both development and exploration projects.
The Corporation's exploration activities headquarters are in Littleton,
Colorado, with one district exploration office in La Paz, Bolivia. The
exploration department has a permanent staff of one geologist. Consultants and
contract personnel are used for specific projects and tasks.
The 2000 exploration program was focused at the Hycroft mine where a mapping and
sampling program is ongoing and a revised ore reserve estimate was completed.
During 2001,option
agreement, the Corporation intends to spend $1.3 million on exploration if the
necessary funding is obtained. The majority of the exploration expenditures will
be madewould pay Standard $750,000 over five years in
Nevada at the Hycroft mine.annual installments. The Corporation will continue to evaluate
other opportunities.
8
has paid the first installment
of $100,000.
PROPERTY INTERESTS AND MINING CLAIMS
In the United States, most of the Corporation's exploration activities are
conducted in the state of Nevada. Mineral interests may be owned in Nevada by
(i) the United States, (ii) the state of Nevada, or (iii) private parties. Where
prospective mineral properties are owned by private parties, or by the state,
some type of property acquisition agreement is necessary in order for the
Corporation to explore or develop such property. Generally, these agreements
take the form of long term mineral leases under which the Corporation acquires
the right to explore and develop the property in exchange for periodic cash
payments during the exploration and development phase and a royalty, usually
expressed as a percentage of gross production or net profits derived from the
leased properties if and when mines on the properties are brought into
production. Other forms of acquisition agreements are exploration agreements
coupled with options to purchase and joint venture agreements. Where prospective
mineral properties are held by the United States, mineral rights may be acquired
through the location of unpatented mineral claims upon unappropriated federal
land. If the statutory requirements for the location of a mining claim are met,
the locator obtains a valid possessory right to develop and produce minerals
from the claim. The right can be freely transferred and, provided that the
locator is able to prove the discovery of locatable minerals on the
5
claims, is protected against appropriation by the government without just
compensation. The claim locator also acquires the right to obtain a patent or
fee title to his claim from the federal government upon compliance with certain
additional procedures.
Mining claims are subject to the same risk of defective title that is common to
all real property interests. Additionally, mining claims are self-initiated and
self-maintained and therefore, possess some unique vulnerabilities not
associated with other types of property interests. It is impossible to ascertain
the validity of unpatented mining claims solely from an examination of the
public real estate records and, therefore, it can be difficult or impossible to
confirm that all of the requisite steps have been followed for location and
maintenance of a claim. If the validity of a patented mining claim is challenged
by the Bureau of Land Management or Forest Service on the grounds that
mineralization has not been demonstrated, the claimant has the burden of proving
the present economic feasibility of mining minerals located thereon. Such a
challenge might be raised when a patent application is submitted or when the
government seeks to include the land in an area to be dedicated to another use.
RECLAMATION
Although reclamation is conducted concurrently with mining whenever feasible,
theThe Corporation generally is required to mitigate long-term environmental
impacts by stabilizing, contouring, resloping, and revegetating various portions
of a site after mining and mineral processing operations are completed. These
reclamation efforts are conducted in accordance with detailed plans, which have
beenmust
be reviewed and approved by the appropriate regulatory agencies.
The Corporation's principal reclamation liability is the Hycroft mine.
Management estimates the remaining reclamation costs for the Hycroft mine to be
$2.9$4.1 million. These costs have been charged to earnings over the life of the
mine and the provision as of December 31, 2000 was $3.1 million. An amended
Crofoot/Lewis Mine Reclamation Plan that included the new Brimstone deposit was
submitted to the Nevada Bureau of Land Management (the "BLM") in March 1994. In
April 1995, the BLM approved the plan and a surety bond in the amount of
$5.1 million was posted to secure reclamation obligations under the plan.
GOVERNMENT REGULATION
Mining operations and exploration activities are subject to various national,
state, provincial and local laws and regulations in the United States, Bolivia,
Canada, Mexico and other jurisdictions, which govern prospecting, development,
mining, production, exports, taxes, labor standards, occupational health, waste
disposal, protection of the environment, mine safety, hazardous substances and
other matters. The Corporation has obtained or has pending applications for
those licenses, permits or other authorizations currently required to conduct
its operations.exploration and other programs. The Corporation believes that it is in
compliance in all material respects with
9
applicable mining, health, safety and
environmental statutes and the regulations passed thereunder in the United
States, Canada, Bolivia, Mexico and the other jurisdictions in which the
Corporation operates. There are no current orders or directions with respect to
the foregoing laws and regulations.
ENVIRONMENTAL REGULATION
The Corporation's mining operations and exploration activitiesgold projects are subject to various federal, state and local
laws and regulations governing protection of the environment. These laws are
continually changing and, as a general matter, are becoming more restrictive.
The Corporation's policy is to conduct business in a way that safeguards public
health and the environment. The Corporation believes that its operations are
conducted in material compliance with applicable laws and regulations.
Changes to current local, state or federal laws and regulations in the
jurisdictions where the Corporation operates could require additional capital
expenditures and increased operating and/or reclamation costs. Although the
Corporation is unable to predict what additional legislation, if any, might be
proposed or enacted, additional regulatory requirements could render certain
mining operations uneconomic.impact the
economics of its projects.
During 2000,2002, there were no material environmental incidents or non-compliance
with any applicable environmental regulations. The Corporation estimates that it
will not incur material capital expenditures for environmental control
facilities during the fiscal year.
6
COMPETITION
The Corporation competes with other mining companies in connection with the
acquisition of gold and other precious metals properties. There is noteworthy
and increasing competition for the limited number of
gold acquisition opportunities, some of which is with other companies having
substantially greater financial resources than the Corporation. As a result, the
Corporation may eventually be unable to acquirehave difficulty acquiring attractive gold mining properties.projects at
reasonable prices.
The Corporation believes no single company has sufficient market power to affect
the price or supply of gold in the world market.
EMPLOYEES
As at December 31, 2000,RISK FACTORS
An investment in the Corporation's Common Shares involves risk. The risks
described below are not the only ones facing the Corporation. Additional risks
not presently known to the Corporation had 17 full-time employees,or which management currently considers
immaterial may also adversely affect the Corporation's business. Management has
attempted to identify the major factors under the heading "Risk Factors" that
could cause differences between actual and planned or expected results, and has
included all material risk factors. If any of which
seventhe following risks actually
happen, the Corporation's business, financial condition and operating results
could be materially adversely affected.
MANAGEMENT CANNOT BE CERTAIN THAT THE CORPORATION'S ACQUISITION, EXPLORATION AND
DEVELOPMENT ACTIVITIES WILL BE COMMERCIALLY SUCCESSFUL.
The Corporation currently has no properties that produce gold in commercial
quantities. The Corporation's gold production has declined steadily since mining
activities were employedsuspended at the Hycroft mine five were employed at the Amayapampa
properties, one was employed in exploration activities in Littleton, Colorado1998. Gold production is now
nominal and four were employed at Vista Gold's executive office (other than in
exploration activities). The Hycroft mine has never experienced a loss of
production dueis incidental to a work stoppage. The Corporation considers its relations with
its employees to be satisfactory.
RISK FACTORS
FLUCTUATING PRICES
The Corporation's revenues are expected to be, in large part, derivedheap leach pad rinsing activities. In these
circumstances, proceeds realized from the
mining and sale of gold and other precious metals or interests related thereto.
The price of those commodities has fluctuated widely, and is affected by
numerous factors beyond the control of the Corporation, including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, central bank activities, interest rates, global or regional
consumption patterns (suchare not reported as
the development of gold coin programs),
speculative activities and increased production due to new mine developments and
improved mining and production methods. The effect of these factors on the price
of precious metals, and therefore the economic viability of any of the
Corporation's projects, cannot accurately be predicted.
EXPLORATION AND DEVELOPMENT
All of the mineral properties, which the Corporation owns, other than the
Hycroft mine,revenues, but rather are in the exploration and development stages. Mineral exploration
and development involves a high degree of risk and few properties, which are
explored, are ultimately developed into producing mines. There is no assurance
that the Corporation's mineral exploration and development activities will
result in any
10
discoveries of commercial bodies of ore. The long-term profitability of the
Corporation's operations will be in part directly related to the cost and
success of its exploration programs, which may be affected by a number of
factors beyond the control of the Corporation.netted against operating costs.
Substantial expenditures are required to acquire existing gold properties, to
establish ore reserves through drilling and analysis, to develop metallurgical
processes to extract metal from the ore and, in the case of new properties, to
develop the mining and processing facilities and infrastructure at any site
chosen for mining. Although
substantial benefits mayThere can be derived from the discovery of a major mineralized
deposit, no assurance can be given that mineralsany gold reserves or
mineralized material acquired or discovered will be discovered in sufficient quantities to
justify commercial operations or that the funds required for development can be
obtained on a timely basis.
THE PRICE OF GOLD IS SUBJECT TO FLUCTUATIONS, WHICH COULD ADVERSELY AFFECT THE
REALIZABLE VALUE OF THE CORPORATION'S ASSETS AND POTENTIAL FUTURE RESULTS OF
OPERATIONS AND CASH FLOW.
The Corporation's principal assets are gold reserves and mineralized material.
The Corporation intends to attempt to acquire additional properties containing
gold reserves and mineralized material. The price that the Corporation pays to
acquire these properties will be, in large part, influenced by the price of gold
at the time of the acquisition. The Corporation's potential future revenues are
expected to be, in large part, derived from the mining and sale of gold from
these properties or from the outright sale of some of these properties. The
value of these gold reserves and mineralized material, and the value of any
potential gold production therefrom, will vary in direct proportion to
variations in gold prices. The price of gold has fluctuated widely, and is
affected by numerous factors beyond the control of the Corporation, including,
but not limited to, international, economic and political trends, expectations
of inflation, currency exchange fluctuations, central bank activities, interest
rates, global or regional consumption patterns and speculative activities. The
effect of these factors on the price of gold, and therefore the economic
viability of any of the Corporation's projects, cannot accurately be predicted.
Any drop in the price of gold would adversely affect the Corporation's asset
values, cash flows, potential revenues and profits.
7
MINING EXPLORATION, DEVELOPMENT AND OPERATING HAZARDS AND RISKSACTIVITIES ARE INHERENTLY
HAZARDOUS.
Mineral exploration involves many risks that even a combination of experience,
knowledge and careful evaluation may not be able to overcome. Operations in
which the Corporation has direct or indirect interests will be subject to all
the hazards and risks normally incidental to exploration, development and
production of gold and other metals, any of which could result in work
stoppages, damage to property and possible environmental damage. Although the
Corporation has obtained liability insurance in an amount that they consider
adequate, theThe nature of
these risks is such that liabilities might exceed any liability insurance policy
limits,limits. It is also possible that the liabilities and hazards might not be
insurable, or, the Corporation mightcould elect not to insure itself against such
liabilities due to high premium costs or other reasons, in which event, the
Corporation could incur significant costs that could have a material adverse
effect uponon its financial condition.
MINORITY INTERESTRESERVE CALCULATIONS ARE ESTIMATES ONLY, SUBJECT TO UNCERTAINTY DUE TO FACTORS
INCLUDING METAL PRICES AND RECOVERABILITY OF METAL IN PROPERTIES
Third parties hold minority interests in certain of the Corporation's
properties. Under Bolivian law, a minority interest in a mining concession is an
undivided interest in that concession and the holder of such a minority interest
may take action to restrict all exploration and development of the mining
concessions by the holder of the majority interest if such exploration and
development is conducted without the minority owner's permission. Furthermore,
if the majority and minority parties wish to separate their interests, but are
unable to agree as to the method of division or purchase of the property, the
parties must file a request for division before a Bolivian civil court.
CALCULATION OF RESERVES AND GOLD RECOVERYTHE MINING PROCESS.
There is a degree of uncertainty attributable to the calculation of reserves and
corresponding grades being mined or dedicated to future production. Until reserves are actually
mined and processed, the quantity of ore and grades must be considered as an
estimate only. In addition, the quantity of reserves and ore may vary depending
on metal prices. Any material change in the quantity of reserves,
mineralization, grade or stripping ratio may affect the economic viability of
the Corporation's properties. In addition, there can be no assurance that gold
recoveries or other metal recoveries in small-scale laboratory tests will be
duplicated in larger scale tests under on-site conditions or during production.
THE CORPORATION'S EXPLORATION AND DEVELOPMENT OPERATIONS ARE SUBJECT TO
ENVIRONMENTAL FACTORSREGULATIONS, WHICH COULD RESULT IN INCURRENCE OF ADDITIONAL COSTS
AND OPERATIONAL DELAYS.
All phases of the Corporation's operations are subject to environmental
regulation. Environmental legislation is evolving in some countries or
jurisdictions in a manner which will require stricter standards and enforcement,
increased fines and penalties for non-compliance, more stringent environmental
assessments of proposed projects and a heightened degree of responsibility for
companies and their officers, directors and employees. There is no assurance
that future changes in environmental regulation, if any, will not adversely
affect the Corporation's projects. The Corporation is currently subject to
environmental regulations with respect to its properties in Nevada, Bolivia
and Mexico.
The Hycroft mine in Nevada occupies private and public lands. The public lands
include unpatented mining claims on lands administered by the U.S. Bureau of
Land Management. These claims are governed by the laws and regulations of the
U.S. federal government and the state of Nevada.
U.S. FEDERAL LAWS
The Bureau of Land Management requires that mining operations on lands subject
to its regulation obtain an approved plan of operations subject to environmental
impact evaluation under the National Environmental Policy Act. Any significant
modifications to the plan of operations may require the completion of an
environmental assessment or Environmental Impact Statement prior to approval.
Mining companies must post a bond or other surety to guarantee the cost of
post-mining reclamation. These requirements could add significant additional
cost and delays to any mining project undertaken by the Corporation.
Under the Resource Conservation and Recovery Act, mining companies may incur
costs for generating, transporting, treating, storing, or disposing of hazardous
waste, as well as for closure and post-closure maintenance once they have
completed mining activities on a property. The Corporation's mining operations
may produce air emissions, including fugitive dust and other air pollutants,
from stationary equipment, storage facilities, and the use of mobile sources
such as trucks and heavy construction equipment which are subject to review,
monitoring and/or control requirements under the Federal Clean
8
Air Act and state air quality laws. Permitting rules may impose limitations on
the Corporation's production levels or create additional capital expenditures in
order to comply with the rules.
The Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, ("CERCLA") imposes strict joint and several liability on parties
associated with releases or threats of releases of hazardous substances. Those
liable groups include, among others, the current owners and operators of
facilities which release hazardous substances into the environment and past
owners and operators of properties who owned such properties at the time the
disposal of the hazardous substances occurred. This liability could include the
cost of removal or remediation of the release and damages for injury to the
surrounding property. The Corporation cannot predict the potential for future
CERCLA liability with respect to its Nevada property or surrounding areas.
NEVADA LAWS
At the state level, mining operations in Nevada are also regulated by the Nevada
Department of Conservation and Natural Resources, Division of Environmental
Protection. Nevada state law requires the Hycroft mine to hold Nevada Water
Pollution Control Permits, which dictate operating controls and closure and
post-closure requirements directed at protecting surface and ground water. In
addition, the Corporation is required to hold Nevada Reclamation Permits
required under NRS 519A.010 through 519A.170. These permits mandate concurrent
and post-mining reclamation of mines and require the posting of reclamation
bonds sufficient to guarantee the cost of mine reclamation. Other Nevada
regulations govern operating and design standards for the construction and
operation of any source of air contamination, and landfill operations. 11Any
changes to these laws and regulations could have an adverse impact on the
Corporation's financial performance and results of operations by, for example,
required changes to operating constraints, technical criteria, fees or surety
requirements.
BOLIVIA LAWS
The Corporation is required under Bolivian laws and regulations to acquire
permits and other authorizations before it could develop and mine the Amayapampa
project. In Bolivia there is relatively new comprehensive environmental
legislation, and the permitting and authorization process may be less
established and less predictable than in the United States. There can be no
assurance that the Corporation will be able to acquire necessary permits or
authorizations on a timely basis. Delays in acquiring any permit or
authorization could increase the development cost of the Amayapampa project, or
delay the start of production.
Under Bolivian regulations, the primary component of environmental compliance
and permitting is the completion and approval of an environmental impact study
known as Estudio de Evaluacion de Impacto Ambiental, or EEIA. The EEIA provides
a description of the existing environment, both natural and socio-economic, at
the project site and in the region; interprets and analyzes the nature and
magnitude of potential environmental impacts that might result from project
activities, and describes and evaluates the effectiveness of the operational
measures planned to mitigate the environmental impacts. Baseline environmental
conditions, including meteorology and air quality, hydrological resources and
surface water, are the basis by which direct and indirect project-related
impacts are evaluated and by which potential mitigation measures are proposed.
If the Corporation's project is found to significantly adversely impact any of
these baseline conditions, the Corporation could incur significant costs to
correct the adverse impact, or delay the start of production.
MEXICO LAWS
The Corporation is required under Mexican laws and regulations to acquire
permits and other authorizations before the Paredones Amarillos project could be
developed and mined. Since the passage of Mexico's 1988 General Law on
Ecological Equilibrium and Environmental Protection, a sophisticated
9
system for environmental regulation has evolved. In addition, North American
Free Trade Agreement (NAFTA) requirements for regulatory standards in Mexico
equivalent to those of the U.S. and Canada have obligated the Mexican government
to continue further development of environmental regulation. Most regulatory
programs are implemented by various divisions of the Environment, Natural
Resources and Fisheries Secretariat (SEMARNAP). There can be no assurance that
the Corporation will be able to acquire necessary permits or authorizations on a
timely basis. Delays in acquiring any permit or authorization could increase the
development cost of the Paredones Amarillos project, or delay the start
of production.
The most significant environmental permitting requirements, as they relate to
the Paredones Amarillos project are: developing reports on environmental
impacts; regulation and permitting of discharges to air, water and land; new
source performance standards for specific air and water pollutant emitting
sources; solid and hazardous waste management regulations; developing risk
assessment reports; developing evacuation plans; and monitoring inventories of
hazardous materials. If the Paredones Amarillos project is found to not be in
compliance with any of these requirements, the Corporation could incur
significant compliance costs, or delay the start of production.
THE CORPORATION FACES INTENSE COMPETITION AND AGREEMENTS WITH OTHER PARTIESIN THE MINING INDUSTRY.
The mining industry is intensely competitive in all of its phases,phases. As a result
of this competition, some of which is with large established mining companies
with substantial capabilities and with greater financial and technical resources
than those of the Corporation, the Corporation may be unable to acquire
additional attractive mining claims or financing on terms management considers
acceptable. The Corporation competes with manyother mining companies possessing greater financial resourcesin the
recruitment and retention of qualified managerial and technical facilities than themselves. Competition inemployees. If
the mining business
could adversely affectCorporation is unable to successfully compete for qualified employees, its
exploration and development programs may be slowed down or suspended. The
Corporation competes with other gold companies for capital. If the Corporation
is unable to raise sufficient capital, its exploration and development programs
may be jeopardized or it may not be able to acquire, develop or operate
gold projects.
THE CORPORATION MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL ON FAVORABLE TERMS.
The exploration and development of the Corporation's abilitydevelopment properties,
specifically the construction of mining facilities and commencement of mining
operations, may require substantial additional financing. Significant capital
investment is required to acquire suitable producing
propertiesachieve commercial production from each of the
Corporation's non-producing properties. The Corporation will have to raise
additional funds from external sources in order to restart mining activities at
the Hycroft mine or prospects for mineral exploration inbegin construction and development activities at any of its
other gold projects. There can be no assurance that additional financing will be
available at all or on acceptable terms and, if additional financing is not
available, the future.Corporation may have to substantially reduce or
cease operations.
10
SOME OF THE CORPORATION'S DIRECTORS MAY HAVE CONFLICTS OF INTEREST Certain directorsAS A RESULT
OF THEIR INVOLVEMENT WITH OTHER NATURAL RESOURCE COMPANIES.
Some of the CorporationCorporation's directors are directors or officers and/or directors of or are
associated with other natural
resource companies that acquireor mining-related companies. Robert A. Quartermain is currently
President and a director of Silver Standard Resources Inc., and is an officer
and a director of Canplats Resources Corporation and of Pacific Sapphire
Company Ltd. He is a director of Repadre Capital Corporation (which holds
interests in mineral properties. Suchresource properties), Western Copper Holdings Ltd., Paso Rico
Resources and Reliant Ventures Ltd. C. Thomas Ogryzlo is the President and Chief
Executive Officer of Canatec Development Corporation. Michael B. Richings is
President and a director of Kinrade Resources Limited. John Clark is a director
of Impact Energy Inc. (an oil & gas exploration company). These associations may
give rise to conflicts of interest from time to time. In the event that any such
conflict of interest arises, a director who has such a conflict willis required to
disclose the conflict to a meeting of the directors of the company in question
and willto abstain from voting for or against approval of any matter in which such
director may have a conflict. In appropriate cases, the company in question will
establish a special committee of independent directors to review a matter in
which several directors, or management, may have a conflict. In accordance with
the laws of the Yukon Territory, the directors of all companies are required to
act honestly, in good faith and in the best interests of a company for which
they serve as a director.
THERE MAY BE CHALLENGES TO THE CORPORATION'S TITLE TO ASSETS
AlthoughIN ITS MINERAL PROPERTIES.
There may be challenges to title to the Corporation has reviewed and is satisfied with the title for all mineral properties in which it hasthe
Corporation holds a material interest. If there are title defects with respect
to any of the Corporation's properties, the Corporation might be required to
compensate other persons or perhaps reduce its interest there is no guarantee
thatin the affected
property. Also, in any such case, the investigation and resolution of title
to such concessions will not be challenged or impugned.issues would divert management's time from ongoing exploration and development
programs.
THE CORPORATION'S PROPERTY INTERESTS IN BOLIVIA ARE SUBJECT TO RISKS FROM
POLITICAL AND ECONOMIC INSTABILITY IN SOUTH AMERICA
Certain of the Corporation's exploration and developmentTHAT COUNTRY.
Vista Gold has property interests are in Bolivia, and Ecuador. As a result, the Corporationwhich may be affected by risks
associated with political or economic instability in those countries.that country. The risks
include, but are not limited to: military repression, extreme fluctuations in
currency exchange rates, labor instability or militancy, mineral title
irregularities and high rates of inflation. Changes in mining or investment
policies or shifts in political attitude in the aforementioned countriesBolivia may adversely affect the
Corporation's business. OperationsThe Corporation may be affected in varying degrees by
government regulation with respect to restrictions on production, price
controls, export controls, income taxes, expropriation of property, maintenance
of claims, environmental legislation, land use, land claims of local people,
water use and mine safety. The effect of these factors cannot be accurately
predicted.
THE CORPORATION'S FINANCIAL POSITION AND RESULTS ARE SUBJECT TO FLUCTUATIONS IN
FOREIGN CURRENCY The Corporation'sVALUES.
Because the Corporation has mining exploration and development operations throughoutin
North and South America, render the
Corporationit is subject to foreign currency fluctuations, which
may materially affect its financial position and results. The Corporation does
not engage in currency hedging to offset any risk of currency fluctuations.
CASH RESOURCES AND LIQUIDITY
The Corporation believesmeasures and reports financial results in U.S. dollars. The
Corporation has mining projects in Bolivia and Mexico, and is looking for other
projects in Mexico and in Central and South America. Economic conditions and
monetary policies in these countries can result in severe currency fluctuations.
Currently all the Corporation's material transactions in Mexico and Bolivia are
denominated in U.S. dollars. However, if the Corporation were to begin
commercial operations in Mexico or Bolivia (or other Latin American countries)
it is possible that it has sufficient financial resources to continue
producing goldmaterial transactions incurred in the local currency, such
as engagement of local contractors for major projects, will be settled at a
U.S. dollar value that is
11
different from previously mined orethe U.S. dollar value of the transaction at the Hycroft mine. However,time it was
incurred. This could have the Corporation will haveeffect of undermining profits from operations in
that country.
IT MAY BE DIFFICULT TO ENFORCE JUDGMENTS OR BRING ACTIONS OUTSIDE THE UNITED
STATES AGAINST THE CORPORATION AND CERTAIN OF ITS DIRECTORS AND OFFICERS.
Vista Gold is a Canadian corporation and certain of its directors and officers
are neither citizens nor residents of the United States. A substantial part of
the assets of several of these persons, and of Vista Gold, are located outside
the United States. As a result, it may be difficult or impossible for an
investor:
- to raise additional funds from external sourcesenforce in ordercourts outside the United States judgments obtained in
United States courts based upon the civil liability provisions of United
States federal securities laws against these persons and Vista Gold; or
- to restart mining activities atbring in courts outside the Hycroft mine or begin constructionUnited States an original action to enforce
liabilities based upon United States federal securities laws against these
persons and development activities at the Amayapampa project in Bolivia.
There can be no assurance that additional financing will be available at all or
on acceptable terms and, if additional financing is not available, the
Corporation may have to substantially reduce or cease its operations. The
Corporation is actively investigating various alternatives, including debt
financing, the issuance of equity, mergers with other companies and the sale of
property interests.
12
Vista Gold.
ITEM 2. PROPERTIES.
OPERATIONS
Detailed information is contained herein with respect to the Hycroft mineMaverick Springs
and the Amayapampa properties. Vista Gold holdsMountain View projects, the Hycroft mine, the Long Valley project, the
Paredones Amarillos and Amayapampa projects. The Corporation holds the Maverick
Springs, Mountain View and Long Valley projects through wholly-owned
subsidiaries Vista Gold Holdings Inc. and Vista Nevada Corp.; the Hycroft mine
is held through its wholly-owned subsidiaries, Vista Gold Holdings Inc., Hycroft
Resources Development, Inc. and Hycroft Lewis Mine, Inc. Vista Gold holds the Bolivian
properties; Paredones Amarillos is
held through its wholly owned subsidiary Minera Paredones Amarillos S.A. de
C.V.; Amayapampa is held through wholly-owned subsidiaries, Vista Gold (Antigua)
Corp., Compania Inversora Vista S.A., Minera Nueva Vista S.A., and Compania Exploradora
Vistex S.A. Estimates of
reserves and productionmineralization herein are subject to the effect of changes in metal
prices and to the risks inherent in mining and processing operations.
MAVERICK SPRINGS
The Maverick Springs project is located in northeast Nevada at the southeast end
of the Carlin Trend belt of gold-silver mineralization, approximately half-way
between Elko and Ely, Nevada. The property consists of 86 claims with a total
area of approximately 3,900 acres.
On October 7, 2002, the Corporation completed the acquisition of a 100% interest
in the Maverick Springs gold and silver project and the Mountain View gold
project (described below) from Newmont Mining Corporation (Newmont), and its
wholly-owned subsidiary Newmont Capital Limited. To acquire the interest, the
Corporation paid cash of $250,000 and issued of 141,243 equity units to Newmont.
Newmont retains a 1.5% net smelter returns royalty; and on October 7, 2003 the
Corporation will issue $500,000 in common shares to Newmont, together with an
equivalent number of two year warrants. In addition, the Corporation must
complete 20,000 feet of drilling before October 7, 2004 and an additional 30,000
feet of drilling before October 7, 2006. The Corporation may terminate this
agreement at any time after October 7, 2004. After October 7, 2006, Newmont has
a one-time right to acquire a 51% interest in the project, by paying to the
Corporation twice the amount that the Corporation has spent on the project,
including acquisition costs. In the event that Newmont exercises this right,
Newmont will relinquish its 1.5% net smelter returns royalty. (See also
Consolidated Financial Statements--Note 3).
Maverick Springs is subject to a lease agreement, the Artemis lease, between
Newmont and Artemis Explorations Ltd. The lease was entered into on October 1,
2001 and the key terms include: payment of advanced minimum royalties of $50,000
on October 1, 2003, and $100,000 on October 1, 2004 and each year thereafter
while the agreement is in effect; work commitments of 6,400 feet of exploration
drilling, on or before October 1 in each of 2002 (extended by agreement to
November 15, 2002), 2003 and 2004, and a
12
preliminary economic evaluation is to be conducted by October 1, 2004; and a net
smelter returns royalty based on a sliding scale ranging from 2% to 6%,
depending on gold and silver prices at the time of production.
On November 7, 2002, the Corporation entered into a non-binding letter of intent
with respect to granting Silver Standard Resources Inc. (SSRI) an option to
acquire the Corporation's interest in the silver resources hosted in the
Maverick Springs project. The Corporation will retain its 100% interest in the
gold resources. Completion of this transaction is subject to regulatory
approvals, and negotiation and execution of a definitive agreement. The
agreement with SSRI will be subject to the terms of the purchase agreement
between Newmont and the Corporation. Under the proposed agreement, SSRI will pay
$1.5 million over four years including a payment of $300,000 at closing. The
remaining $1.2 million will be used to fund exploration programs, land holding
costs and option payments. SSRI and the Corporation will form a committee
through which they will jointly manage exploration of the Maverick Springs
project. The Corporation will be the operator and have a 45% vote on the
committee, and SSRI will have a 55% vote. After SSRI has completed its
$1.5 million in payments, costs will be shared by the two corporations on the
same ratio as established for operation of the management committee: Vista--45%
/ SSRI--55%, subject to standard dilution provisions. (See also Consolidated
Financial Statements--Note 20).
In November 2002, the Corporation completed a 7,020-foot drill program on its
Maverick Springs project. The program consisted of seven vertical reverse
circulation holes, stepped out 500 feet to 2,200 feet from previously identified
mineralization. All seven holes encountered flat-lying mineralization,
predominantly oxidized to depths of up to 900 feet. The program outlined
continuous mineralization in a 2,200-foot by 1,200-foot area, immediately
adjacent to known gold-silver mineralization. With additional in-fill drilling,
this newly outlined mineralization has the potential to significantly increase
the mineralized material. The Corporation expects to complete approximately
10,000 feet of drilling in 2003.
GEOLOGY
Maverick Springs can be classified as a Carlin-type or sediment/carbonate hosted
disseminated silver-gold deposit. Sediment hosted deposits are common within
northern Nevada, although the systems are usually gold dominated with relatively
minor amounts of silver. Silver and gold mineralization at Maverick Springs has
been interpreted as a roughly antiformal or arch-shaped zone with an axis that
plunges shallowly to the south and seems to flatten to horizontal over the
northern half of the deposit. The limbs of the arch dip shallowly to moderately
at 10-30 DEG. to the east and west. Overall, the mineralized zone is elongate in
the north-south direction with a length of over 6,000 feet, a width of up to
3,000 feet, and a thickness of commonly 100-300 feet.
Mineralization consists of micron-sized silver and gold with related pyrite,
stibnite and arsenic sulphides. It is usually associated with intense fracturing
and brecciation, with or without accompanying whole-rock silicification or
stockwork quartz.
Alteration consists of pervasive decalcification, weak to intense silicification
and weak alunitic argillization. Massive jasperoid is common in surface
exposures and in drill core. Oxidation has affected all sulphides on surface and
is pervasive to a depth of at least 400 feet, intermittent to 900 feet, and
generally absent below 1,000 feet.
Based on a third-party technical study completed by Snowden Mining Industry
Consultants of Vancouver, British Columbia the Maverick Springs project contains
approximately 97.1 million tons of mineralized material with an average grade of
0.011 ounces of gold per ton and 0.98 ounces of silver per ton at a cut-off
grade of 0.005 ounces of gold per ton.
MOUNTAIN VIEW
The Mountain View property is located in northwest Nevada near the Blackrock
Desert. The property is approximately 15 miles northwest of Gerlach, Nevada in
Washoe County; it straddles the boundary
13
between the Squaw Valley and Banjo topographic quadrangles. The property
currently consists of 127 claims with a total area of approximately
2,360 acres.
The Corporation's acquisition of the Mountain View property was completed along
with that of the Maverick Springs property, as described above. To acquire the
interest, the Corporation paid cash of $50,000 and issued 56,497 equity units to
Newmont Capital; and Newmont retains a 1.5% net smelter returns royalty. In
addition, the Corporation must complete 4,000 feet of drilling before
October 7, 2003 and an additional 4,000 feet of drilling before October 7, 2004.
The Corporation may terminate this agreement at any time after October 7, 2003.
After October 7, 2006, Newmont has a one-time right to acquire a 51% interest in
the project, by paying to the Corporation twice the amount that the Corporation
has spent on the project, including acquisition costs. In the event that Newmont
exercises this right, Newmont will relinquish its 1.5% net smelter returns
royalty (see also Consolidated Financial Statements--Note 3).
Newmont's interest in the Mountain View property is subject to a lease known as
the Wittkopp lease and two other royalty arrangements, the principal terms of
which are: the Wittkopp lease grants a 50% interest to Newmont in all claims,
with a few exceptions where a 5% interest is granted; and the lessee may
purchase the remaining interest in the claims for $250,000 at any time. The
lessee is obligated to purchase the remaining 50% for $250,000 on achieving
commercial production. Also, the lessee shall pay a 1% net smelter returns
royalty during production, with advance minimum payments of $25,000 per year.
Advanced royalties are deductible from the net smelter returns royalty and cease
upon purchase of the remaining interest from the Wittkopps. A 1% net smelter
returns royalty also applies to certain other claims.
The Corporation expects to complete 4,000 feet of drilling in 2003.
GEOLOGY
The dominant rock types in the area are Miocene volcanics and interbedded
volcaniclastic sediments. Minor greenschist facies Permo-Triassic strata occur
to the northeast and a large body of granodiorite makes up the bulk of the
Granite Range to the east and south.
The Miocene lithologies consist of mafic tuffs, rhyolite tuffs and flows,
volcaniclastic sediments and basalts. These units are separated from the Granite
Range to the east by a range front normal fault that dips steeply to the
southwest. The gold mineralization is hosted by a unit known as the Severance
rhyolite that is sandwiched between the range front fault to the northeast and
older Tertiary tuffs, flows and volcaniclastic sediments to the southwest.
Structure on the property is dominated by northwest and northeast trending
faults. Major fault offsets occur along the range-front fault system and these
are offset by the northeast trending structures. Recent alluvium is offset by
the range front faults.
Based on a third-party technical study completed by Snowden Mining Industry
Consultants of Vancouver, British Columbia, the Mountain View project contains
approximately 27.7 million tons of mineralized material with an average grade of
0.017 ounces of gold per ton at a cut-off grade of 0.006 ounces of gold
per ton.
HYCROFT MINE
The Hycroft mine and related facilities are located 54 miles (86 kilometers)
west of Winnemucca,
Nevada. The mine is an open-pit, heap leaching operation
that produces gold and by-product silver. In 1983, the Lewis Mine commenced
operation as a small heap-leach gold mine. The Corporation acquired the Lewis mine in early 1987 and completed
construction of the adjacent Crofoot mine project in April 1988. In early 1989, the two mines were consolidated into a
single operation under an ore purchase agreement, with ore from both properties
processed through the larger and more efficient Crofoot plant. Hycroft Inc.
began stripping at the new Brimstone pit, located one mile to the east of the
existing Central Fault pit, in April 1996 and commenced construction of a new
3 million-square-foot (280,000 square meter) leach pad and a 2,800
gallon-per-minute (10,598 liter-per-minute) leach solution processing plant in
the summer of the same year. Ore from the Brimstone pit was hauled to the new
leach pad beginning in September 1996 and the Brimstone plant commenced
operation in February 1997. Mining
operations at the Hycroft mine were suspended in December 1998.1998, and the site was
placed on care and maintenance. Gold production, from continued leaching and
rinsing of the heap leach pads, continued in 1999 and 2000 and is expected to continue in 2001. In 2000,2002 the amount
of gold recovered was not material, as expected. The mine is currently on care
and maintenance.
14
OPERATING STATISTICS
Operating statistics for the Hycroft mine produced 13,493 ouncesfor the period 1998 to 2002 were as
follows:
YEARS ENDED DECEMBER 31
----------------------------------------------------
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Ore and waste material mined (000's of tons).......... Nil Nil Nil Nil 10,127
Strip ratio........................................... Nil Nil Nil Nil 0.42
Ore processed (000's of tons)(1)...................... Nil Nil Nil Nil 7,117
Ore grade (oz. gold/ton).............................. N/A N/A N/A N/A 0.018
Ounces of gold produced............................... Nil 3,232 13,493 40,075 112,685
Cash operating costs ($/oz. of gold)(2)............... N/A $210 $183 $277 $229
- ------------------------
(1) Ore processed means ore placed on pads but not necessarily leached during
the year.
(2) Cash operating costs are composed of goldall direct mining expenses including
inventory changes, refining and 38,418 ounces of silver. Hycroft
mine gold production for 2001 is expected to be in excess of 3,000 ounces. The
Corporation will continue to pursue sources of funding or strategic alliances
with other companies that will lead to the restart of operations. Reclamation
will proceed in areas that will not be disturbed by future operations.
DESCRIPTION OF PROPERTIES
The Crofoot and Lewis properties together comprise approximately 12,230 (4,950
hectares). The Crofoot property, originally held under two leases, covers
approximately 3,544 acres (1,434 hectares). The Lewis property, which virtually
surrounds the Crofoot property, is held through a lease that covers
approximately 8,686 acres (3,515 hectares). The mine is accessible by road and
has access to adequate supplies of water and power. The major mining facilities
consist of four leach pads, two Merrill-Crowe gold-silver recovery plants, two
carbon plants and associated maintenance and support facilities.transportation costs, less by-product silver
credits.
GEOLOGY AND HISTORYORE RESERVES
The Hycroft mine is located on the western flank of the Kamma Mountains. The
deposit is hosted in a volcanic eruptive breccia and conglomerates associated
with the Tertiary Kamma Mountain volcanics. The volcanics are mainly acidic to
intermediate tuffs, flows and coarse volcaniclastic rocks. Fragments of these
units dominate the clasts in the eruptive breccia. Volcanic rocks have been
block-faulted by dominant north-trending structures, which have affected the
distribution of alteration and mineralization. The Central Fault and East Fault
control the distribution of mineralization and subsequent oxidation. A
post-mineral range-front fault separates the orebody from the adjacent
Pleistocene Lahontan Lake sediments in the Black Rock Desert. The geological
events have created a physical setting ideally suited to the open-pit,
heap-leach mining operation at the Hycroft mine. The heap leach method is widely
used in 13
the southwestern United States and allows the economical treatment of
oxidized low-grade ore deposits in large volumes.
The known gold mineralization within the Crofoot and Lewis properties extends
for a distance of three miles (4.8 kilometers) in a north-south direction by 1.5 miles (2.5 kilometers) in an
east-west direction. Mineralization extends to a depth of less than 330 feet (100 meters) in
the outcropping to near-outcropping portion of the deposit on the northwest side
to over 990 feet (300 meters) in the Brimstone deposit in the east. Not all the
mineralization is oxidized and the depth of oxide ore varies considerably over
the area of mineralization.
The determination of whether mineralization can be mined economically is dependent
on the grade of mineralization, the depth of overburdenCrofoot and the degree of
oxidation.
In 1992, Hycroft Inc. exercised its options to convert its leasehold interests
inLewis properties together comprise approximately 12,230 acres.
The Crofoot property, originally held under two leases, covers approximately
3,544 acres. The Lewis property, which virtually surrounds the Crofoot property,
intois held through a 100% ownership interest in the patented mining
claims, a 100% possessory interest in the unpatented claimslease that covers approximately 8,686 acres. The mine is
accessible by road and a 100% interest
in the incidental rights thereto, all subjecthas access to 4% net profits royaltiesadequate supplies of water and excluding rights to sulfur. No royalty payments were made in 1995, 1994 and 1993
because minimum royalty payments made prior to 1993 aggregating $2.8 million
were available for credit against the royalty obligations. The Crofoot
lease/purchase agreement was amended in 1996 to provide for minimum advance
royalty payments of $120,000 on January 1 of each year in which mining occurs.
An additional $120,000 payment is due if ore production exceeds 5.0 million tons
from the Crofoot property in any calendar year. All advance royalty payments are
available as credit against the 4% net profit royalty. The aggregate acquisition
cost to Hycroft Inc. was $6,881,481 and was financed by the issuance of Common
Shares and the assumption of certain debts associated with the Lewis mine.power.
The leasehold interest in the Lewis property extends until January 1, 2013 or
for so long thereafter as Hycroft Lewis continues to conduct commercial mining operations continue on the property.
The Lewis lease provides for the payment to the lessor of a 5% net smelter
return royalty on gold production. The royalty increases for ore grades above
0.05 ounce per ton and is offset by annual advance minimum royalties. The
Corporation has the right to commingle the ore from the Lewis property with ore
from the adjoining Crofoot property under an agreement with the lessor of the
Lewis property.
The ore mined to date from the Brimstone deposit, which lies partially on the
Crofoot property and partially on the Lewis property, was processed on both the
Brimstone leach pad and the Crofoot leach pad. The allocation of metal produced
from the commingled Crofoot and Lewis ores is calculated using methods
consistent with industry standards. The same method will be employed during 2001
and in the future if mining is resumed.
MINING AND PROCESSING
During 2000, no ore was excavated at the Hycroft mine. Waste stripping was
suspended in January 1998 and ore mining was suspended in December 1998.
Until November 1996, higher-grade ore was crushed prior to treatment on the
leach pads. From November 1996 to December 1998, all ore was hauled directly to
the leach pads without crushing. Dilute alkaline cyanide solution is pumped from
a pond to the heap surface and distributed evenly over the crushed and
run-of-mine ore through a network of pipes and irrigation sprinklers or drip
emitters. The solution percolates down through the layers of ore, preferentially
leaching gold and silver from the rock. This pregnant solution, containing
dissolved gold and silver, flows along the surface of the impervious leach pad
to a collection ditch from which it drains into one of two pregnant solution
ponds. The low-grade solutions are recirculated to the heaps to increase the
amount of gold in the solution, and the high-grade solution is pumped directly
to the recovery plant where the gold and silver are extracted. The process is a
zero-discharge closed circuit.
14
The Crofoot recovery plant can process up to 3,000 gallons-per-minute (11,355
liters-per-minute) of solution from leach pads 1, 2, 3 and 5 (18,000 tons of
solution per day) and the Brimstone recovery plant can process up to 2,800
gallons-per-minute (10,600 liters-per-minute) of solution from the Brimstone
leach pad (also referred to as pad 4). This process includes filtering to remove
particulates, de-aeration to remove dissolved oxygen and introduction of small
quantities of zinc dust. The dissolved gold and silver precipitate out of the
solution onto the zinc particles which are then removed by a second stage of
filtration. The barren solution is returned to the leaching circuit. The
precipitate is treated to remove and collect mercury for sale, then mixed with
fluxes and smelted to yield a dore bar. Dore bars are shipped offsite for
refining and sale. Metalor USA Refining Corporation refines gold and silver
production from the Hycroft mine. Alternate refiners are available if necessary.
Early in 2000 Hycroft purchased two used carbon adsorption plants; one with a
nominal capacity of 500 gallons per minute and the other with a capacity of
1,500 gallons per minute. These plants are used to concentrate gold from leach
solutions by adsorbing it onto activated carbon. Typically at Hycroft the carbon
will load to around 100 ounces of gold per ton of carbon. Periodically a batch
of the carbon is removed and shipped to Metals Research, an independent company
in Idaho, which strips the gold off of the carbon, and produces a dore bar which
is then shipped to Metalor for refining and sale. The Crofoot/ Merrill-Crowe
plant was closed down in April 2000, and all of the gold production since April
was via the 1,500 gpm carbon plant. The Brimstone/Merrill-Crowe plant was shut
down at the end of October 2000 and all production from that time has been from
the 500 gpm carbon plant. The Merrill-Crowe plants are available for restart
once mining restarts, and the amount of gold, the volume of solutions and the
reagent levels return to normal production levels. In the mean time, however,
the carbon plants are the preferred method for continuing gold production as
they function well with the current lower and variable flow rates, with the
lower precious metals values in solution and with the lower reagent values in
the solution.
ORE RESERVES
Gold production from the Brimstone deposit, the largest ore deposit at the
Hycroft mine, hashad consistently exceeded projections, and duringprojections. During 1999 and 2000, the
Corporation conducted a $0.6 million exploration program to determine the
reasons for the excess gold production, and to re-estimate the grade and tons of
the remaining reserves left in the Brimstone deposit. MRDI,Mineral Resources Development, Inc.
("MRDI"), an independent
15
consultant was retained to assist with the evaluation and to provide an
independent review of the recalculated mineable reserves. During the period 1996
through 1998, gold mined from the north end of the Brimstone deposit exceeded
planned production by 47,090 ounces, or 26%. The excess gold production was a
result of mining 13% more ore tons at a 12% higher average grade than predicted
in the exploration reserve model.
To evaluate the potential for a similar favorable variance in the remaining
Brimstone resource,mineralized material, nine diamond drill holes for a total of
4,870 feet (1,484
meters) and 11 reverse-circulation drill holes for a total of 5,540 feet (1,689
meters) were
completed in the unmined southern portion of the Brimstone deposit. Seventeen of
the 20 holes were twin holes, which were used to establish an adjustment
(upgrade) factor for the remaining Brimstone resource.mineralized material. Working with
MRDI engineers, a gold-grade enhancement of 25% was estimated. Based upon a reserve model developedon
technical study completed by MRDI, Vista Gold hasBrimstone contains 56.0 million tons at an
average grade of 0.0184 ounces of gold per ton, using a cut-off grade of
0.007 ounces per ton.
In 2000, the Corporation completed a new study of the ore reserves in the Brimstone
deposit. Proven and probable minable
reserves contained inwithin the planned Brimstone Pit containmineralized
material described above, total 23,791,000 tons
(21,581,000 tonnes) of ore with an average gold
content of 0.0200.0204 ounces per ton, (0.069 grams per tonne).containing 486,000 ounces of gold. Ore reserve
calculations were based upon a gold price of US$300$300 per ounce and an economic
cut-off grade equivalent to 0.007 ounces (0.024 grams per tonne)ton.
Extraction dilution at the Hycroft mine is negligible due to the large size of
gold per tonthe pit and the continuity of ore.the ore body. Metallurgical recovery of gold from
run-of-mine leaching of the Brimstone ore is projected to be 57% and the planned
pit would have a stripping ratio of 1.2-to-1.
The planned pit contains an additional 2,349,000 tons (2,130,778 tonnes) of
material classified as inferred resource containing an estimated 41,982 ounces
of gold (average grade--0.018 ounces per ton (0.062
15
grams per tonne). Ore reserves were estimated under the direction of Mr. Warren
Bates, International Exploration Manager, and have been independently reviewed
by MRDI. The definition of "ore reserve" employed by Vista Gold is consistent
with USGS Circular 831 and meets the standard for "Probable Mining Reserve"
under National Instrument 43-101 of the Canadian Securities Administrators.
Stated inferred resources are equivalent to "inferred mineral resources" under
Canadian National Instrument 43-101.
OPERATING STATISTICS
Operating statistics for the Hycroft mine for the period 1996 to 2000 were as
follows:
YEARS ENDED DECEMBER 31
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Ore and waste material mined (000's of tons)...... Nil Nil 10,127 37,531 36,882
Strip ratio....................................... Nil Nil 0.42 2.53 1.8
Ore processed (000's of tons)(1).................. Nil Nil 7,117 10,629 13,060
Ore grade (oz. gold/ton).......................... N/A N/A 0.018 0.020 0.018
Ounces of gold produced........................... 13,493 40,075 112,685 117,378 89,381
Cash operating costs ($/oz. of gold)(2)........... $183 $277 $229 $261 $359
- ------------------------
(1) Ore processed means ore placed on pads but not necessarily leached during
the year.
(2) Cash operating costs is composed of all direct mining expenses including
inventory changes, refining and transportation costs, less by-product silver
credits.
Gold production for 2000 was down significantly from 1999. The decreased gold
production was due to the suspension of mining activities at the Hycroft mine in
December 1998 and the continued depletion by leaching and rinsing of gold
contained in the heaps. All 2000 gold production was from ore that had been
mined in previous years.
MINE SITE EXPLORATION
At the Hycroft mine in Nevada, nine diamond drill holes for 4,870 feet (1,485
meters) and 11 reverse-circulation drill holes for 5,540 feet (1,690 meters)
were completed in the unmined southern portion of the Brimstone deposit in 1999.
Seventeen of the 20 holes were twin holes, which were used to establish an
upgrade factor for the remaining Brimstone resource. The upgrade program was
necessary in light of the fact that historical gold production from the
Brimstone deposit was 26% greater than predicted from the 1995 ore reserves.
Over 525 reverse-circulation drill holes were re-logged in the Albert and
Brimstone area, a new geologic model was built, and the current assay and
geologic files were audited and re-entered into a new database.
There is significant potential to extend the oxide mineralization to the south,
along strike, at both the Central Fault and Brimstone deposits, but the greatest
upside lies in the largely unexplored sulfide mineralization below the Brimstone
deposit, as well as higher grade intercepts along the Central Fault.
Current resourcesmineralized material at Brimstone areis limited to the oxide cap of an
apparently large but previously unexplored gold-bearing sulfide system. Two
diamond drill holes, drilled in 1996 and earlier, have intercepted mineralized
sulfides averaging 0.023 ounces per ton gold and 0.5 ounces per ton silver over
intervals exceeding 500 feet (153 meters) in thickness. In 1996, the Corporation also
intercepted 30 feet (nine meters) of gold mineralization in drill hole 95-2728. This intercept
assayed 0.155 ounces per ton gold at a true depth of 310 feet (94
meters) below surface. The
hole terminated in this mineralization, somineralization; the true width of the mineralization is
unknown. Vistanot known.
LONG VALLEY
The Long Valley gold project is located in the Inyo National Forest, about
7 miles east of the town of Mammoth Lakes, in Mono County, California. The
property consists of 95 contiguous, unpatented mining claims that cover an area
of approximately 1,800 acres.
The Corporation has an option to acquire 100% of the Long Valley project from
Standard Industrial Minerals, Inc. (Standard). Under the terms of the option
agreement, the Corporation would pay Standard $750,000 over five years, with
annual payments to be due as follows: $100,000 due on each of January 15, 2003,
2004, and 2005; $200,000 due on January 15, 2006, and $250,000 due on
January 15, 2007. The Corporation has made the January 2003 payment (see
Consolidated Financial Statements--Note 20). The Corporation retains the right
to terminate the agreement at any time, and has no work commitments on
the project.
During the period of 1994 through 1997, Royal Gold, Inc. (Royal) drilled 615
reverse circulation and 10 core holes at the Long Valley property. During this
time, Royal also completed metallurgical investigations, preliminary engineering
studies, including resource estimations, and initiated baseline-type
16
environmental studies of the biological, water, and archeological resource of
the area. The Corporation has acquired all related data from Royal in exchange
for a 1% net smelter return royalty to Royal. The database contains 896 drill
holes, totaling 268,275 feet. The majority of holes were drilled using reverse
circulation methods. Gold was primarily analyzed by fire assay, with grade
determinations by atomic absorption.
GEOLOGY
The Long Valley project claims are contained entirely within the early
Pleistocene-age Long Valley Caldera, which has been dated at about
760,000 years old. The caldera is an elongated east-west oval depression
measuring some 10 miles by 20 miles and is related to eruption of the Bishop
Tuff, which are covered by younger rocks within the caldera.
The Long Valley gold mineralization is located near the center of the caldera
and is underlain by lithologic units related to the caldera formation and its
subsequent resurgence. Associated with resurgent doming is a sequence of
interbedded volcaniclastic sedimentary rocks which were deposited in a
lacustrine setting within the caldera. These rocks consist of sediment
(siltstones through conglomerates) and debris-flow deposits, with local deposits
of intercalated silica sinter and rhyolite flows and dikes. All of these
lithologies have been altered and/or mineralized to variable degrees. Intruding
the generally flat-lying lake sediments are several rhyolite domes that have
been dated form 200,000 to 300,000 years in age.
The north-south trending Hilton Creek fault zone appears to define the eastern
limit of the resurgent dome within the central part of the Long Valley Caldera
and extends outside the caldera to the south. Offset along this fault appears to
be variable and suggests that fault activity along this zone may be episodic
in nature.
Gold and silver mineralization at Long Valley appears to fall under the general
classification of an epithermal, low sulfidation type deposit. Several areas,
termed the North, Central, South, Southeast, and Hilton Creek zones, on the Long
Valley property are mineralized with low grades of gold and silver. The
mineralized zones are generally north-south trending, up to 8,000 ft in length
with widths ranging from 500 ft to 1,500 ft. The tabular bodies are generally
flat-lying or have a shallow easterly dip. Mineralization is typically from 50
to 200 ft thick and, in the South and Southeast zones, is exposed at or very
near the surface. The top of the Hilton Creek zone is covered by 20 to 50 feet
of alluvium. The majority of the mineralization discovered to date is located in
the Hilton Creek zone.
Gold and silver mineralization is quite continuous throughout the zones and is
well defined above a cut-off grade of 0.010 ounces per ton. Within the
continuous zones of low-grade gold mineralization (above 0.010 ounces per ton)
are numerous zones of higher grade mineralization above 0.050 ounces per ton,
particularly in the Hilton Creek zone, which may relate to zones of enhanced
structural preparation. Mineralized zones are typically correlated with zones of
more intense clay alteration or argillization and/or silicification.
Based on a third-party technical study by Mine Development Associates of Reno,
Nevada, the Long Valley project contains approximately 101.2 million tons of
mineralized material with an average grade of 0.018 ounces of gold per ton at a
cut-off grade of 0.010 ounces of gold per ton.
PAREDONES AMARILLOS
Paredones Amarillos is located 65 km southeast of the city of La Paz, in the
Mexican state of Baja California Sur. The project area covers over
13,784 acres.
The Corporation acquired 100% of the project on August 29, 2002 from Viceroy
Resource Corporation (Viceroy). To acquire the project, the Corporation paid
cash of Cdn $1.0 million and issued 303,030 equity units to Viceroy; on
August 29, 2003 the Corporation will pay Viceroy an additional Cdn $0.5 million
(see also Consolidated Financial Statements--Notes 3 and 20).
17
The Paredones Amarillos project has been a significant exploration target since
the 1980s. In 1996, Echo Bay Mines Limited (EBM), completed a bankable
feasibility study for an open pit mine on the project. The study was completed
using a $375 per ounce gold price and included a proven and probable reserve of
approximately 49 million tons with an average gold grade of 0.031 ounces per
ton, containing approximately 1.5 million ounces. As a result of the subsequent
decline in gold prices, start-up was postponed. EBM holds a 2% net profits
interest on the project. The Corporation intends to investigate these
targets when market conditionsreview the principal
operating assumptions upon which the EBM study was based to identify
opportunities to improve the economics of this project.
The project holds environmental authorizations for the purpose of: project
development including access road, power line, telephone communications, and
fundinginfrastructure to supply water; construction and operation of a tailings dam;
and disposal of tailings, construction of a mill, and installation of three
pumping stations.
GEOLOGY
General geology consists of diorite roof pendants intruded by a granodiorite
batholith with local low and high-angle fault zones. A north-east striking,
south-east dipping low angle fault zone is available.
16
the main host of gold mineralization
at Paredones Amarillos. Movement along this structure has been characterized as
reverse, resulting from compression. Secondary, high angle faulting is thought
to control the higher-grade mineralization at the project.
The known gold mineralized material occupies an inverted U-shaped block with an
approximate strike length of 3,600 feet east-west, a width of approximately
1,000 feet north-south, and a thickness of approximately 100 feet. The apex of
the "U" is near the center of EBM's proposed pit with the legs forming the east
and west pit lobes.
Based on a third-party technical study completed by Snowden Mining Industry
Consultants of Vancouver, British Columbia the Paredones Amarillos project
contains approximately 67.4 million tons of mineralized material with an average
grade of 0.030 ounces of gold per ton at a cut-off grade of 0.015 ounces of gold
per ton.
AMAYAPAMPA
AMAYAPAMPA PROPERTY
SUMMARY
The Amayapampa project is located 186 miles southeast of La Paz in the Chayanta
Municipality, Bustillos Province, Department of Potosi, in southwestern Bolivia.
Access is via 167 miles of paved road from La Paz to Machacamarca near Oruro,
followed by 62 miles of gravel road to Lagunillas, then nine miles of dirt road
to Amayapampa. The Amayapampa property is situated within the moderately rugged
Eastern Cordilleran region of Bolivia with elevations at the property varying
from 12,300 to 13,450 feet above sea level. Amayapampa consists of 24 mining
concessions covering 805 hectares
(1,989 acres)1,989 acres plus an additional 6,800 hectares (16,803 acres)16,803 acres in regional
exploration and exploitation concessions. The Corporationproject is currently on care
and maintenance.
GEOLOGY AND ORE RESERVES
The Amayapampa deposit underlies a north-northwest trending ridge approximately
0.3 miles east of the town of Amayapampa. The deposit is defined by about
48 diamond drill holes; 96 reverse-circulation drill holes; and 315 underground
channel samples totaling 17,585 feet from more than 200 accessible cross-cuts in
the process43 different levels and sub-levels extending over a vertical distance of
refiling the concessions as required by the new mining law.682 feet. The deposit is approximately 600 meters (1,970 feet)1,970 feet in strike length, 30 to 70 meters (9898 to
230 feet)feet in width and extendshas an overall dip of the mineralized envelope of 80 to over 200 meters (656 feet)90
degrees west. The depth extent of continuous mineralization is in excess of
656 feet to about the 12,795-foot elevation, although some mineralization is
present below this depth. Gold occurs free and associated with sulfides in a
structural zone in which quartz veins were emplaced then sheared prior to
introduction of sulfides and gold mineralizing solutions.
Prior18
The host rocks are composed of Ordovician black shales, sandstones, and
siltstones, which were weakly metamorphosed to the Amalgamation, CEM (as defined below under
"Ownership") mined the Amayapampa deposit using primarily open-stope methods at
a rate of approximately 220 tons (200 tonnes) of ore per day,argillites, quartzites, and
processed the
ore in two mills on site. See "Ownership" and "History" below.
Approval of the permit to construct and operate, called the DECLATORIA DE
IMPACTO AMBIENTAL, under Article 24 of the Environmental Law was received on
May 6, 1998. This permit was based on a 3,300-tonne-per-day (3,638-ton-per-day)
ore processing project, and if financing arrangements for the project are
obtained, the Corporation will request a modification of the permit to allow
operation at the lower production rate.
In the fall of 1999, with gold prices rising above $300 per ounce, an update and
additional optimization of the feasibility study was begun. It was completed in
the first quarter of 2000. Based on a gold price of $300 per ounce, the proven
and probable reserves at Amayapampa were calculated by Mine Reserve
Associates, Inc., an independent consultant, to be 9.3 million tonnes
(10.2 million tons) grading 1.76 grams per tonne (0.051 ounces per ton)
including dilution, containing 526,000 ounces of gold. Gold production during
the first five years of operations is estimated to average approximately 47,400
ounces per year. The initial capital costs are estimated to be about
$25 million, including contingency and necessary working capital. Average
operating costs are estimated to be $7.99 per tonne ($7.25 per ton) of ore for a
total cash cost of $168 per gold ounce. The Corporation is examining various
development and production scenarios, and believes that a gold price of $325 per
ounce will be required for construction and development to commence. At a gold
price of $325 per ounce, the project is expected to generate an after-tax
internal rate of return of 20%.
In February 2000, the Corporation signed an agreement with the government of
Bolivia, which provides for the timely refund of value-added taxes and customs
duties that would be paid by the Corporation once the construction period
starts. These refunds will be used to pay for certain improvements to
infrastructure that are required by the project and will also benefit the
inhabitants of the area. The Corporation would be entitled to a refund of these
taxes and duties over time anyway, but the agreement accelerates the refund. The
acceleration of these refunds will help the project's cash flows during
construction. The refunds are expected to total approximately $2.0 million.
LOCATION AND ACCESSsiltites, respectively. The Amayapampa property is located 300 kilometers (186 miles) southeast of La
Paz in the Chayanta Municipality, Bustillos Province, Department of Potosi, in
southwestern Bolivia (Latitude: 18 DEG.34.5"S, Longitude: 66 DEG.22.4"W). Access
is via 268 kilometers (167 miles) of paved road from La Paz to Machacamarca near
Oruro, followed by 100 kilometers (62 miles) of gravel road to Lagunillas, then
14 kilometers (nine miles) of dirt road to Amayapampa. Total driving time is
about six hours. Charter air service is available to Uncia, 35 kilometers (22
miles) from the project.
The Amayapampa property is situated within the moderately rugged Eastern
Cordilleran region of Bolivia with elevations at the property varying from 3,750
meters to 4,100 meters (12,300 to 13,450 feet) above sea
17
level. The area is generally arid with a defined rainy season during the summer
months of November through April. There is little or no precipitation during the
rest of the year.
OWNERSHIP
On April 28, 1994, Da Capo entered into an agreement with Mr. David Anthony
O'Connor of Casilla 11314, La Paz, Bolivia and La Compania Minera Altoro S.R.L.
("Altoro") of Casilla 11314, La Paz, Bolivia, both parties at arm's length to Da
Capo, which was amended by agreements dated June 10, 1994 and July 15, 1994 (the
"Altoro/O'Connor Agreement"), pursuant to which Mr. O'Connor and Altoro assigned
to Da Capo:
(a) Altoro's exclusive right and option to acquire a 51% interest in eight
mining concessions that constitute a part of the Amayapampa property (and
a further option to acquire an additional 19% interest in such
concessions), pursuant to an option agreement dated March 22, 1994 (the
"Amayapampa Option") between Altoro and Raul Garafulic Gutierrez ("R.
Garafulic") of Ave. Argentina No. 2057, Casilla 9285, La Paz, Bolivia and
Compania Exploradora de Minas S.A. ("CEM", and collectively with R.
Garafulic, the "Amayapampa Vendors") of Calle San Salvador 1421, Casilla
4962, La Paz, Bolivia. The Amayapampa Vendors are both parties at arm's
length to Da Capo;
(b) Mr. O'Connor's exclusive right and option to acquire the Capa Circa
property pursuant to an option agreement dated January 12, 1994 (the
"Yamin Option Agreement") between Mr. O'Connor and Yamin. See "Capa Circa
Property--Ownership"; and
(c) a 100% interest in the Santa Isabel Property, for which an exploration
concession application had been made on behalf of Altoro.
As consideration for the assignment of the above interests, Da Capo issued a
total of 1,000,000 Da Capo common shares to Mr. O'Connor between June 30, 1994
and April 16, 1996.
On February 5, 1996, Da Capo exercised the Amayapampa Option and acquired a 51%
interest in the eight mining concessions that constitute a part of the
Amayapampa property in consideration for: (i) the cancellation of a loan in the
amount of $2,425,000 which had been previously made by Da Capo to R. Garafulic
on December 22, 1994; and (ii) payment of $75,000 by Da Capo to R. Garafulic
between March 22, 1994 and September 22, 1994.
On March 8, 1996, Da Capo entered into an agreement (the "Amayapampa Acquisition
Agreement") with the Amayapampa Vendors to acquire the following interests in
the Amayapampa property:
(a) R. Garafulic's remaining 24% interest in two mining concessions (the
Gran Porvenir and Chayentena concessions) that are part of the Amayapampa
property;
(b) R. Garafulic's 49% interest in six mining concessions that are part of
the Amayapampa property; and
(c) CEM's 100% interest in 16 mining concessions that are part of the
Amayapampa property.
In consideration for these interests, Da Capo:
(a) issued 1,000,000 special warrants (the "Amayapampa Special Warrants"),
each exercisable to acquire one Da Capo Common Share without further
payment, to a nominee of the Amayapampa Vendors on April 11, 1996; and
(b) made a non-recourse, interest-free loan of $3.24 million (the
"Amayapampa Loan") to a nominee of the Amayapampa Vendors on April 11,
1996.
The Amayapampa Loan was secured by an assignment of all proceeds from the sale
of any of 1,000,000 Da Capo common shares held by such nominee. The Amayapampa
Loan was canceled on April 29, 1996 upon
18
the sale of such Da Capo common shares and Cdn.$4,355,000 received from the
proceeds of such sale on or before May 7, 1996.
After being acquired by the Amayapampa Vendors, the Amayapampa Special Warrants
were transferred to third parties at arm's length to Da Capo in transactions
exempt from prospectus requirements under the relevant securities legislation.
On August 14, 1996, Da Capo issued 1,000,000 Da Capo common shares without
payment of any additional consideration upon the deemed exercise of the
Amayapampa Special Warrants.
All of Da Capo's interests in the Amayapampa property were transferred into the
name of its subsidiary, Yamin, on April 11, 1996. As a result of the
Amalgamation with Da Capo, Vista Gold acquired the Amayapampa property. During
1999 and subsequent to December 31, 1999 Yamin transferred these interests to
Minera Nueva Vista.
Ms. Elizabeth Mirabel, a resident of Bolivia at arm's length to Vista Gold, held
the remaining 25% interest in the Gran Porvenir and Chayentena mining
concessions, which constitute 603 hectares (1,488 acres) of the Amayapampa
property. On June 28, 1996, Da Capo and Ms. Mirabel entered into a lease
agreement (the "Lease") under which Ms. Mirabel granted a lease for her 25%
interest in the two mining concessions in favor of Da Capo for a term of ten
years commencing July 10, 1996 and renewable for an additional ten year term.
During the first two years of the Lease, Da Capo will pay Ms. Mirabel $7,000 per
month, and $10,000 per month for the subsequent eight years.
On May 23, 1997, Ms. Mirabel transferred ownership of the La Chayantena and Gran
Porvenir mining concessions to Mr. Agustin Melgarejo Zuleta.
On March 1, 2000, Minera Nueva Vista S.A. and Mr. Agustin Melgarejo signed a
"Lease with option to purchase" agreement for the 25% interest of Gran Porvenir
and La Chayanena mining concessions, which supercedes the Leasing agreement of
June 28, 1996 with Ms. Mirabel. The new lease agreement requires the payment of
$2,000 per month for the first three years increasing to $10,000 per month in
March 2003. The agreement expires in March 2006. At any time, Minera Nueva
Vista S.A. may exercise the purchase option for $800,000.
A legal dispute in Bolivia, in which a Mr. Estanislao Radic brought legal
proceedings in the lower penal court in Bolivia against Raul Garafulic, resulted
in comments in the Bolivian press questioning the validity of the Corporation's
ownership of the Amayapampa property. In May 1998, a judge in the Bolivian penal
court found that there was no justifiable case. In June 1998, a judge of the
Superior Court of the District of Potosi dismissed the appeal of the case and
indicated that there could be no further appeals on the matter in the Bolivian
penal courts. In 1999, Radic filed a lawsuit against Garafulic in civil court,
but the Corporation does not anticipate that the outcome will have any impact on
its title to the Amayapampa property. See "Item 3. Legal Proceedings".
HISTORY
The Amayapampa district was initially mined on a very small scale by indigenous
peoples prior to the arrival of the Spanish conquistadors and small-scale mining
continued during the Spanish colonial period into modern times. Prior to the
Amalgamation, CEM mined the Amayapampa deposit using primarily open-stope
methods at a rate of about 220 tons (200 tonnes) of ore per day and processed
the ore in two mills on site. At that time, the Amayapampa mine was one of the
largest producing underground gold mines in Bolivia and consisted of 32 levels
of underground development. Upper level, generally oxidized ore was removed via
the upper Virtus Adit (4,100 meters/13,450 feet elevation) and trucked to the
Porvenir mill, while lower sulfide ore was dropped by ore passes to the
850-meter-(2,790-foot-) long Virquicocha Adit (3,970 meters/13,025 feet
elevation) and taken out by electric locomotives to the Virquicocha mill. At
both mills, gold was recovered via amalgam plates and gravity tables. The lower
mill included a flotation
19
circuit to upgrade the pyrite concentrate. Approximately 150 people worked at
the mine and lived locally at the village of Amayapampa and at other small camps
near the mine.
Since the Amalgamation, mining has ceased and the old mills removed as per an
agreement with the previous owner. The Corporation kept the miners employed in
exploration, development and socio-economic projects during the period when the
original feasibility study was being prepared. During 1999, the workforce was
inactive, but was paid a subsistence allowance to promote good will and maintain
social stability in the region. With low gold prices continuing into 2000, this
subsistence allowance was discontinued in April 2000 and the Amayapampa workers
were laid off. The Corporation continues to provide community assistance by
providing teachers and a nurse and by allowing restricted access to the old
underground workings to some of the ex-miners.
GEOLOGY
The Amayapampa propertyproject is located along the east flank
of a north-south trending regional anticline near the top of the Ordovician
sequence. The
Amayapampa deposit underlies a north-northwest trending ridge approximately 0.5
kilometers (0.3 miles) east of the town of Amayapampa. The deposit is defined by
about 48 diamond drill holes; 96 reverse-circulation drill holes; and 315
underground channel samples totaling 5,360 meters (17,585 feet) from more than
200 accessible cross-cuts in 43 different levels and sub-levels extending over a
vertical distance of 208 meters (682 feet). The deposit is approximately
600 meters (1,969 feet) in strike length, 30 to 70 meters (98 to 230 feet) in
width and has an overall dip of the mineralized envelope of 80 to 90 degrees
west. The depth extent of continuous mineralization is in excess of 200 meters
(656 feet) to about the 3,900-meter (12,795-foot) elevation, although some
mineralization is present below this depth.
Da Capo channel, core drill and reverse-circulation drill hole samples were
analyzed at Bondar-Clegg Laboratories in Oruro, Bolivia, with check samples
analyzed at Chemex Laboratories in Vancouver, British Columbia. Because of the
coarse gold particles and concerns about nugget effect, all samples were
processed using the Hammer Mill Process (similar to a metallic screen assay). In
addition to check assaying, Vista Gold has continued to use Bondar-Clegg and the
Hammer Mill Process to analyze its samples, and in addition, has had an on-going
check assay program in place for samples generated by Vista Gold's exploration
and development program. Approximately 225 random assay pulps were check-assayed
by three laboratories (American Assay Laboratory in Reno, Nevada, Cone
Geochemical Inc. in Lakewood, Colorado, and Rocky Mountain Geochemical in Salt
Lake City, Utah) and compared to original pulp assays with generally good
agreement. Approximately 600 reverse-circulation drill hole sample splits from
the Da Capo program were assayed and used to verify assays obtained from the
original reverse-circulation sample splits. Sample splits are duplicate samples
taken at the drill rig at the time of drilling. Sample splits show good
correlation with original samples with some dispersion expected for this type of
deposit. Check assays show that assaying precision meets industry standards.
The host rocks are composed of black shales, sandstones, and siltstones, which
were weakly metamorphosed to argillites, quartzites, and siltites, respectively. Bedding dips are steep at 60 to 80 degrees west, with the east limb of
the anticline being overturned and thus, also dipping steeply west.
The mineralized envelope is best described as a structural zone, withinin which
were emplaced quartz
vein setswere emplaced along a preferential pre-quartz-vein fracture direction and post-quartz-vein faults and shears which were probably the
conduits for gold-bearing fluids.direction.
Most faults, shears and fractures are north-northeast to north-northwest
trending and steeply dipping, both east and west, at 60 to 90 degrees. Quartz
veins predominantly dip east. Locally, within the zone of mineralization, flat,
thrust-like faults are present, which have offset quartz veins to a minor
extent. These flat faults, commonly west-dipping at 40 to 45 degrees, are not
generally mappable outside of the main structural zone, which hosts the gold
mineralization. A west dipping, 45-degree fault projects into the pit 20
on the
northeast side of the deposit and was intersected by two vertical, geotechnical
core holes. The base of mineralization may also be slightly offset by a similar
west-dipping, 45-degree fault.
Oxidation effects are pervasive from the surface to depths of 20 to 30 meters
(6666 to 98 feet),feet,
with only partial oxidization below those depths. Hydrothermal alteration
effects evident in fresh rock are minor, and occur as coarse sericite
(muscovite) in thin (2 to 5 millimeter/0.08(0.08 to 0.20 inch) selvages along some quartz veins. In
addition, chlorite is present in and adjacent to some quartz veins, but this
presence may be a product of low-grade metamorphism. Alteration effects are
minimal overall, except for surface oxidization.
Mineralization is composed of quartz veins and sulfides and both constitute a
visual guide to ore. Quartz veins actually pre-gold, are a locus for later gold mineralization. Quartz
veins are typically a few centimeters to 0.5 meters (two
feet)two feet in width and commonly occur as
sub-parallel vein sets. The strike extent can be 50 to 75 meters (164164 to 246 feet)feet or more for any
one vein or vein set, but the dip extent is not as well established and probably
ranges up to 20 to 30
meters (6666 to 98 feet).feet. Multiple vein sets are present in the overall
mineralized envelope and veins commonly pinch and swell along strike and
down dip.
Sulfide mineralization, entered thehosted by multiple fractures to depositis composed of
predominantly pyrite within and adjacent to quartz veins, as sulfide veinlets in the host
rocks and as clots of coarse sulfides and disseminations of sulfide grains along
fractures in the black argillites. Locally, sulfide disseminations are more
prevalent in the quartzite/siltite interbeds than in the argillites.veins. The total sulfide
concentration for the overall mineralized zone is estimated at 33% to 5%.
Petrographic examination of the sulfide mineralization shows pyrite to dominate
at plus 95% of the total sulfides; arsenopyrite is also present, as are minor
amounts of chalcopyrite, galena, sphalerite, stibnite and tetrahedrite. Gold is
present as free gold in association with pyrite, on fractures within pyrite and
attached to the surface of pyrite and is often visible as discrete grains on
fractures in quartz and argillite. Gold grains exhibit a large size-range, with
much of the gold being relatively coarse at 40 to 180 microns. All gold grains
display irregular shapes with large surface areas. No gold was noted to be
encapsulated in either quartz or sulfide. The content of gold grains was
verified as over 97% gold by scanning-electron-microprobe analysis.
EXPLORATION
In 2000, no exploration was undertaken at Amayapampa.
District-scale exploration potential exists for defining styles of gold
mineralization similar to Amayapampa, which could be developed as satellite ore
bodies. Specific targetsIn addition, at least 15 drill holes beneath the planned Amayapampa pit
suggest the presence of four higher-grade shoots.
In 2000 an update and additional optimization study was completed on the Corporation's properties include an untested
surface geochemical target at Irpa Irpa, and raw exploration targets elsewhere
within a 10-kilometre (six-mile) radius of Amayapampa.
UPDATED FEASIBILITY STUDY
The Corporation began updating and optimizing the
feasibility study on the
Amayapampa propertyoriginally completed in the fall of 1999 and completed this work during the first
quarter of 2000.1997. Based on a gold price of $300 per ounce, the proven and
probable reserves at Amayapampa were calculatedtechnical study
completed by Mine Reserve Associates, Inc., an independent consultant, to be 9.3total
mineralized material is 14.2 million tonnes
(10.2tons with an average grade of 0.047 ounces
of gold per ton. Included in this mineralization are proven and probable
reserves of 10.2 million tons)tons grading 1.76 grams per tonne (0.0510.051 ounces per ton)
including dilution,ton, containing
526,000 ounces of gold. These reserves are
consistent with the definition of Proven and Probable ore reserves under USGS
Circular 831 and are classified as Probable Minable Reserves under Canadian
Instrument 43-101. Within thisThe reserve an optimized plan atcalculation is based on a gold price of
$325$300 per ounce will generate an after-tax internal rateounce. Reserves include extraction dilution of return of 20%. The
optimized study includes the same flow sheet consisting of a gravity and
carbon-in-leach circuit with a projected metallurgical recovery of 84% and
operating at a rate of 2,330 tonnes (2,563 tons) of ore per day.
21
Gold production the first five years of operations is estimated at approximately
47,400 ounces per year. The initial capital costs are estimated to be about
$25 million, including contingency and necessary working capital. Average
operating costs are estimated to be $7.99 per tonne ($7.25 per ton) of ore for a
total cash cost of $168 per gold ounce.
The Corporation is investigating means of obtaining financing in order to move
the project into design and construction. Approval5% of the permit to constructtons and operate, called the DECLATORIA DE IMPACTO AMBIENTAL, under Article 241% of
the Environmental Law was received on May 6, 1998. This permit was based on a
3,300-tonne- (3,638-ton-) per-day ore processing project, and if financing
arrangements for the project are obtained, the corporation will request a
modificationtotal ounces. Extraction dilution does not result in any losses of
the permit to allow operation at the lower production rate.
CAPA CIRCA
The Capa Circa property, which was owned by the Corporation's wholly-owned
subsidiary Yamin, consists of four partly overlapping mining concessions
covering 117 hectares (289 acres). Mineralization on the Capa Circa property is
similar to that of the Amayapampa deposit, but consists of discrete veins within
a mineralized zone approximately 150 meters (490 feet) wide that can be traced
for about 600 meters (1,970 feet) along strike. Because mineralization is
limited to narrow veins, suited for small-scale underground mining, and there
are no estimated mineable reserves, the decision was made to sell Capa Circa to
a miners' cooperative. This sale was completed on February 7, 2000, through the
sale of Yamin which owns the Capa Circa Mine. The terms of the sale agreement
included approximately $300,000 in cash payments to Vista Gold, the assumption
of Yamin debts and a production royalty.
EXPLORATION PROPERTIES
UNITED STATES
The only exploration performed by the Corporation in the United States was at
the Hycroft mine. See "Item 2. Properties--Hycroft Mine--Mine Site Exploration".
ECUADOR
Vista Gold currently owns 26% of Zamora. Compania Minera Gribipe S.A.
("Gribipe"), an Ecuadorian mineral exploration company controls and currently
owns 58.2% of Zamora. Gribipe is one of the largest mineral exploration
companies in Ecuador and has been involved in a number of important exploration
projects in Ecuador.
CANADA
The Corporation holds interests in two properties in Canada, which continue to
be explored by joint venture partners. They are the Manville project in Ontario
and the Isle project in Manitoba. Falconbridge Limited performed initial drill
testing on the Manville project and Phelps Dodge Corp. performed initial drill
testing on the Isle project.
22recoverable gold.
19
2000 EXPLORATION, PROPERTY EVALUATION AND HOLDING EXPENDITURES
In the last two completed financial years, the Corporation incurred expenditures
of the following approximate dollar amounts on exploration and holding costs:
DESCRIPTION 2000 1999
- ----------- -------- --------
(IN MILLIONS)
Mineral exploration, property evaluation and holding cost... $1.1 $2.0
Hycroft (mine-site)......................................... 0.8 0.6
Mineral Ridge............................................... -- 0.2
---- ----
Totals...................................................... $1.9 $2.8
==== ====
2001 EXPLORATION PLAN
The 2001 exploration program will be limited by the amount of funds that the
Corporation can obtain and make available for this purpose, which in turn will
be a function of gold price and market conditions.
The exploration focus in 2001 will be the Hycroft mine. The Corporation has
prepared a plan for follow-up drilling on the targets derived from work
performed during 2000. This program would investigate oxide and high-grade
sulphide mineralization continuing to the south from known mineralization.
Approximately $400,000 is required for the initial program and this would be
followed up with a second program costing $900,000, if and when funding is
available.
ITEM 3. LEGAL PROCEEDINGS.
Except as described below, the Corporation is not aware of any material pending
or threatened litigation or of any proceedings known to be contemplated by
governmental authorities which is, or would be, likely to have a material
adverse effect upon the Corporation or its operations, taken as a whole.
On December 10, 1999, Mineral Ridge Inc.,ESTANISLAO RADIC
In April 1998, a legal dispute was initiated in Bolivia by a Mr. Estanislao
Radic ("Radic") who brought legal proceedings in the lower penal court against
Mr. Raul Garafulic ("Garafulic") and the Corporation, questioning the validity
of the Garafulic's ownership of the Amayapampa property. Garafulic sold
Amayapampa to a wholly owned subsidiary of Vista
Gold, voluntarilythe Corporation. In May 1998, a judge
in the Bolivian penal court found there was no justifiable case. In June 1998, a
judge of the superior court of the district of Potosi dismissed the appeal of
the case and indicated that there could be no further appeals on the matter in
the Bolivian penal courts. In 1999, this time in civil court, Radic filed a
second lawsuit against Garafulic, in Potosi, and Garafulic filed a civil lawsuit
for protectiondamages against Radic in La Paz. Garafulic appealed to the Court to have
both cases combined under the U.S. Bankruptcy Code. See
"Item 2. Properties--Mineral Ridge Mine".
Earlyjurisdiction of a judge in 2000, a trustee was appointed byLa Paz. Finally, in
January 2001, the court to disposeCourt decreed that the lawsuits should be combined and heard
in Potosi. The Corporation never has and does not now have direct ownership of
the assets of
Mineral Ridge Inc. Atdisputed property and is therefore uncertain as to why it was a named
defendant in this lawsuit. The court in Potosi agreed with this assessment and
annulled the end of 2000, all assets of Mineral Ridge Inc. had been
disposed of andcase in June 2001. In September 2001, Radic appealed to the Mineral Ridge Inc. Chapter 11 case was dismissed. Mineral
Ridge Inc.Supreme
Court. The Corporation does not anticipate that there will be dissolved in accordance with the applicable state
corporations code.
On August 25, 2000, United States Fidelity & Guarantee Company ("USF&G") filed
an action in the United States District Court against Vista Gold, Vista Gold
Holdings, Inc., Stockscape.com Technologies, Inc., Cornucopia Resources, Inc.,
Red Mountain Resources, Inc. and Touchstone Resources, Inc. This action involves
a General Contract of Indemnity in connection with the posting of a reclamation
bond for mining activities by Mineral Ridge Inc. at Silver Peak, Nevada. In the
action, USF&G seeks to compel all of the defendants to post additional
collateral for the bond in the total amount of $793,583. Neither Vista Gold nor
Vista Gold Holdings, Inc. was a party to the General Contract of Indemnity and
have denied any liability in connection therewith. In November 2000, the parties
stipulated to an agreed upon discovery plan and scheduling order. The maximum
potential exposure tomaterial
adverse impact on the Corporation isor the additional collateral requestedvalue of its holdings in the amount of $793,583, together with the attorneys fees and costs related to
defense of the action. Other defendants, if found to be jointly liable could
reduce the amount for which the Corporation has exposure.Bolivia.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, by Vista Gold during the quarter ended
December 31, 2000.
232002.
EXECUTIVE OFFICERS OF THE CORPORATION
The executive officers of the Corporation as of March 19, 2003, together with
their age, length of service and business experience, are listed below.
NAME, POSITION AND AGE HELD OFFICE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ---------------------- ----------------- -----------------------------------------------
RONALD J. MCGREGOR September 8, 2000 President and Chief Executive Officer of Vista
PRESIDENT, CHIEF EXECUTIVE Gold from September 8, 2000 to present; Vice
OFFICER AND DIRECTOR President Development and Operations for Vista
Age--55 Gold from July 1, 1996 to September 8, 2000.
JOHN F. ENGELE May 1, 2001 Vice President Finance and Chief Financial
VICE PRESIDENT FINANCE AND Officer of Vista Gold from May 1, 2001 to
CHIEF FINANCIAL OFFICER present; Director of Accounting, Vista Gold,
Age--51 from March 2001 to April 2001; Director of
Planning, Analysis and Operations Accounting,
Echo Bay Mines Ltd. from June 1996 to
February 2001.
WILLIAM F. SIRETT January 1, 1996 Lawyer; Partner, Borden Ladner Gervais LLP, a
SECRETARY law firm.
Age--52
There are no family relationships by blood, marriage or adoption among any of
the above executive officers of the Corporation. None of the above executive
officers has entered into any arrangement or understanding with any other person
pursuant to which he was or is to be elected as an executive officer of Vista
Gold or a nominee of any other person.
20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON SHARES
The Common Shares of Vista Gold are listed on the American Stock Exchange and
The Toronto Stock Exchange under the symbol VGZ. The following table sets out
the reported high and low sale prices on the American Stock Exchange and on The
Toronto Stock Exchange for the periods indicated as reported by the exchanges:exchanges.
All prices give effect to the Corporation's June 19, 2002 1-for-20 share
consolidation.
AMERICAN STOCK THE TORONTO STOCK
EXCHANGE (US$) EXCHANGE (CDN$)
------------------------ ------------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
19992001 1st quarter................................... 0.19 0.13 0.25 0.20quarter................................. 2.60 1.00 3.40 1.20
2nd quarter................................... 0.22 0.13 0.28 0.21quarter................................. 3.00 1.40 3.60 2.00
3rd quarter................................... 0.22 0.13 0.25 0.18quarter................................. 2.20 1.40 3.00 1.80
4th quarter................................... 0.22 0.09 0.30 0.13
2000quarter................................. 2.00 1.00 3.00 1.60
2002 1st quarter................................... 0.16 0.09 0.22 0.13quarter................................. 2.60 1.20 3.80 2.00
2nd quarter................................... 0.13 0.09 0.16 0.13quarter................................. 10.40 1.80 15.60 2.80
3rd quarter................................... 0.11 0.06 0.18 0.10quarter................................. 6.20 2.51 9.63 3.71
4th quarter................................... 0.25 0.03 0.14 0.04quarter................................. 4.10 2.40 6.40 3.72
On March 26, 2001,19, 2003, the last reported sale price of the Common Shares of Vista
Gold on the American Stock Exchange was $0.09$3.21 and on The Toronto Stock Exchange
was Cdn$0.14.Cdn $4.80. As at March 26, 2001,19, 2002, there were 90,715,04012,411,725 Common Shares issued
and outstanding, and Vista Goldthe Corporation had 900868 registered shareholders of record.
DIVIDENDS
Vista GoldThe Corporation has never paid dividends. While any future dividends will be
determined by the directors of Vista Goldthe Corporation after consideration of the
earnings, and financial condition of Vista Gold and other relevant factors, it is currently
expected that available cash resources will be utilized in connection with the
ongoing acquisition, exploration and development programs of the Corporation.
EQUITY COMPENSATION PLAN INFORMATION
The information in the table below is as of December 31, 2002. See also the
Consolidated Financial Statements--Note 10.
NUMBER OF SECURITIES
NUMBER OF SECURITIES WEIGHTED-AVERAGE REMAINING AVAILABLE FOR
TO BE ISSUED UPON EXERCISE PRICE OF FUTURE ISSUANCE UNDER EQUITY
EXERCISE OF OUTSTANDING OPTIONS, COMPENSATION PLANS
OUTSTANDING OPTIONS, WARRANTS AND RIGHTS (EXCLUDING SECURITIES REFLECTED
WARRANTS AND RIGHTS $ CDN IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
- ------------- -------------------- -------------------- -------------------------------
Equity compensation plans approved
by security holders............. 172,500 $4.19 52,500
Equity compensation plans not
approved by security holders.... 489,500 4.37 n/a
Total............................. 662,000 $4.32 52,500
21
Under the current terms of the Corporation's Stock Option Plan, a maximum of
225,000 common shares may be issued. The Board of Directors has proposed an
increase in the plan to 1 million shares and has approved the issuance of
489,500 options under the proposed increase, subject to shareholder approval
which will be sought at the Corporation's Annual General Meeting.
EXCHANGE CONTROLS
There are no governmental laws, decrees or regulations in Canada that restrict
the export or import of capital, including foreign exchange controls, or that
affect the remittance of dividends, interest or other payments to non-resident
holders of the securities of Vista Gold, other than a Canadian withholding tax.
See "Item 5. Certain Canadian Income Tax Considerations for Non-Residents
of Canada".
CERTAIN CANADIAN INCOME TAX CONSIDERATIONS FOR NON-RESIDENTS OF CANADA
Canadian withholding tax at a rate of 25% (subject to reduction under the
provisions of any relevant tax treaty) will be payable on dividends paid to a
holder of Common Shares who is not resident in Canada. The rate of withholding
tax applicable to dividends paid on the Common Shares to a resident of the
United States who beneficially holds such Common Shares would generally be
reduced to 15% or, if the non-resident holder is a corporation that owns at
least 10% of the Common Shares, to 5%. It is the Canada Customs and Revenue
Agency's present published policy that entities (including certain limited
liability companies) that are treated as being fiscally transparent for United
States federal income tax purposes will not qualify as residents of the United
States under the provisions of the Canada-United States Income Tax Convention.
24
Upon a disposition or deemed disposition of Common Shares, a capital gain (or
loss) will generally be realized by a non-resident holder to the extent that the
proceeds of disposition are greater (or less) than the aggregate of the adjusted
cost base of the Common Shares to the non-resident holder thereof immediately
before the disposition and any reasonable costs of disposition. Capital gains
realized on a disposition of Common Shares by a non-resident shareholder will
not be subject to Canadian tax unless the non-resident holder and/or persons
with whom the non-resident holder did not deal at arm's length, at any time
within the five-year period before the disposition, owned or had an option to
acquire 25% or more of the
issued Common Shares of any class or series of Common Shares of Vista Gold.
Under the Canada-United States Income Tax Convention, a resident of the United
States who does not carry on a business from a permanent establishment or fixed
base in Canada and who realizes a capital gain on the disposition of Common
Shares that is otherwise subject to tax in Canada, will be exempt from Canadian
income tax. It is the Canada Customs and Revenue Agency's present published
policy that entities (including certain limited liability companies) that are
treated as being fiscally transparent for United States federal income tax
purposes will not qualify as residents of the United States under the provisions
of the Canada-United States Income Tax Convention.
RECENT SALES OF UNREGISTERED SECURITIES
On December 27, 2002, the Corporation completed a private placement financing in
which it issued 1,000,000 equity units at a price of $2.35 per unit, for an
aggregate offering price of $2,350,000. All of the purchasers in the placement
were "accredited investors" as such term is defined in Rule 501 of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act"). Each unit
consisted of one common share and one warrant, exercisable over a two-year
period from the issuance date, to purchase one common share for $3.04 during the
first year and $3.45 during the second year. The securities were issued in
reliance upon the exemption from the registration requirements of the Securities
Act specified by the provisions of Section 4(2) of the Securities Act and
Rule 506 of Regulation D promulgated thereunder. See also the Consolidated
Financial Statements--Note 8.
22
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL DATA
The selected financial data in Table Ibelow have been derivedselected in part, from the
consolidated financial statements of the Corporation, which have been prepared
in accordance with accounting principles generally accepted in Canada. The
selected financial data should be read in conjunction with those financial
statements and the notes thereto.
See "Item 8. Consolidated Financial Statements and Supplementary Data".
TABLE I
YEARS ENDED DECEMBER 31
----------------------------------------------------
2002 2001 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS,(U.S. $ 000'S, EXCEPT LOSS PER SHARE DATA)SHARE)
RESULTS OF OPERATIONS
Gold sales.................................revenues.................................. $ -- $ 890 $ 3,757 $ 19,496 $ 37,083 $ 40,123 $ 34,847$19,496 $37,083
Net earnings (loss)loss before write-downs..... (2,283) (11,481) (1,640) (5,292) (11,826)write-downs.................... 2,775 3,275 2,283 11,481 1,640
Net earnings (loss)........................ (13,209) (27,700) (1,640) (54,019) (11,826)
Net earnings (loss)loss....................................... 2,775 3,275 13,209 27,700 1,640
Basic and diluted loss per share.............. (0.15) (0.31) (0.02) (0.61) (0.21)
AT DECEMBER 31
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS)
share (restated for
years prior to 2002, see Consolidated
Financial Statements--Note 8)................ 0.41 0.72 2.91 6.11 0.37
FINANCIAL POSITION
Working capital(1)............................capital................................ $ 3,507 $ (199) $ 106 $ 2,972 $10,282 $ (237) $ 18,702$10,285
Total assets..................................assets................................... 20,688 13,889 17,232 33,429 80,878
79,028 123,316
Long-term debt and other non-current liabilities.................................liabilities..... 4,665 3,134 3,345 5,229 19,629
4,568 3,929
Shareholders' equity..........................equity........................... 15,425 9,401 12,673 25,889 53,530 55,075 109,173
- ------------------------
(1) Including current portion of long-term debt of $695--2000; $481--1999;
$2,372--1998; and $13,000--1997.
Had the consolidated financial statements of the Corporation been prepared in
accordance with accounting principles generally accepted in the United States,
certain selected financial data would have been reported as shown in Table II.
25
TABLE IIfollows (see also
Note 19 of the Consolidated Financial Statements).
YEARS ENDED DECEMBER 31
----------------------------------------------------
2002 2001 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS,(U.S. $ 000'S, EXCEPT LOSS PER SHARE DATA)SHARE)
RESULTS OF OPERATIONS
Gold revenues................................. $ -- $ 971 $ 3,526 $ 19,496 $37,083
Net earnings (loss)......................... $(20,978) $(13,716) $........................... (5,773) (3,194) (20,978) (13,716) 1,561 $(71,643) $(35,187)
Basic and diluted earnings (loss)loss per share..................................... (0.23) (0.15) 0.02 (0.80) (0.62)
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(IN THOUSANDS)
share (restated for
years prior to 2002, see Consolidated
Financial Statements--Note 8)............... (0.85) (0.70) (4.63) (3.02) 0.35
FINANCIAL POSITION
Total assets................................... $9,364 $33,330assets.................................. $12,814 $ 6,102 $ 9,364 $ 33,330 $66,551
$61,500 $123,316
Shareholders' equity........................... 4,805 25,646equity.......................... 7,551 1,614 4,808 25,786 39,203 37,546 109,172
See note 12 to the consolidated financial statements for the year ended
December 31, 2000 under "Item 8. Consolidated Financial Statements and
Supplementary Data--Notes to Consolidated Financial Statements".
UNITED STATES$/CANADIAN$ EXCHANGE RATES (1)(3)
AT DECEMBER 31
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
As at December 31.............................. $0.6669 $0.6925 $0.6504 $0.6999 $0.7301
Average(2)..................................... 0.6725 0.6730 0.6740 0.7220 0.7331
High........................................... 0.6969 0.6925 0.7105 0.7487 0.7515
Low............................................ 0.6410 0.6535 0.6341 0.6945 0.7215
- ------------------------
(1) Exchange rates are expressed as the amount of United States funds equivalent
to one Canadian dollar, being the noon buying rates in New York City for
cable transfers in Canadian dollars, as certified for customs purposes by
the Federal Reserve Bank of New York.
(2) The yearly average rate means the average of the exchange rates on the last
day of each month during a year.
(3) On March 26, 2001, the noon buying rate as quoted by the Federal Reserve
Bank of New York was 1.5545 (Cdn.$1.00 equals U.S.$0.6433).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
This discussion should be read in conjunction with the consolidated financial
statements of the Corporation for the three years ended December 31, 20002002 and
the related notes thereto, which have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada. Differences from United
States GAAP are described in note 12Note 19 to the consolidated financial statements.
During 2000, 1999 and 1998,23
RESULTS OF OPERATIONS
SUMMARY
The Corporation's 2002 net loss was $2.8 million ($0.41 per share), compared to
the Corporation's primary mining operation and
principal source2001 net loss of earnings was$3.3 million ($0.72 per share). The improvement in 2002 is
a result of reduced holding costs at the Hycroft mine; lower depreciation and
amortization costs; and a 2001 non-recurring charge of $0.8 million for
settlement of a law suit, net of related $0.2 million cost recoveries in 2002;
offset by an expense to increase the provision for reclamation at Hycroft.
GOLD PRODUCTION AND REVENUE
The Hycroft mine in Nevada, which began gold
production in 1987. In December 1998, miningis on care and maintenance. Mining activities were suspended at
Hycroft in 1998 and, as expected, gold production has declined steadily since
that time. Currently, solution is being circulated over the heap leach pads to
enhance evaporation. As the solution is circulated over the heap leach pads, it
is passed through a carbon plant, where small amounts of gold are adsorbed onto
activated carbon. Subsequently the gold is stripped from the carbon, refined and
sold. Effective at the beginning of fiscal 2002, gold production was considered
incidental to the activities at the Hycroft mine.mine and reporting the associated
sales proceeds as revenue was no longer warranted. Accordingly, gold sales
proceeds of approximately $0.6 million in 2002 have been accounted for as an
offset to exploration, property evaluation and holding costs. Gold processing and recovery continued from previously mined orerevenues in
1999 and 2000 and is expected2002 therefore were nil, compared to continue$0.9 million in 2001. The 2001 gold
revenues were a result of 3,232 ounces of gold production.
Gold production in 2001 withwas 3,232 ounces compared to 13,493 ounces in 2000; 2001
gold revenues of $0.9 million were down, as expected, from $3.8 million in 2000.
The decline in gold revenues in 2001 reflects the decrease in gold production
for
2001 estimated to befrom 2000. Of this $2.9 million reduction in excess of 3,000 ounces.
26
On December 10, 1999, Mineral Ridge Inc., a wholly-owned subsidiary ofrevenue, substantially the Corporation, voluntarily filed for protection under the U.S. Bankruptcy Code
after the Mineral Ridge mine failed to meet minimum cash flow levels required
under Mineral Ridge Inc.'s loan with Dresdner Bank due to ore reserve
deficiencies and low gold prices. The loan was not guaranteed by, and the lender
has no recourse to, the Corporation. The Corporation recognized no revenue,
production or operating expenses at Mineral Ridge Inc. in the year 2000.
RESULTS OF OPERATIONS
2000 COMPARED WITH 1999
The 2000 net loss was $13.2 million as compared to the 1999 net loss of
$27.7 million. The 2000 net loss included a $10.9 million write-down of mineral
properties and other assets and a $0.3 million gainentire
difference resulted from sale of assets and
marketable securities. In 1999, the net loss included a $16.2 million write down
of mineral properties. Excluding the write-down of mineral properties and
disposal of assets, the 2000 net loss of $2.3 million decreased $9.2 million
from the 1999 loss of $11.5 million. The $9.2 million decrease in net losses in
2000 was due to substantially lower operating costs partially offset by lower
gold revenues, both of which reflect the Corporation's lower gold production and
operating levels in 2000 as compared2001. Slightly lower gold
prices in 2001 ($275 per ounce average vs. $278 average in 2000) accounted for
approximately $10,000 of the $2.9 million reduction in revenue.
COSTS AND EXPENSES
As discussed above, effective at the beginning of fiscal 2002, gold production
was considered incidental to 1999.
The Corporation's average gross realized price declined in 2000 reflecting the absence of any benefitactivities at the Hycroft mine, accordingly
gold production costs, which approximately offset the $0.6 million proceeds
received from forward sales. Gold sales of $3.8 million in 2000
decreased $15.7 million, or 81%, from $19.5 million in 1999. The decrease in gold sales, was primarily because of lower goldare no longer recorded as production combined withcosts, but are
accounted for as exploration, property evaluation and holding costs. Recorded
2002 production costs are therefore nil.
Production costs at the lower average gold price realized by the Corporation.
2000 1999
-------- --------
Average gross realized price............................... $ 278 $ 298
Average spot price......................................... $ 279 $ 279
Gold sales (000s).......................................... $3,757 $19,496
Gold production (ounces)................................... 13,493 65,468
Gold productionHycroft mine decreased 51,975 ouncesto $0.7 million ($210 per ounce)
in 2001 from 65,468 in 1999 to 13,493 ounces$2.6 million ($183 per ounce) in 2000. The decrease in gold production was attributable to the closure of the
Mineral Ridge Mine in 1999 and the progressive depletion of recoverable gold in
the leach pads at the Hycroft Mine. Gold production from the two mines was as
follows.
2000 1999
-------- --------
(OUNCES)
Hycroft mine................................................ 13,493 40,075
Mineral Ridge mine.......................................... -- 25,393
------ ------
Total gold production..................................... 13,493 65,468
====== ======
There was no ore mined at the Hycroft mine in 2000. All gold production from the
Hycroft mine was from previously mined ore.
Operating costs from mining operations decreased $18.0 million from
$20.6 million in 1999 to $2.6 million in 2000. Mining, processing and other
costs accounted for $4.3 million, $9.0 million and $4.7 million of the decrease
in operating costs, respectfully. The decrease was
primarily due to the closure
of the Mineral Ridge Mine, and the progressive reduction of leach solution volume processed at
the Hycroft Mine,mine, with related reductions in manpower, in consumption of
materials and supplies, and in the consumption of reagents and electricelectrical power. 27
Operating costs at the two mines were as follows.
2000 1999
-------- --------
(IN THOUSANDS)
Hycroft mine............................................... $2,560 $11,307
Mineral Ridge mine......................................... -- 9,271
------ -------
Total operating costs.................................... $2,560 $20,578
====== =======
The cash operating costincrease in per ounce at the two minescosts
was as follows.
1999 1998
-------- --------
(PER OUNCE)
Hycroft mine................................................ $183 $277
Mineral Ridge mine.......................................... -- 358
---- ----
Cash operating costs...................................... $183 $309
==== ====
Mining costs in 2000 were zero due to the closure of the Mineral Ridge Mine in
1999 and the prior suspension of mining activity at the Hycroft Mine in 1998.
Processing costs, including changes in inventory, decreased $9.0 million in 2000
due to the closure of the Mineral Ridge Mine in 1999 and the progressive
reduction in the volume of leach solution processed at the Hycroft mine during
the year. The Corporation processed no newly mined ore in the year 2000.
Processing activities at the Hycroft Mine continued throughout the year as
previously mined ore was treated for gold extraction.
Other operating costs including mine administration, refining and freight costs,
and silver credits decreased $4.7 million in 2000. Excluding silver credits,
other operating costs decreased $5.5 million reflecting the closure of the
Mineral Ridge Mine in 1999 and a reduced operating level at the Hycroft Mine.
However, lower silver production and sales offset $0.8 million of the decrease.production.
Depreciation, depletion and amortization (DD&A) in 2000 of $0.9 million
decreased $3.5 million from $4.4costs at Hycroft were $0.1 million in
1999. At2002 compared to $0.3 million in 2001 and $0.8 million in 2000. This downward
trend reflects the fact that a significant portion of the Hycroft mine, DD&A
decreased $1.4 millionproperty plant
and wasequipment has been sold, and a resultsubstantial portion of the write-downremaining
equipment has been fully depreciated.
Consistent with Bureau of certain depreciable
assetsLand Management, Nevada State Office mandated
procedures, in 2002 the prior year andCorporation commissioned a third-party comprehensive
review of the sale of assets including crushing and conveying
equipment during the year. DD&Aestimated reclamation costs at the Mineral Ridge mine decreased
$2.1Hycroft mine. Based on this
review, the Corporation increased by $1.0 million its obligation accrued to
nil as a resultDecember 31, 2002. No such adjustments were made in 2001 and 2000.
24
Exploration, property evaluation and holding costs were $0.6 million in 2002,
compared to $1.2 million in 2001. Holding costs at Hycroft comprise
substantially all of the bankruptcy of Mineral Ridge Inc. in 1999.
The Corporation did not have any major equipment leases.
Mineral$0.6 million exploration, property evaluation and
holding costs werein 2002, and it accounts for $1.1 million of the 2001 costs,
Amayapampa accounted for the remaining $0.1 million in 2001. The 2002 Hycroft
cost reductions resulted principally from manpower reductions and generally
lower levels of activity at the Hycroft site. 2002 net holding costs at
Amayapampa are negligible as a result of the collection of royalties accruing
from the sale in 2000 of the Capa Circa mine.
Exploration, property evaluation and holding costs of $1.2 million in 2001
compared to $1.9 million in 2000 as2000. Of these amounts, Hycroft accounted for
1.1 million in 2001, and a similar amount in 2000. Holding costs for Amayapampa
were $0.1 million, compared to $2.8 million in 1999. The 2000 costs included $0.7 million in holding2000. This reduction is mainly a
result of manpower reductions effected in April 2001, and resulting reduced
office and administration costs for the Corporation's Bolivian properties as compared to
$1.7in Bolivia.
Corporate administration and investor relations costs were $1.3 million in 1999.2002,
slightly higher than the $1.2 million in 2001. The Corporation incurred these holding costs while
maintainingincrease reflects investor
relations and protectingbusiness development programs, consistent with its property interestsincreased level
of gold project acquisition and private placement financings in Bolivia. Also included in
the 2000 costs were $0.8 million for exploration and evaluation work and holding
costs at the Hycroft mine, and $0.4 million of other exploration and evaluation
expenditures.2002. Corporate
administration and investor relations costs were $1.2 million in 2000,
unchanged from 1999. 2000 expenses included approximately $0.2 million of
one-time expenses related2001, similar
to the closing of Mineral Ridge Inc. and merger and
acquisition studies.
Interest$1.2 million incurred in 2000, as expected.
The Corporation incurred $14,000 in interest expense in 20002002, in connection with
its convertible debenture issuance, which closed on March 19, 2002. The
debentures had an annual interest rate of 1% and were converted automatically,
pursuant to their terms, on September 19, 2002 (see Consolidated Financial
Statements--Note 8). 2001 interest expense of $21,000 was lower than
$0.1 million asincurred in 2000 because the Corporation repaid most of its debt in
the first quarter of 2001.
Net gains from disposals of Hycroft equipment in 2002 totalled $30,000, compared
to $1.1net gains of $0.1 million in 1999,
reflecting2001. 2002 net gains from disposals of assets
include a gain of $53,000 from the Corporation's lower average debt balance during the year. The
decreasedisposal of Canadian exploration claims. Net
gains from disposal in the average debt balance was directly related to the bankruptcy of
Mineral Ridge Inc. and paying down of debt at the Hycroft Mine.
In 2000 thewere $41,000. A gain on the sale of assets and marketable
securities of $0.3 million was $0.3 million.realized in 2000; no similar gain was realized or
realizable in 2001.
In 2001, the Corporation recorded a non-recurring provision of $0.8 million for
the settlement of the USF&G lawsuit as discussed in Consolidated Financial
Statements--Note 5. There was no similar gain or lossprovision in 2000.
The Corporation received from Golden Phoenix Minerals, Inc. ("GPMI"), the
disposalcurrent owner of assetsthe Mineral Ridge Mine, 628,931 common shares in 1999.
28
Other incomeconsideration
for benefits GPMI received in 2000 included insurance settlements totaling
$0.2 million. Thereas a direct result of the Corporation's facilitation
of the USF&G settlement. These shares had a fair value of $220,000 when
received. In addition, the final settlement amount for the USF&G lawsuit was
no similar settlement in 1999.approximately $20,000 less than provided for.
An $85,000 write-down to fair value has been made to reflect an estimated
$135,000 fair value of the GPMI shares.
Management regularly reviews the carrying values of its long-lived assets and
investments. These evaluations indicated thatassets. In
2000, based on these reviews, management wrote down the carrying values of certain
properties and investments were overstated at December 31, 2000 and,
accordingly, were written down to estimated recoverable amounts. Based upon
management's evaluation, $10.9 million was written downAmayapampa property in
2000, of this,Bolivia by $10.6 million, was related to the Bolivian mineral properties and other Boliviancertain Hycroft assets by $0.3 million. No similar
write-downs were deemed necessary in 2002 and $0.3 million was related to Hycroft equipment. $16.2 million was
written down in 1999, including Bolivian mineral properties--$13.2 million;
Mineral Ridge mine net assets--$2.9 million; and Zamora accounts
receivable--$0.1 million. Additionally in 1999, the Corporation wrote off its
remaining investment of $0.6 million in Zamora, reflecting its decreased levels
of ownership and control.
Income tax in 2000 was a $33,000 refund of Canadian Income tax, as compared to
nil in 1999.
1999 COMPARED WITH 19982001. The 1999 net loss was $27.7 million as compared to the 1998 net loss of
$1.6 million. The 1999 net loss included a $16.2$10.6 million write-down
of mineral
properties. There was no similar write-downthe Amayapampa project in 1998. The 1998 net loss includedBolivia in 2000 resulted from a one-time gain oncarrying value
review wherein the liquidationpreviously assumed long-term gold price of gold futures of $3.2 million and a
$0.8 million gain from the disposal of assets, while there were no similar gains
in 1999. Excluding the write-down of mineral properties and the gains from the
liquidation of gold futures and disposal of assets, the 1999 net loss of
$11.4 million increased $5.8 million from the 1998 loss of $5.6 million. The
$5.8 million increase in net losses$325 per ounce, as
assumed in 1999, was duereduced to substantially lower gold
revenues partially offset by lower operating costs, both of which reflect the
Corporation's lower gold production and operating levels$300 per ounce in 1999 as compared
to 1998.2000, consistent with industry
practice. The Corporation's average gross realized price continued to decline in 1999
reflecting the lower average spot price of gold for 1999. Gold sales of
$19.5 million in 1999 decreased $17.6 million, or 48%, from $37.1 million in
1998. The decrease in gold sales was primarily due to lower gold production
combined with the lower average gold prices realized by the Corporation.
1999 1998
-------- --------
Average gross realized price.............................. $ 298 $ 329
Average spot price........................................ $ 279 $ 294
Gold sales (000s)......................................... $19,496 $37,083
Gold production (ounces).................................. 65,468 112,838
Gold production decreased 47,370 ounces from 112,838 in 1998 to 65,468 ounces in
1999. The decrease in gold production was attributable to the suspension of
mining activities at the Hycroft mine in 1998, which was partially offset by the
start up of mining activities at the Mineral Ridge mine in 1999. Gold production
from the two mines was as follows.
1999 1998
-------- --------
(OUNCES)
Hycroft mine............................................... 40,075 112,685
Mineral Ridge mine......................................... 25,393 153
------ -------
Total gold production.................................... 65,468 112,838
====== =======
There was no ore mined at the Hycroft mine in 1999. All gold production from the
Hycroft mine was from previously mined ore. At the Mineral Ridge mine,
1.1 million tons of ore were mined in 1999, as compared to 0.1 million tons of
ore in 1998. The average grade of the ore mined in 1999 was 0.05 ounces of gold$25 per ton. During the initial mining and processing start up activities at Mineral
Ridge Inc., various mechanical
29
problems were encountered. These problems, primarilyounce change in the crushing plant,
inhibited the mine's ability to place ore onto the heaps for leaching and gold extraction. As the mine continued to operate in 1999, the mechanical problems
were addressed and crusher production improved in the third quarter of 1999 to
an average of 100,000 tons per month, which was in line with Corporation's
projections. However, the mine then began to experience ore deficiencies during
mining operations, as compared to original ore reserve estimates, and gold
production failed to meet expectations.
Operating costs from mining operations decreased $6.4 million from
$27.0 million in 1998 to $20.6 million in 1999. Mining, processing and other
costs accounted for $5.2 million, $1.1 million and $0.1 million of the decrease
in operating costs, respectfully. The decrease was primarily due to the
elimination of mining activities at the Hycroft mine, which was partially offset
by the commencement of mining activities at the Mineral Ridge mine.
Operating costs at the two mines were as follows.
1999 1998
-------- --------
(IN THOUSANDS)
Hycroft mine.............................................. $11,307 $26,257
Mineral Ridge mine........................................ 9,271 752
------- -------
Total operating costs................................... $20,578 $27,009
======= =======
The cash operating cost per ounce at the two mines was as follows.
1999 1998
-------- --------
(PER OUNCE)
Hycroft mine................................................ $277 $229
Mineral Ridge mine.......................................... 358 --(1)
---- ----
Total operating costs..................................... $309 $235
==== ====
- ------------------------
(1) The cash operating costs at the Mineral Ridge mine for the two months ended
December 31, 1998 have been omitted because the mine was in the initial
start-up phase and, accordingly, it is not possible to accurately determine
the true cash operating costs.
Mining costs in 1999 decreased $5.2 million as a result of mining fewer tons at
a lower average cost per ton. Total tons mined, including waste tons, decreased
to 6.4 million tons in 1999 from 10.4 million tons in 1998. The average cost per
ton mined decreased to $0.70 in 1999, as compared to $0.80 in 1998. In 1998,
inefficiencies associated with the reduction in mining activities at the Hycroft
mineprice assumption resulted in a
higher average mining cost per ton. In 1999, there was no
mining at the Hycroft mine and all mining activities occurred at the Mineral
Ridge mine.
Processing costs, including changes in inventory, decreased $1.1reduction of approximately $10 million in 1999
as a resultexpected future cash flows from the
Amayapampa project. Accordingly an impairment loss was recognized.
25
LIQUIDITY AND CAPITAL RESOURCES
As of treating fewer tons of ore asDecember 31, 2002, the Corporation had $3.5 million in working capital
compared to 1998. Ore tons
processed decreased to 1.0 million tons in 1999 from 7.2 million tons in 1998.
At the Hycroft mine, while no additional ore was placed on the heaps in 1999,
processing activities still continued throughout the year as previously mined
ore was treated for gold extraction. Processing activities at the Mineral Ridge
mine included placing and treating 1.0 million tons of ore in 1999.
Other operating costs including mine administration, refining and freight costs,
and silver credits decreased $0.1 million in 1999. Excluding silver credits,
other operating costs decreased $0.5 million reflecting the efficiencies of
combining the administrative functions of the two mines and the Corporation's
efforts to minimize costs. However, lower silver production and sales offset
$0.4 million of the $0.5 million decrease.
30
DD&A in 1999 of $4.4 million decreased $1.9 million from $6.3 million in 1998.
At the Hycroft mine, DD&A decreased $3.8 million and was directly related to the
suspension of mining activities in 1998. DD&A at the Mineral Ridge mine
increased $1.9 million reflecting the start up of mining activities in 1999.
The provision for reclamation and closure costsa working capital deficiency of $0.2 million in 1999
decreased significantly from $2.4 million in 1998. In 1998, the higher provision
compensated for the revised Hycroft mine plan, which called for the reduction
and subsequent suspensionas of mining activities in December 1998. In 1999, the
provision31,
2001. The principal component of $0.2 million was solely from the Mineral Ridge mine.
Operating lease costs in 1999 decreased to $44,000 as compared to $1.1 million
in 1998. During 1998, the leases on several large pieces of mobile mining
equipment terminated and the equipment was purchased at the end of the leases.
During 1999, the Corporation did not have any major equipment leases.
Mineral exploration, property evaluation and holding costs were $2.8 million in
1999 as compared to $2.6 million in 1998. The 1999 costs included $1.7 million
in holding costs for the Corporation's Bolivian properties as compared to
$2.0 million in 1998. The Corporation incurred these holding costs while
maintaining and protecting its property interests in Bolivia. Also included in
the 1999 costs were $0.6 million for exploration and evaluation work at the
Hycroft mine, $0.2 million for exploration at the Mineral Ridge mine, and
$0.3 million of other exploration and evaluation expenditures.
Corporate administration and investor relations decreased $0.3 million in 1999
to $1.2 million as the Corporation continued to reduce its overhead and
administrative costs.
Interest expense in 1999 was $1.1 million as compared to $0.7 million in 1998,
reflecting the Corporation's higher average debt balance during the year. The
increase in the average debt balance was directly related to the additional debt
of Mineral Ridge Inc.
In 1998, the gain on the disposal of assets was $0.8 million and primarily
consisted of the sales of surplus mining equipment from the Hycroft mine and the
sale of the Corporation's non-producing Tartan mine in Canada. There was no
similar gain or loss from the disposal of assets in 1999.
Management regularly reviews the carrying values of its long-lived assets and
investments. These evaluations indicated that the carrying values of certain
properties and investments were overstated and, accordingly, were written down.
Based upon management's evaluation, $16.2 million was written down in 1999,
including Bolivian mineral properties--$13.2 million; Mineral Ridge mine net
assets--$2.9 million; and Zamora accounts receivable--$0.1 million.
Additionally, the Corporation wrote off its remaining investment of
$0.6 million in Zamora, reflecting its decreased levels of ownership and
control. There were no similar write-downs in 1998.
Income tax expense in 1999 was nil as compared to $0.2 million in 1998. The 1998
income tax expense was primarily the result of U.S. alternative minimum taxes,
which limited the Corporation's ability to utilize existing loss carry forwards.
LIQUIDITY AND CAPITAL RESOURCESworking capital is cash. The Corporation's
consolidated cash balance at December 31, 20002002 was $0.1$3.4 million, a decreasean increase of
$2.2$2.7 million from the end of 2001. This increase resulted from the previous year.
During 2000, operating activities consumed $2.8 million, as follows.
2000
--------------
(IN THOUSANDS)
Hycroft mine................................................ $ 407
Bolivian properties......................................... 631
Corporate activities........................................ 1,688
------
Net operating activities.................................... $2,726
31
The Hycroft mine consumed $0.4two private
placement financings, which provided $6.8 million in operating activities net of
$1.0 million for reclamation costs. Before reclamation, the mine generated
$0.6 million of cash.proceeds (see
Consolidated Financial Statements--Note 8). In December 1998, mining activities were suspended at the
Hycroft mine. Gold processing and gold recovery continued in 2000 from
previously mined ore. The mine produced 13,493 ounces in 2000, at a cash
operating cost of $183 per ounce.
Bolivian and corporate activities required $0.6 million and $1.7 million in
cash, respectively. During 2000,addition, the Corporation held and maintained its
Bolivian properties, and at the same time steps were undertaken to minimize
future property holding costs. The Corporation continues to investigate
alternatives to reduce its corporate overhead.
Investing activities provided $1.2raised
$0.2 million in 2000 mainly from the sale of Hycroft crushing and conveyingmining equipment and spare parts.Canadian mining
claims. The Corporation used $1.5 million as partial consideration in acquiring
gold projects (see Consolidated Financial Statements--Note 3), $0.8 million to
settle the USF&G lawsuit (see Consolidated Financial Statements--Note 5),
and $2.0 million was used in operating activities. In 2001 the Corporation
raised no cash from financings, used $0.7 million to repay debt; made no
acquisitions of property, plant and equipment, raised $3.0 from the sale of idle
mining equipment and used $1.7 million in operating activities.
Subsequent to December 31, 2002, the Corporation completed a private placement
equity unit financing for net proceeds of $3.0 million (see Consolidated
Financial Statements--Note 21).
Cash consumed in operating activities in 2001 was $1.7 million, compared to
$2.8 million in 2000. The $1.1 million improvement in 2001 is comprised mainly
of the reduction in reclamation and mine closure costs: $0.2 million compared to
$1.0 million in 2001 and 2000 respectively. The remainder of the cash
improvement reflects the Corporation's successful cost reduction efforts, offset
by a reduction in gold revenues. The Corporation made no capital expenditures in
2001, and no material capital expenditures in 2000.
In 2000, financing activities used $0.6 million to reduce the long-term
equipment loan from Finova Inc.
RECLAMATION AND ENVIRONMENTAL COSTSOUTLOOK
Management estimates the current reclamation and closure costs forhas estimated that the Corporation's Hycroft mine to be $2.9 million. These costs have been charged to
earnings over the life$3.5 million of the mine and the provision for reclamationworking capital
as of December 31, 20002002, will be adequate to meet its corporate administrative
and property obligations for the coming year. In 2003, the Corporation is
$3.1 million.committed to approximately $300,000 in capital expenditures relating to
exploration and land holding costs for those projects acquired in 2002.
The Corporation expects that emphasis on gold project acquisition will continue
in the future. In April 1995,support of this strategy, the Nevada BureauCorporation has available, in
addition to its current working capital, approximately $3.0 million net
proceeds, from a financing completed subsequent to December 31, 2002.
The Corporation does not currently generate operating cash flows. Subject to
sustained higher gold prices, management expects that it can generate revenues
and cash flows, in the future, from its portfolio of Land Management ("BLM") approved an amended
Hycroft mine reclamation plangold projects by several
means, including, but not limited to: options or leases to third parties, joint
venture arrangements with other gold producers, outright sale for cash and/or
royalties. The Corporation does not have adequate cash to begin development of
any its projects, and would need to seek additional financing in order to
construct and operate a gold mine. Although the Corporation has been successful
in obtaining such financing in the past, there can be no assurance that includedit will
be able to do so in the Brimstone deposit, and an
uncollateralizedfuture.
The Corporation has provided a surety bond in the amount of $5.1 million was posted to
secureensure reclamation obligations under an approved reclamation plan at the plan.
REGULATORY COMPLIANCE AND OTHER MATTERS
During 2000, there were no material environmental incidents or non-compliance
with any applicable environmental regulations.
GOING CONCERNHycroft
mine. The Corporation's consolidated cash balanceBureau of Land Management, Nevada State Office, has requested an
additional bond of $443,279 for interim fluid management and working capital balance were
both $0.1it is probable that
the State will request that the Corporation increase the total surety bond
amount to an estimated $6.7 million, asinclusive of December 31, 2000. $2.6 millionthe interim fluid management
bond. Furthermore, the Corporation has been realized from
the sale of mining equipmentrequested to pledge collateral in
the first quarter of 2001. Management estimates
consolidated total cash expenditures of $2.4 million for 2001, including debt
repayments of $0.7 million with an estimated December 31, 2001 cash balance of
$0.3 million. Management continuesorder to pursue cost-cutting measures and is
actively pursuing additional sources of capital, including debt financing, the
issuance of equity, mergers with other companies,provide this surety bond. The amount and the salenature of property
interests and other assets. Management estimatesthe collateral
will be subject to negotiation. There can be no assurance that the Corporation
will have
sufficient cash resources to continue its current level of activity through tobe successful in providing acceptable collateral and thus posting the
end of March 2002.
The Corporation relies on the Hycroft mine as its only current source of
operating cash flows. Mining activities at Hycroft were suspended in 1998.
During 2000, Hycroft produced gold from previously mined ore on the leach pads,
a process that will continue through 2001. However, Hycroft's remaining gold
inventory is decreasing and, therefore, gold production will continue to
decrease throughout the year 2001. The Corporation is investigating the economic
feasibility of restarting the Hycroft mine and developing the Amayapampa project
in Bolivia. The Corporation's ability to restart the Hycroft mine and develop
the Amayapampa project is dependent upon its ability to raise additional
capital.
OUTLOOK
Following a brief rally in February 2000 and a minor readjustment in June, the
price of gold has continued to remain low, finishing the year at approximately
$270 per ounce.
Amayapampa cannot be developed economically at current gold prices. The
resumption of mining at Hycroft, although economic at current gold prices, would
attract more favorable financing terms and yield a greatly improved return for
shareholders at a gold price over $300. The Corporation is reluctant to deplete
its valuable gold resources before ensuring a higher return on the necessary
investment. Hycroft
32
continues to produce gold at higher than anticipated rates and will continue to
produce gold into 2001. Gold production, however, is dropping and management
expects to produce about 3,000 ounces in 2001.
To enhance the Corporation's gold resource position, management has rigorously
re-evaluated the Brimstone reserve at the Hycroft mine under the scrutiny of an
independent consulting firm and continues to systematically re-log drill hole
data and compile all existing exploration data for the Hycroft property. This
exercise together with some additional field-work, by the Corporation's in-house
geologist, has identified several areas on the property for additional
exploration as well as firming up drill targets to add additional oxide reserves
and explore for high-grade feeder zones. The Corporation will be in a position,
if funding is available, to restart operations immediately if the price of gold
recovers above $300 per ounce or to start a comprehensive drilling program to
expand the reserve.
In Bolivia, holding costs have been reduced by the sale of Yamin and Capa Circa
to a worker's co-operative and by the elimination of the stand-by work force at
Amayapampa. Development of Amayapampa will require initial capital of
$25 million and a gold price of around $325 per ounce. Again, this project is
dependent on a higher gold price and in the meantime the Corporation continues
to explore every avenue to maintain the asset at minimum cost until the gold
price improves.
At the corporate level, management has reduced staff, moved into more economic
office space and continues to explore all avenues to ensure the future of Vista
Gold and to protect and enhance shareholder value. In the first quarter of 2001,
four haul trucks and a shovel from the Hycroft mine were sold to provide an
additional $2.6 million in operating capital, without shareholder dilution. This
will allow the Corporation to continue on the present course into 2002, and
continue to pursue merger or acquisition opportunities and promote company
growth.surety bond.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
COMMODITY PRICE RISK
The Corporation is engaged in gold mining and related activities, including
exploration, extraction, processing, and refining and reclamation. Gold bullion
is the Corporation's principal product. Changes in the price of gold could
affect the Corporation's profitability and cash flows. Gold prices may fluctuate
widely from time to time. For a description of factors that affect gold prices,
see note 1(a) to the consolidated financial statements for the year ended
December 31, 2000 under "Item 8. Consolidated Financial Statements and
Supplementary Data--Notes to Consolidated Financial Statements".
Using current 2001 estimates of production, a $10 change in the gold price would
result in a corresponding change in net income and cash flows of approximately
$30,000.
The Corporation occasionally utilizes derivative commodity instruments for
purposes other than trading purposes to manage the Corporation's exposure to the
risks associated with fluctuations in the price of gold by protecting the
selling price of a portion of its production. The market risk of these commodity
instruments to the Corporation's cash flow is related to the possible failure of
all counterparties to honor their contractual obligations. Also, precious metals
contracts between the Corporation and various counterparties involve the
requirement that the Corporation deliver gold to the counterparty at agreed-upon
prices. If the counterparty is unable to fulfill its purchase obligations, there
is no guarantee that the Corporation will be able to receive the agreed-upon
sales price in the open market. If the Corporation is unable to produce
sufficient gold to meet its hedging contract obligations, it may be obligated to
purchase such gold at the then market price. At December 31, 2000,2002, the Corporation's had no outstanding forward sales contracts.
INTEREST RATE RISK
At December 31, 2000, the Corporation hadregistrant was a $75,000"small business issuer" as such term
note bearing a fixed
rate of interest at 4.5%. Management does not believe that the Corporation is exposed to major interest rate risk and the Corporation does not utilize market
risk sensitive instruments to manage its exposure to this risk.
33
FOREIGN CURRENCY EXCHANGE RATE RISK
The price of gold is denominateddefined in U.S. dollars, and allRule 12b-2 of the Corporation's
revenuesExchange Act, and a majority of its expenses are incurred in U.S. dollars. As a
result, management doesaccordingly is not believe thatrequired to
provide the Corporation is exposed to any
noteworthy foreign currency exchange rate risk and the Corporation does not
utilize market risk sensitive instruments to manage its exposure toinformation under this risk.Item.
26
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL INFORMATION
To the Shareholders of Vista Gold Corp.
The consolidated financial statements are the responsibility of the Board of
Directors and management. The accompanying consolidated financial statements of
the Corporation have been prepared by management based on information available
through February 23, 2001,
and28, 2003; these consolidated financial statements are in
accordance with Canadian generally accepted accounting principles, and have been
reconciled to United States generally accepted accounting principles as
presented in Canada.Note 19.
A system of internal accounting and administrative controls is maintained by
management in order to provide reasonable assurance that financial information
is accurate and reliable, and that the Corporation's assets are safeguarded.
Limitations exist in all cost-effective systems of internal controls. The
Corporation's systems have been designed to provide reasonable but not absolute
assurance that financial records are adequate to allow for the completion of
reliable financial information and the safeguarding of its assets. The
Corporation believes that the systems are adequate to achieve the stated
objectives.
Regular testing of these systems is employed to ensure continued
effectiveness of the controls, and actions are taken when necessary to correct
deficiencies when they are identified.
The Audit Committee of the Board of Directors is comprised of fourthree outside
directors, and meets regularly with management and the independent auditors to
ensure that management is maintaining adequate internal controls and systems and
to approverecommend to the Board of Directors approval of the annual and quarterly
consolidated financial statements of the Corporation. The committee also reviews the audit plan ofmeets
with the independent auditors and discusses the results of their audit and their
report prior to submitting the consolidated financial statements to the Board of
Directors for approval.
The consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, Chartered Accountants, who arewere appointed by the
shareholders. The auditors' report outlines the scope of their examination and
their opinion on the consolidated financial statements.
/s/ DAVID R. SINCLAIRRONALD J. MCGREGOR /s/ ROBERT L. FOLENJOHN F. ENGELE
---------------------------- ----------------------------
David R. Sinclair Robert L. Folen
Chairman of the Board ViceRonald J. McGregor John F. Engele
President and Vice President Finance and
Chief Executive Officer Chief Financial Officer
3427
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Vista Gold Corp.
We have audited the consolidated balance sheets of Vista Gold Corp. as of
December 31, 20002002 and 19992001 and the consolidated statements of loss, deficit and
cash flows for the years ended December 31, 2000, 19992002, 2001 and 1998.2000. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States of America. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Corporation as of
December 31, 20002002 and 1999,2001 and the consolidated results of its operations and
cash flows for the years ended December 31, 2000, 19992002, 2001 and 19982000 in accordance
with Canadian generally accepted accounting principles.
/s/ PRICEWATERHOUSECOOPERS LLP
- ----------------------------
Chartered Accountants
Vancouver, British Columbia, Canada
February 23, 2001
Comments by the Auditors for U.S. Readers on Canada-U.S. Reporting Difference
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Corporation's ability to continue as a going concern such as those described
in Note 1 of the consolidated financial statements. Our report to the
shareholders dated February 23, 2001, is expressed in accordance with Canadian
reporting standards, which do not permit a reference to such conditions and
events in the auditors' report when these are adequately disclosed in the
financial statements.
/s/ PRICEWATERHOUSECOOPERS LLP
Chartered Accountants
Vancouver, British Columbia, Canada
February 23, 2001
3528, 2003
28
CONSOLIDATED FINANCIAL STATEMENTSVISTA GOLD CORP.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31
----------------------------
2000 1999-----------------------------
2002 2001
----------- ---------------------
(U.S. DOLLARS IN THOUSANDS)
ASSETS:
Cash and cash equivalents...................................equivalents--Note 15.......................... $ 963,443 $ 2,297674
Marketable securities.......................................securities--Note 14.............................. 135 -- 77
Accounts receivable......................................... 760 1,571
Gold inventory in process................................... -- 117185 180
Supplies inventory and prepaid expenses..................... 464 1,221other.......................................... 342 301
--------- -----------------
Current assets.............................................. 1,320 5,2834,105 1,155
Mineral properties--Note 3.................................. 14,919 10,730
Plant and equipment--Note 4................................. 1,664 2,004
--------- -----------------
Property, plant and equipment--Note 3....................... 15,912 28,124
Other assets................................................ -- 22equipment............................... 16,583 12,734
--------- --------
15,912 28,146
--------- --------
Total assets................................................ $ 17,23220,688 $ 33,42913,889
========= =================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable............................................ $ 218228 $ 744145
Accrued liabilities and other............................... 301 1,086370 1,209
--------- ---------
Current portion of long-term debt--Note 4................... 695 481
--------- --------
Current liabilities......................................... 1,214 2,311
--------- --------
Long-term debt--Note 4......................................liabilities--Note 5................................. 598 1,354
Payables to be settled with equity--Note 6.................. 510 -- 801
Accrued reclamation and closure costs--Note 5............... 3,339 4,411
Other liabilities........................................... 6 177............... 4,155 3,134
--------- --------
3,345 5,229
--------- --------
Total liabilities........................................... 4,559 7,5405,263 4,488
--------- --------
SHAREHOLDERS' EQUITY:---------
Capital stock, no par value per share--Note 6:8:
Preferred--unlimited shares authorized; no shares
outstanding
Common--unlimited shares authorized; shares outstanding:
20002002--10,744,613 and 1999--90,715,040...............................2001--4,535,752.................... 129,575 121,146
121,146Warrants--Note 9............................................ 345 --
Options--Note 10............................................ 25 --
Deficit..................................................... (106,985) (93,776)
Currency translation adjustment............................. (1,488) (1,481)(114,520) (111,745)
--------- -----------------
Total shareholders' equity.................................. 12,673 25,88915,425 9,401
--------- -----------------
Total liabilities and shareholders' equity.................. $ 17,23220,688 $ 33,42913,889
========= ========
Nature of operations and going concern--Note 1=========
Commitments and contingencies--Note 713
Subsequent events--Note 1321
Approved by the Board of Directors
/s/ DAVID R. SINCLAIRC. THOMAS OGRYZLO /s/ PETER WALTONJOHN M. CLARK
-------------------------- --------------------------
David R. Sinclair Peter Walton
ChairmanC. Thomas Ogryzlo John M. Clark
Director Director
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3629
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF LOSS
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------------------------
2002 2001 2000
1999 1998
------------- ------------- ----------------------- ---------- ----------
(U.S. DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
REVENUES:
Gold sales............................................sales--Note 11................................... $ 3,757-- $ 19,496890 $ 37,083
Other revenues........................................ 48 109 3,350
---------- ---------- ----------
Total revenues........................................ 3,805 19,605 40,4333,757
---------- ---------- ----------
COSTS AND EXPENSES:
Mining operations.....................................Production costs--Note 11............................. -- 746 2,560 20,578 27,009
Depreciation, depletion and amortization.............. 74 301 867 4,421 6,270
Provision for reclamation and closure costs........... 1,048 -- 232 2,442
Operating leases...................................... --
44 1,094
Mineral exploration,Exploration, property evaluation and holding costs...............................................costs.... 642 1,246 1,875
2,802 2,596
Corporate administration.............................. 1,046 926 1,278
Investor relations.................................... 198 257 209administration and investor relations....... 1,257 1,158 1,244
Interest expense...................................... 14 21 114
1,146 660
Loss (gain)Gain on disposal of assets.....................assets............................ (83) (105) (41) 5 (775)
Gain on saledisposal of marketable securities................. (280)securities............. -- -- Equity in loss and impairment(280)
Other income.......................................... (22) (16) (266)
Provision for settlement of Zamora Gold Corp.....USF&G suit--Note 5........ -- 601 427
Other (income) expense................................ (218) 74 692814 --
Cost recoveries related to USF&G lawsuit--Note 12..... (240) -- --
Write-down of mineral properties and other assets--Note 3......................................assets..... -- -- 10,926
16,219Write-down of marketable securities................... 85 -- --
---------- ---------- ----------
Total costs and expenses.............................. 17,047 47,305 41,9022,775 4,165 16,999
---------- ---------- ----------
Loss before income taxes..............................taxes..................................... (2,775) (3,275) (13,242)
(27,700) (1,469)
Income taxes--Note 9..................................taxes.......................................... -- -- (33) -- 171
---------- ---------- ----------
Loss for the year.....................................Net loss.............................................. $ (13,209)(2,775) $ (27,700)(3,275) $ (1,640)(13,209)
========== ========== ==========
Weighted average number of shares outstanding................... 90,715,040 90,715,040 89,456,478outstanding
(restated--Note 8).................................. 6,760,755 4,535,752 4,535,752
- -------------------------------------------------------------------------------------------------------
Loss----------------------------------------------------------------------------------------------
Basic and diluted loss per share........................................share (restated--Note 8)... $ (0.15)(0.41) $ (0.31)(0.72) $ (0.02)(2.91)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3730
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF DEFICIT
YEARS ENDED DECEMBER 31
------------------------------
2002 2001 2000 1999 1998
-------- -------- --------
(U.S. DOLLARS IN THOUSANDS)
Deficit, beginning of year..................................year--Note 2(d)....................... $111,745 $108,470 $ 93,776 $66,076 $64,437
Loss for the year...........................................95,261
Net loss.................................................... 2,775 3,275 13,209
27,700 1,640
-------- ------- --------------- --------
Deficit, end of year........................................ $106,985 $93,776 $66,076period...................................... $114,520 $111,745 $108,470
======== ======= =============== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3831
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
------------------------------
2002 2001 2000 1999 1998
-------- -------- --------
(U.S. DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the year...........................................period......................................... $(2,775) $(3,275) $(13,209) $(27,700) $ (1,640)
ADJUSTMENTS TO RECONCILE LOSS FOR THE YEARPERIOD TO CASH
PROVIDED BY (USED IN) OPERATIONS:
Depreciation, depletion and amortization.................... 74 301 867 4,421 6,270
Amortization of deferred stripping.......................... -- -- 1,169
Deferral (recognition) of hedging gains..................... -- (1,150) 1,426
Provision for reclamation and closure costs................. 1,048 -- 232 2,442--
Reclamation and closure costs...............................costs paid.......................... (27) (163) (982)
(1,800) (592)
Loss (gain)Gain on disposal of assets...........................assets.................................. (83) (105) (41)
5 (775)Cost recoveries related to USF&G lawsuit--Note 12........... (240) -- --
Write-down of marketable securities......................... 85 -- --
Gain on disposal of marketable securities................... (280) -- -- Equity in loss and impairment of Zamora Gold Corp........... -- 601 427
Loss (gain)(280)
Gain (loss) on currency translation......................... -- 3 (7) 59 (181)
Write-down of mineral properties............................properties and other assets........... -- -- 10,926 16,219 --
Other non-cash items........................................ 70 142 -- (11) (5)
-------- -------- --------
(2,726) (9,124) 8,541
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Marketable securities....................................... -- 13 42
Accounts receivable......................................... (5) 580 461 1,723 (1,759)
Gold inventory.............................................. 117 3,397 5,399
Realization of hedging gains acquired....................... -- 3,041 --
Supplies inventory and prepaid expenses..................... 391 (133) 452(41) 4 508
Accounts payable............................................ (526) (294) (2,047)
Accrued liabilitiespayable and other............................... (513) (370) (141)
-------- --------accrued liabilities.................... (953) 804 (1,039)
------- ------- --------
Net cash provided by (used in)used in operating activities.........activities....................... (2,847) (1,709) (2,796)
(1,747) 10,487
-------- --------------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment..................mineral properties............................. (1,457) -- (7) (1,917) (4,552)
Acquisition of Mineral Ridge Inc............................ -- -- 4,639
Proceeds on disposal of fixed assets and supplies........... 810 86 5,758246 2,982 832
Proceeds on disposal of marketable securities............... 357 -- -- Investment in and advances to Zamora Gold Corp.............. -- (30) (141)
Other assets................................................ 22 139 (204)
-------- --------357
------- ------- --------
Net cash provided by (used in) investing activities......... (1,211) 2,982 1,182
(1,722) 5,500
-------- --------------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt........................................... -- (695) (587)
(520) (13,000)Net proceeds from private placements--Note 8................ 6,848 -- --
Costs to issue equities for other transactions.............. (55) -- --
Proceeds from debt..........................................the exercise of stock options................. 34 -- 1,500 --
-------- --------------- ------- --------
Net cash provided by (used in) financing activities......... 6,827 (695) (587)
980 (13,000)
-------- --------------- ------- --------
Net increase (decrease) in cash and cash equivalents........ 2,769 578 (2,201) (2,489) 2,987
Cash and cash equivalents, beginning of year................period.............. 674 96 2,297
4,786 1,799
-------- --------------- ------- --------
Cash and cash equivalents, end of year...................... $ 3,443 $ 674 $ 96
$ 2,297 $ 4,786
======== =============== ======= ========
Supplemental cash flow disclosure--Note 8disclosure and material non-cash transactions--Note 15
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3932
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.AS OTHERWISE STATED.
1. NATURE OF OPERATIONS
AND GOING CONCERN
(a) NATURE OF OPERATIONS
Vista Gold Corp. (Vista Gold) is engagedThe Corporation operates in the gold mining sector; it does not currently
produce gold in the United States,commercial quantities. The Corporation evaluates, acquires and
improves gold exploration activities in the United States, Canada and Latin America.potential development projects. The Corporation's
results are dependent on the price of gold. Gold prices
fluctuate and are affected by numerous factors, including, expectations with
respectapproach to the rate of inflation, exchange rates, interest rates, global and
regional political and economic circumstances and governmental policies,
including those with respect to gold holdings by central banks. The demand for
and supplyacquisitions of gold affect gold prices, but not necessarily inprojects has generally been to seek projects
within political jurisdictions with well established mining, land ownership and
tax laws, which have adequate drilling and geological data to support the
same manner as
demand and supply affect the prices of other commodities. The supply of gold
consistscompletion of a combinationthird-party review of new mine productionthe geological data and existing stocksto complete an
estimate of bullionmeasured and fabricatedindicated gold held by governments, public and private financial
institutions, industrial organizations and private individuals. The demand for
gold primarily consists of jewelry and investments. Additionally, hedging
activities by producers, consumers, financial institutions and individuals can
affect gold supply and demand. Gold can be readily sold on numerous markets
throughout the world and its market value can be ascertained at any particular
time. As a result,mineralization. In addition, the
Corporation is not dependent on any one customerlooks for opportunities to improve the salevalue of its product.
(b) GOING CONCERN
These consolidated financial statements have been prepared ongold projects
through exploration drilling, and/or reengineering the basis of
accounting principles applicable to a going concern and assumesoperating assumptions
underlying previous engineering work.
Although the realization
of assets and the discharge of liabilities in the normal course of business. The
Corporation's consolidated cash balance and working capital were both
$0.1 million as of December 31, 2000. $2.6 millionCorporation has been realized from the
sale of mining equipment, in the first quarter of 2001 (Note 13). Management
estimates consolidated total cash expenditures of $2.4 million for 2001,
including debt repayments of $0.7 million with an estimated December 31, 2001
cash balance of $0.3 million. Management continues to pursue cost-cutting
measuresreviewed and is actively pursuing additional sources of capital, including debt
financing,satisfied with the issuance of equity, mergers with other companies, and the sale of
property interests and other assets.title for all
mineral properties in which it has a material interest, there is no guarantee
that title to such concessions will not be challenged or impugned.
Management estimateshas estimated that the Corporation will have sufficient cash resources to continue its current level of activity
throughadequate funds from
existing working capital and from the private placement subsequent to the
end of March 2002.
Theyear-end (Note 21) to meet its corporate administrative and property obligations
for the coming year. If the Corporation relies on the Hycroft mine asis to advance or develop its only current source of
operating cash flows. Mining activities at Hycroft were suspended in 1998.
During 2000, the Hycroft mine produced gold from previously mined ore on the
leach pads, a process thatmineral
properties further, it will continue through 2001. However, the amount of
recoverable gold remainingbe necessary to obtain additional funding. Although
in the leach pads is decreasing and, therefore, gold
production will continue to decrease throughoutpast the year 2001. The Corporation
is investigating the economic feasibility of restarting the Hycroft mine and
developing the Amayapampa project in Bolivia. The plans to restart the Hycroft
mine and develop the Amayapampa project will depend on management's ability to
raise additional capital for these purposes. While management has been successful in raising such capital in the past,obtaining financing, there
can be no assurance that it will be able to do sosuccessful in the future.
BecauseThe Corporation has provided a surety bond in the amount of these uncertainties, there$5.1 million to
ensure reclamation obligations under an approved reclamation plan at the Hycroft
mine. The Bureau of Land Management, Nevada State Office has requested an
additional bond of $443,279 for interim fluid management and it is substantial doubt aboutprobable that
the abilityState will request that the Corporation increase the total surety bond
amount to an estimated $6.7 million, inclusive of the Corporation to continue as a going
concern beyond March of 2002. These financial statements do not give effect to
any adjustments, which may be necessary shouldinterim fluid management
bond. Furthermore, the Corporation has been requested to pledge collateral in
order to provide this surety bond. The amount and the nature of the collateral
will be unablesubject to continue as a going concern.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.negotiation. Although in the past the Corporation has been
successful in arranging bonding, there can be no assurance that the Corporation
will be successful in providing acceptable collateral and thus posting the
surety bond.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements of the Corporation and its subsidiaries
have been prepared in accordance with accounting principles generally accepted
in Canada. TheseFor the purposes of these financial statements these principles
differconform, in certainall material respects, from thosewith generally accepted accounting principles generally accepted
in the United States. The differences
areStates, except as described in note 12.Note 19.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Vista Goldthe Corporation
and its subsidiaries. Vista Gold'sAll material intercompany transactions and balances have
been eliminated. The Corporation's subsidiaries and its percentage ownership in
these entities as of December 31, 20002002 are:
OWNERSHIP
---------
Vista Gold Holdings Inc. and its wholly-owned
subsidiaries.............................................. 100%
Hycroft Resources & Development, Inc. and its wholly-owned
subsidiary Hycroft Lewis Mine, Inc.
Mineral Ridge Resources Inc.(1)
Vista Gold U.S. Inc.
Vista Nevada Corp......................................... 100%
Granges Inc. (previously called Granges (Canada) Inc.)...... 100%
Minera Paredones Amarillos S.A. de C.V...................... 100%
Vista Gold (Antigua) Corp. and its wholly-owned
subsidiary................................................ 100%
Compania Inversora Vista S.A. and its wholly-owned
subsidiary................................................ 100%
Compania Inversorasubsidiaries
Minera Nueva Vista S.A.
and its wholly-owned
subsidiaries
Minera Nueva Vista S.A.
Compania Exploradora Vistex S.A.
The Corporation sold its wholly owned subsidiary Sociedad
Industrial Yamin Limitada (Yamin) on February 7, 2000.
- ------------------------
(1) In 1999, Mineral Ridge Resources Inc. voluntarily filed for protection under
the U.S. Bankruptcy Code. Accordingly, effective 1999 the Corporation ceased
consolidating the investment in Mineral Ridge Resources Inc.
(c) USE OF ESTIMATES
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the consolidated financial
statements and the reported amount of revenues and expenses during the reporting
period. Significant areas requiring the use of estimates include mine closure
and reclamation obligations, useful lives for asset depreciation purposes, and
impairment of mineral properties. Actual results could differ from those reported.these
estimates.
(d) FOREIGN CURRENCY TRANSLATION
Sales revenuesThe Corporation has restated the financial statements and atransferred an amount
of $1.485 million from the currency translation adjustment (CTA) account to
deficit. This amount represents the cumulative exchange gains and losses arising
on the translation of the assets and liabilities of the Corporation's Canadian
self-sustaining operations. The Corporation has determined that it had
liquidated substantially all of the assets held within Canadian entities prior
to the periods presented in these financial statements. The Corporation believes
that this adjustment is not material as it has no impact on net income or cash
flows for any of the periods presented.
A significant portion of the Corporation's expenses, and while in production,
revenue from gold sales, are denominated in U.S. dollars. The focus of the Corporation is increasingly on
international operating activities and the Corporation's
executive office is located in Littleton, Colorado. The U.S. dollar is the
principal currency of the Corporation's business. Accordingly, theall amounts in
these consolidated financial statements of the Corporation are expressed in
U.S. dollars.
41dollars, unless otherwise stated.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.AS OTHERWISE STATED.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The accounts of self-sustaining foreign operations are translated using the
current rate method. Under this method, assets and liabilities are translated at
the rate of exchange on the balance sheet date, and revenue and expenses at the
average rate of exchange during the period. Exchange gains and losses are
deferred and shown as a currency translation adjustment in shareholders' equity
until transferred to earnings when the net investment in the foreign operation
is reduced or settled.
Foreign currency denominatedThe accounts of integrated foreign operations are translated using the temporal
method. Under this method, monetary items of the Corporation, excluding its
foreign operations,assets and liabilities are translated at the
year-end rate of exchange, rate. Exchangenon-monetary assets and liabilities are translated at
the rates prevailing at the respective transaction dates, and revenue and
expenses, except for depreciation, are translated at the average rate of
exchange during the year. Translation gains and losses on these items are recognized in earningsreflected in the year they arise.loss
for the year.
(e) REVENUE RECOGNITION
Since ceasingGold production has gradually declined since mining operationsactivities were suspended at
the Hycroft mine in 1998. Effective at the beginning of fiscal 2002, gold
production is considered incidental to the activities at the Hycroft mine, and
reporting the associated sales proceeds as revenue is no longer warranted.
Accordingly, proceeds from gold sales, are netted against costs. In 2001 and
2000, the Corporation recognizesrecognized revenue upon adsorption of gold onto carbon.
(f) MINERAL EXPLORATION
Exploration expenditures on mineral properties are expensed when incurred.
Holding costs to maintain a property on a stand-by basis are charged to expense
as incurred.
(g) CASH EQUIVALENTS
Cash equivalents are represented by investments in short-term investment funds consisting of highly liquid
debt instruments such as certificates of deposit, commercial paper, and money
market accounts purchased with an originalinitial maturity date of less than three
months. The Corporation's policy is to invest cash in conservative, highly rated
instruments and limit the amount of credit exposure to any one institution.
(h) MARKETABLE SECURITIES
Marketable securities are carried at the lower of cost(g) INVENTORIES
Materials and market value.
(i) INVENTORIES
Gold inventory is valued at the lower of average cost and net realizable value.
The direct cash costs associated with ore placed in stockpiles and on leach pads
are inventoried and charged to operations as the contained gold is recovered.
Based upon actual metal recoveries, ore grades and operating plans, management
continuously evaluates and refines estimates in determining the carrying values
of costs associated with gold inventories. Although all gold estimated to be
recoverable from the leach pads had been recovered, as of December 31, 2000, the
leach pads continue to produce gold. Gold production from the leach pads is
expected to continue throughout the year 2001.
Supplysupplies inventories are valued at the lower of average cost and
net replacement value.
(j) PROPERTY, PLANT AND EQUIPMENTThe Corporation recovered more gold than anticipated from the heap leach pads at
the Hycroft mine; accordingly heap leach pad inventory has been fully recognized
in prior years.
(h) MARKETABLE SECURITIES
Marketable securities are stated at the lower of cost or fair value, with
unrealized losses included in net loss.
(i) DevelopedMINERAL PROPERTIES
Acquisition cost and exploration and development expenditures incurred on
non-producing mineral properties Property acquisitionidentified as having development potential, are
deferred until the viability of the property is determined.
Option payments received are treated as a recovery of mineral property costs.
Option payments are at the discretion of the optionee and development costsaccordingly are
carried at cost less
accumulated amortization and write-downs. Amortizationaccounted for on a cash basis or when receipt is provided on the
units-of-production method based on proven and
42reasonably assured.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.AS OTHERWISE STATED.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
probable reserves.
Holding costs to maintain a property on a stand-bycare and maintenance basis are
charged to expenseexpensed as incurred.
Management reviews the carrying value of the Corporation's interest in each
property quarterlyquarterly. Where information and where necessary,conditions suggest impairment, these
properties are written down to their estimatednet recoverable amount, determinedbased on an undiscounted basis.estimated future
cash flows. Management's estimates of gold price, recoverable proven and
probable reserves, operating, capital and reclamation costs are subject to risks
and uncertainties affecting the recoverability of the Corporation's investment
in property, plant and equipment. Although management has made its best estimate
of these factors based on current conditions, it is possible that changes could
occur in the near term that could adversely affect management's estimate of net
cash flows expected to be generated from its operating properties and the need
for possible asset impairment write-downs.
(ii) PlantWhere estimates of future net cash flows are not available and equipmentwhere other
conditions suggest impairment, management assesses if carrying value can
be recovered.
Property acquisition and development costs are carried at cost less accumulated
amortization and write-downs. Amortization during production is provided on the
units-of-production method based on proven and probable reserves.
(j) PLANT AND EQUIPMENT
Plant and equipment are recorded at cost and depreciated using the units-of-production method or the straight-line
method over their estimated useful lives. The cost of normal maintenance and repairs
is charged to expense as incurred. Significant expenditures, which increase the
life of an asset, are capitalized and depreciated over the remaining estimated
useful life of the asset. Upon sale or retirement of assets, the costs and
related accumulated depreciation or amortization are eliminated from the
respective accounts and any resulting gains or losses are reflected
in operations.
(k) PROVISION FOR FUTURE RECLAMATION AND CLOSURE COSTS
AllMinimum standards for mine site reclamation and closure have been established by
various government agencies that affect certain operations of the Corporation's operations are subject to reclamation, site restoration
and closure requirements. Costs related to ongoing site restoration programs are
expensed when incurred. A provision for mine closure and site restoration costs
is charged to earnings over the lives of the mines on a units-of-production
basis.Corporation.
The Corporation calculates its estimates of the ultimate reclamation liability based on
current laws and regulations and the expected future costs to be incurred in
reclaiming, restoring and closing its operating mine sites. It is possible that
the Corporation's estimate of its ultimate reclamation, site restoration and closure
liability could change in the near term due to possible changes in laws and
regulations and changes in cost estimates.
(l) ESTIMATES OF PROVEN AND PROBABLE RESERVES
Management's calculation of provenDuring mine production, a provision for reclamation and probable reservesmine closure is based upon
engineering and geological estimates and financial estimates including gold
prices and operating costs. The Corporation depreciates some of its assets and
accrues for reclamationcharged
to earnings over the mine life on a units-of-production basis over proven and probable
reserves. Changes in geological interpretations of the Corporation's ore bodies
and changes in gold prices and operating costs may change the Corporation's
estimate of proven and probable reserves. It is possible that the Corporation's
estimate of proven and probable reserves could change in the near term and could
result in revised charges for depreciation and reclamation in future reporting
periods.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) HEDGING
The Corporation may from time to time protect against falling gold prices
through forward sales of future production. Revenue from these forward sales is
recognized when the gold is due to be delivered. At December 31, 2000, the
Corporation had no forward sales commitments.
(n)basis.
(l) LOSS PER SHARE
Loss per share is calculated by dividing the loss for the year by the weighted
average number of common shares outstanding during the year. FullyBasic and diluted
losslosses per share is not disclosed asare the same because inclusion of common share equivalents
would be anti-dilutive.
(o) FINANCIAL INSTRUMENTS
The recorded value of the Corporation's cash and cash equivalents, accounts
receivable and accounts payable approximate their fair values due to the
relatively short periods to maturity. The fair value of long term-debt is
disclosed in Note 4.
(p) STOCK BASED COMPENSATION
The Corporation has a stock-based compensation plan, which is described in
note 6. No compensation expense is recognized for the plan when stock or stock
options are issued to employees. Any consideration paid by employees on the
exercise of stock options or the purchase of stock is credited to share capital.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following:
2000 1999
----------------------------------- -----------------------------------
ACCUMULATED ACCUMULATED
DEPRECIATION, DEPRECIATION,
AMORTIZATION AMORTIZATION
AND AND
COST WRITE-DOWNS NET COST WRITE-DOWNS NET
-------- ------------- -------- -------- ------------- --------
Hycroft mine................... $ 60,953 $ 55,974 $ 4,979 $ 63,083 $56,418 $ 6,665
Bolivian mineral properties.... 58,029 47,260 10,769 60,561 39,307 21,254
Corporate assets............... 467 303 164 482 277 205
-------- -------- ------- -------- ------- -------
$119,449 $103,537 $15,912 $124,126 $96,002 $28,124
======== ======== ======= ======== ======= =======
WRITE-DOWN OF MINERAL PROPERTIES
Management regularly performs property evaluations to assess the recoverability
of the carrying value of its mining properties and investments and other
long-lived assets. In 2000, the Corporation based its evaluation of the
recoverability of the carrying value of its mining properties upon a gold price
of U.S. $300 per ounce (1999 U.S. $325 per ounce).
4436
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.AS OTHERWISE STATED.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) STOCK-BASED COMPENSATION
The Corporation has a stock-based compensation plan, which is described in
Note 10. On January 1, 2002, the Corporation adopted the new recommendations of
the Canadian Institute of Chartered Accountants, CICA 3870, for the recognition,
measurement and disclosure of stock-based compensation and other stock-based
payments made in exchange for goods and services. As permitted under the
recommendations, the Corporation has elected not to follow the fair value method
of accounting for stock options granted to directors and employees, and follows
the intrinsic value method. Any consideration paid by directors, employees and
non-employees on the exercise of stock options or the purchase of stock is
credited to capital stock. Stock-based compensation on options granted to
non-employees is recorded as an expense at the earlier of completion of
performance or vesting of the options granted, based upon the estimated fair
value on the grant date.
(n) WARRANTS
Warrants issued as consideration for mineral properties are recorded at fair
value. The value of equity units, consisting of common shares and warrants,
issued in a cash financing is assumed to be substantially attributable to the
value of the common shares; no portion of the amount paid is assigned to
the warrants.
3. PROPERTY, PLANT AND EQUIPMENTMINERAL PROPERTIES
DECEMBER 31, 2002 DECEMBER 31, 2001
---------------------------------- ----------------------------------
ACCUMULATED ACCUMULATED
AMORTIZATION AMORTIZATION
AND AND
COST WRITE-DOWNS NET COST WRITE-DOWNS NET
-------- ------------ -------- -------- ------------ --------
($ 000'S)
MINERAL PROPERTIES
Maverick Springs, United
States......................... $ 1,521 $ -- $ 1,521 $ -- $ -- $ --
Mountain View, United States..... 303 -- 303 -- -- --
Long Valley, United States....... 48 -- 48 -- -- --
Hycroft mine, United States...... 21,917 21,917 -- 21,917 21,917 --
Paredones Amarillos, Mexico...... 2,317 -- 2,317 -- -- --
Amayapampa, Bolivia.............. 57,624 46,894 10,730 57,624 46,894 10,730
------- ------- ------- ------- ------- -------
$83,730 $68,811 $14,919 $79,541 $68,811 $10,730
------- ------- ------- ------- ------- -------
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
These evaluations indicated thatTHE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
3. MINERAL PROPERTIES (CONTINUED)
2001 2002
------------ ----------------------------------------
DECEMBER 31, ACQUISITION EXPLORATION DECEMBER 31,
NET COSTS COSTS NET
------------ ----------- ----------- ------------
($ 000'S)
Maverick Springs, United States................ $ -- $1,332 $189 $ 1,521
Mountain View, United States................... -- 303 -- 303
Long Valley, United States..................... -- 48 -- 48
Hycroft mine, United States.................... -- -- -- --
Paredones Amarillos, Mexico.................... -- 2,317 -- 2,317
Amayapampa, Bolivia............................ 10,730 -- -- 10,730
------- ------ ---- -------
$10,730 $4,000 $189 $14,919
======= ====== ==== =======
The recoverability of the carrying values of the followingCorporation's mineral
properties wereis dependent upon the successful start-up and commercial production
from or sale of these properties. Further development and/or start-up of any of
these projects will depend, among other things, on management's ability to raise
additional capital for these purposes. Although the Corporation has been
successful in excessraising such capital in the past, there can be no assurance that
it will be able to do so in the future.
MAVERICK SPRINGS
The Maverick Springs gold and silver project, southeast of their estimated net recoverable amountsElko, Nevada, was
acquired on October 7, 2002 from Newmont USA Limited (Newmont). The total cost
for the Maverick Springs project included cash payments of $250,000; the
issuance of 141,243 equity units, each unit comprised of one common share and accordingly were
written down by $10.9 milliona
two year warrant, valued at $500,000 (Notes 8 and 9); and the issuance of
$500,000 in 2000 and by $16.2 millioncommon shares in 1999 as follows:
2000 1999 1998
-------- -------- --------
Bolivian mineral properties................................. $10,607 $13,248 --
Hycroft mine equipment...................................... 319 -- --
Zamora accounts receivable.................................. -- 111 --
Mineral Ridge mine net assets............................... -- $ 2,860 $ --
------- ------- -------
$10,926 $16,219 $ --
======= ======= =======
DISPOSAL OF ASSETS
During 2000, Hycroft mining equipmentOctober 2003, together with an originalequivalent number of
two year warrants which will be valued as an additional cost at the time of
$2.1 millionissue (Note 6). The Corporation is committed to completing 20,000 feet of
drilling on this project before October 7, 2004 and an additional 30,000 feet of
drilling before October 7, 2006. Newmont retains a 1.5% net smelter returns
royalty or the right to acquire 51% of the project after four years by paying
the Corporation cash equaling 200% of the aggregate expenditures made by the
Corporation on the project.
Maverick Springs is subject to a lease agreement with the underlying
leaseholder, Artemis Exploration Company, which includes payments of advanced
minimum royalties of $50,000 on October 1, 2003 and $100,000 on October 1, 2004
and each year thereafter while the agreement is in effect and a net book valuesmelter
returns royalty based on a sliding scale ranging from 2% to 6%, depending on
gold and silver prices at the time of $0.5 million, was sold for $0.5 million. During 2000,production.
In November, 2002, the Corporation disposedgranted to Silver Standard Resources Inc.,
subject to the terms of its Bolivian subsidiary Yaminthe Newmont agreement, an option to acquire the silver
resources hosted in the Maverick Springs project in exchange for aggregate
future cash payments on $1.5 million (Note 20).
MOUNTAIN VIEW
The Mountain View gold project, located west of the Hycroft mine, was acquired
on October 7, 2002 from Newmont Capital Limited (NCL). The total cost for the
Mountain View project included cash payments of $50,000, the issuance of 56,497
equity units, each unit comprised of one common share and realized a gaintwo year
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
3. MINERAL PROPERTIES (CONTINUED)
warrant, valued at $200,000 (Notes 8 & 9). The Corporation is committed to
completing 4,000 feet of drilling on disposalthis project before October 7, 2003 and an
additional 4,000 feet of $0.1 million.
ROYALTIESdrilling before October 7, 2004. NCL retains a 1.5% net
smelter returns royalty or the right to acquire 51% of the project after four
years by paying the Corporation cash equaling 200% of the aggregate expenditures
made by the Corporation on the project.
LONG VALLEY
The Corporation has a letter agreement with Standard Industrial Minerals, Inc.
(Standard), to acquire Standard's 100% interest in the Long Valley gold project
in east central California, for an aggregate purchase price of $750,000 which
would be made over a five-year period, with annual payments to be due as
follows: $100,000 due on each of January 15, 2003, 2004, and 2005; $200,000 due
on January 15, 2006, and $250,000 due on January 15, 2007 (Note 21). The
Corporation retains the right to terminate the agreement at any time.
HYCROFT MINE
The Corporation acquired the Hycroft gold mine, west of Winnemucca, Nevada, in
1987. Mining activities at the Hycroft mine were suspended in 1998. The mine is
being held on care and maintenance pending a sustained improvement in gold
prices. Holding costs are expensed.
The Crofoot property at the Hycroft mine is subject to a 4% net profit royalty.
During 2000royalty
and 1999, there was no mining activity and as a result the
Corporation did not pay any Crofoot royalties. In 1998, the Corporation paid
royalty payments of $240,000 per year.
The Lewis property at the Hycroft mine is subject to a 5% net smelter
royalty.
During 2000, only nominal minimum royalties were requiredPAREDONES AMARILLOS
The Corporation acquired the Paredones Amarillos gold project in relationMexico from
Viceroy Resource Corporation on August 29, 2002 (Note 20). The total cost of
this project included cash payments of $786,000 for acquisition and related
costs, the issuance of 303,030 equity units with a fair value of $1,211,000
(Notes 8 and 9) and a future cash payment of $320,000 due August 29, 2003.
The Paredones Amarillos project is subject to this
property. During 1999a 2% net profits interest retained
by a former owner.
AMAYAPAMPA
The Corporation acquired the Amayapampa gold project, in Bolivia, in 1996. The
project is being held on care and 1998 royalties paid were $123,000 and $344,000
respectively.maintenance pending a sustained improvement in
gold prices. Holding costs are expensed.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
4. LONG TERM DEBT
During 2000,PLANT AND EQUIPMENT
DECEMBER 31, 2002 DECEMBER 31, 2001
---------------------------------- ----------------------------------
ACCUMULATED ACCUMULATED
DEPRECIATION DEPRECIATION
AND AND
COST WRITE-DOWNS NET COST WRITE-DOWNS NET
-------- ------------ -------- -------- ------------ --------
($ 000'S)
Hycroft mine, United States...... $11,982 $10,318 $ 1,664 $13,275 $11,394 $ 1,881
Corporate, United States......... 331 331 -- 467 344 123
------- ------- ------- ------- ------- -------
$12,313 $10,649 $ 1,664 $13,742 $11,738 $ 2,004
------- ------- ------- ------- ------- -------
5. CURRENT LIABILITIES
DECEMBER 31,
-------------------
2002 2001
-------- --------
($ 000'S)
USF&G settlement............................................ $ -- $ 814
Trade payables and other accruals........................... 598 540
---- ------
$598 $1,354
==== ======
On April 23, 2002, the Corporation repaid $0.6 million undersettled the USF&G lawsuit, for which it had
previously provided approximately $814,000.
6. PAYABLES TO BE SETTLED WITH EQUITY
Pursuant to the terms of the acquisition agreement with respect to the Maverick
Springs project, in October, 2003 the Corporation will issue common shares with
an approximate market value of $500,000, together an equivalent number of two
year warrants. The warrants will be valued at the time of issue. (Note 3).
Pursuant to an agreement with Endeavour Financial Corporation Inc., Endeavour is
to provide financial advisory services to the Corporation for a $1.3 million term loan,monthly fee of
$10,000, which was collateralizedis payable by certain mobile assetsthe issuance to Endeavour of a convertible
promissory note, which is automatically converted into common shares of the
Hycroft mine. The loan bears 10.61% interest and is repayable in monthly
installmentsCorporation (Note 8). As of $49,000 terminating April 2002. In January 2001,December 31, 2002, payment for the loan was
repaid from the proceedsmonth of the sale of mining equipment and has thereforeDecember
had not been classified as short term (Note 13). The Corporation also has a $75,000 term
note, bearing 4.5% interest, which is due October 31, 2001.
5.made.
7. ACCRUED RECLAMATION AND CLOSURE COSTS
AtThe Corporation's aggregate obligation accrued to December 31, 2000,2002, net of the
Corporation's futureactual cost of reclamation activities performed to December 31, 2002, is
$4.1 million (2001: $3.1 million). Substantially all of this estimate relates to
final reclamation and mine closure costs areof the Hycroft mine. Consistent with Bureau of
Land Management, Nevada State Office mandated procedures, in 2002 the
Corporation commissioned a third-party comprehensive review of the estimated to be $3.1 million, $2.9 million of which comprises
environmental
reclamation costs at the Hycroft mine. The remainder comprises
mainly severancemine and other mine closure costs.increased the obligation accrued by
$1.0 million (Note 13).
Estimated reclamation and mine closure costs are determined using management's
best estimates of the scope and the cost of required activities. These estimates
mayare subject to change, based on future changes in operations, regulatory
requirements or costs to complete the reclamation activity. Reclamation and closure costs are
charged to earnings over the life of the mine on a units-of-production basis.
The aggregate
45Estimated
reclamation
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
5.AS OTHERWISE STATED.
7. ACCRUED RECLAMATION AND CLOSURE COSTS (CONTINUED)
obligation accruedand closure costs had been charged to December 31, 2000, netearnings over the life of the actual cost of reclamation
activities performedmine on a
units-of-production basis; after mining was suspended in 1998, adjustments to
December 31, 2000, is $3.3 million (1999:
$4.4 million).
6.the estimate have been reflected in net loss.
8. CAPITAL STOCK
Common Shares issued and outstanding:COMMON SHARES ISSUED AND OUTSTANDING
NUMBER OF CAPITAL STOCK
SHARES AMOUNT
---------------- -----------ISSUED ($ 000'S)
------------- -------------
AtAs of December 31, 2001, 2000 and 1999 (Restated)........... 4,535,752 $121,146
Private placement February-March 2002, net.................. 3,999,986 3,593
Warrants exercised from February-March 2002 private
placement................................................. 679,736 1,020
Private placement December 2002, net........................ 1,000,000 2,235
Shares issued for acquisition of gold properties, net....... 500,770 1,527
Shares issued for services, net............................. 10,869 20
Exercise of stock options................................... 17,500 34
---------- --------
Issued in 2002............................................ 6,208,861 $ 8,429
---------- --------
As of December 31, 2002..................................... 10,744,613 $129,575
========== ========
On June 19, 2002, the Corporation effected a 1-for-20 consolidation of its
common shares. The number of common shares outstanding, on a pre-consolidation
basis, at December 31, 2001, of 90,715,040 has been restated as 4,535,752
shares, giving effect to the consolidation. All references in this document to
common shares, loss per share and value per share or value per unit, are on a
post-consolidation basis, unless otherwise indicated.
PRIVATE PLACEMENT FEBRUARY-MARCH 2002, NET
The Corporation effected a two-step private placement financing in February and
March 2002. In the first step of the private placement, completed in February,
the Corporation issued 1,000,000 units at a price of $1.026 per unit for an
aggregate purchase price of $1,026,000. Each unit consisted of one common share
and one share purchase warrant (Note 9) exercisable for one additional common
share at $1.50, until February 1, 2007. The Corporation also issued 80,000 units
to an agent as consideration for its services in connection with the unit
offering. In the second step of the private placement, completed in March, the
Corporation issued $2,774,000 aggregate principal amount of convertible
debentures. The debentures were convertible into debenture units at a price of
$1.026 per debenture unit, each consisting of one common share and one 5-year
warrant entitling the holder to purchase one common share at a price of $1.50
until March 18, 2007, with the common share component representing substantially
all of the unit value. The Corporation issued to an agent special warrants
exercisable for 216,296 units, with each unit consisting of one common share and
one warrant with the same terms as the share and warrant components,
respectively, of the debenture units. The Corporation incurred approximately
$207,000 in direct costs connected with both steps of this private placement.
On September 19, 2002, a Registration Statement on Form S-3 filed under the
Securities Act of 1933 for the registration for resale of 7,999,974 common
shares (including shares already issued as well as shares to be issued, all in
connection with the private placement), was declared effective by the SEC. As a
result of
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
8. CAPITAL STOCK (CONTINUED)
this registration statement becoming effective, the Corporation's $2,774,000
convertible debentures issued in the second step of the private placement were
automatically converted, pursuant to their terms, into 2,703,690 common shares
and the same number of debenture warrants. The registration included 3,999,986
shares issuable upon the exercise of warrants (Note 9), including the warrants
issued in the first step of the private placement and the debenture warrants,
having the respective expiration dates as noted in the preceding paragraph.
WARRANTS EXERCISED FROM FEBRUARY-MARCH 2002 PRIVATE PLACEMENT
As of December 31, 2002, 679,736 of the warrants issued in the Private placement
February-March 2002 have been exercised, for an aggregate purchase price of
$1,019,604 (Note 9).
PRIVATE PLACEMENT DECEMBER 2002, NET
On December 27, 2002, the Corporation completed a private placement financing in
which the Corporation issued 1,000,000 equity units at a price of $2.35 per
unit, for an aggregate purchase price of $2,350,000. Each equity unit consisted
of one common share and one warrant (Note 9), exercisable over a two-year period
from the issuance date, to purchase one common share for $3.04 during the first
year and $3.45 during the second year. As of December 31, 2002, none of these
warrants have been exercised. The Corporation incurred approximately $115,000 in
direct costs connected with this private placement.
SHARES ISSUED FOR ACQUISITION OF GOLD PROPERTIES, NET
On August 29, 2002, the Corporation issued 303,030 equity units priced at Cdn
$4.95 (approximately U.S.$3.17) with each unit comprised of one common share and
one two-year warrant to purchase one common share at a price of Cdn $6.88
(approximately U.S.$4.40), as partial consideration for the acquisition of the
Paredones Amarillos gold project (Note 3 and 20). The fair value of the equity
units was Cdn $1.9 million (approximately U.S. $1.2), with Cdn $1.5 million
(approximately U.S. $962,000) attributed to common shares and Cdn $390,000
(approximately U.S. $250,000) attributed to warrants (Note 9). As of
December 31, 2002, none of these warrants have been exercised. The Corporation
incurred approximately $18,000 in direct costs connected with the issuance of
these shares.
On October 7, 2002, the Corporation issued 197,740 equity units priced at $3.54
with each unit including one common share and one two-year warrant to purchase
one common share at a price of $4.43, as partial consideration for the
acquisition of the Maverick Springs and Mountain View gold projects (Note 3).
The fair value of the equity units was $700,000, with $605,000 attributed to
common shares and $95,000 attributed to warrants (Note 9). As of December 31,
2002, none of these warrants have been exercised. The Corporation incurred
approximately $22,000 in direct costs connected with the issuance of
these units.
SHARES ISSUED FOR SERVICES, NET
Pursuant to an agreement with Endeavour Financial Corporation Inc. (Endeavour).
Endeavour is to provide financial advisory services to the Corporation for a
monthly fee of $10,000. The monthly fee is payable by the issuance to Endeavour
of a non-transferable convertible promissory note, which is automatically
converted into common shares of the Corporation at a price per share equal to
the weighted average closing price of the shares on the American Stock Exchange
on the last 10 trading days of the month prior to the business day on which the
fee becomes due. As of December 31, 2002, the Corporation
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
8. CAPITAL STOCK (CONTINUED)
had issued 10,869 common shares valued at $35,000 to Endeavour under the terms
of this agreement. The Corporation incurred approximately $15,000 in direct
costs connected with the issuance of shares under this agreement.
9. WARRANTS
Further to Note 8, warrants granted and outstanding in 2002 are summarized in
the following table.
WEIGHTED
AVERAGE WEIGHTED
EXERCISE AVERAGE
WARRANTS VALUATION WARRANTS WARRANTS PRICE REMAINING
GRANTED(1) (000'S) EXERCISED OUTSTANDING (U.S. $) EXPIRY DATE LIFE (YRS)
---------- --------- --------- ----------- --------- ----------- ----------
As of December 31,
2001, 2000 and
1998......................... 90,715,040 $121,1461999................. -- $ -- -- -- $ -- -- --
Private placement
February-March
2002................. 3,999,986 -- (679,736) 3,320,250 1.50 Feb-Mar 07 4.2
Private placement
December 2002........ 1,000,000 -- -- 1,000,000 3.04(2) Dec-04 1.9
Acquisition of
Paredones
Amarillos............ 303,030 250 -- 303,030 4.40 Aug-04 1.7
Acquisition of Maverick
Springs & Mtn.
View................. 197,740 95 -- 197,740 4.43 Oct-04 1.8
--------- ---- -------- --------- -----
Total 2002........... 5,500,756 345 (679,736) 4,821,020 2.12
--------- ---- -------- --------- -----
As of December 31,
2002................. 5,500,756 $345 (679,736) 4,821,020 $2.12
========= ==== ======== ========= =====
(1) Each warrant entitles the holder to purchase one common share
(2) The exercise price increases to $3.45 in December 2003
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
10. OPTIONS TO PURCHASE SHARES
COMMON SHARE OPTIONS ISSUED TO NON-EMPLOYEES
Under the Corporation's Stock Option Plan, 20,000 fully vested stock options
were granted to non-employee consultants of the Corporation in December 2002 and
have been recorded at estimated fair value of $24,602 using the Black-Scholes
option pricing model.
COMMON SHARE OPTIONS
Under the Vista Gold'sCorporation's Stock Option Plan (the "Plan")Plan), Vista Goldthe Corporation may grant
options to directors, officers, employees and employeesconsultants of the Corporation or
its subsidiaries, for up to 4,500,000 Common Shares.225,000 common shares. In addition, in
January 2003, the Board of Directors approved, subject to regulatory and
shareholder approvals, an increase to the Plan of 775,000 options. Under the
Plan, the exercise price of each option shall not be less than the market price
of the Corporation's stock on the date preceding the date of grant, and an
option's maximum term is 10 years or such other shorter term as stipulated in a
stock option agreement between the Corporation and the optionee. Options and
vesting periods under the Plan are granted from time to time at the discretion
of the Board of Directors. Options granted under the proposed 775,000 option
increase may not be exercised until after regulatory and shareholder approvals
have been acquired.
At December 31, 2000, 1,758,333 Common Shares2002, 662,000 common shares were reserved for issuance under
options granted to directors, officers, employees and management employees.non-employees. These
options expire as follows:
YEAR OF EXPIRATION NUMBER OF OPTIONS2005 2006 2007 2008 2009 2010 2011 2012 TOTAL
- ------------------ ------------------------- -------- -------- -------- -------- -------- -------- -------- --------
2001...
Number of Options....... 3,750 8,571 614,679 2,500 5,000 10,000 2004... 5,715
2005... 302,143
2006... 419,761
2007... 460,714
2008... 185,000
2009... 100,000
2010... 275,000
---------
Total.. 1,758,33312,500 5,000 662,000
The following tables summarize information about stock options under the Plan:
2002 2001 2000 1999 1998
------------------------- ------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AVERAGE PRICE NUMBER OF AVERAGE PRICE NUMBER OF AVERAGE
SHARES EXERCISE PRICE
SHARES EXERCISE PRICE(CDN $) SHARES EXERCISE PRICE
(000)'S (CDN.$) (000)'S (CDN.$) (000)'S (CDN.$)
-------- -------------- -------- -------------- -------- --------------(CDN $) SHARES (CDN $)
--------- ------------- --------- ------------- --------- -------------
RESTATED--NOTE 8 RESTATED--NOTE 8
Outstanding--beginning
of year... 2,308 $0.237 2,270 $1.630 2,937 $1.61
Cancelled........................year.................. 75,000 $3.63 87,900 $4.24 115,400 $4.74
Granted.................... 649,500 4.37 21,250 2.40 13,750 1.40
Exercised.................. (17,500) 3.07 -- -- (2,270) 1.630 -- --
Granted.......................... 275 0.07 2,500 0.237 125 0.20
Forfeited........................ (825) 0.235 (192) 0.235 (792) 1.43Expired.................... -- -- -- -- (4,285) 4.70
Forfeited.................. (45,000) 4.37 (34,150) 4.44 (36,965) 4.70
------- ----- ------ ------ ------------- ----- ------- -----
Outstanding--end of year......... 1,758 $0.212 2,308 $0.237 2,270 $1.63year... 662,000 $4.32 75,000 $3.63 87,900 $4.24
------- ----- ------- ----- ------- -----
Exercisable................ 172,500 $4.19 75,000 $3.63 87,900 $4.24
======= ===== ====== ====== ============= ===== ======= =====
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
10. OPTIONS TO PURCHASE SHARES (CONTINUED)
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------- -------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE WEIGHTED AVERAGE
WEIGHTED AVERAGE NUMBER REMAINING AVERAGE EXERCISE NUMBER REMAINING
EXERCISE PRICE OUTSTANDING AT CONTRACT LIFE PRICE EXERCISABLE AT CONTRACT LIFE
(CDN $) DEC. 31/02 (YEARS) (CDN$) DEC. 31/02 (YEARS)
- ---------------- -------------- ------------- ---------------- -------------- -------------
$1.40 10,000 7.9 $1.40 10,000 7.9
2.40 7,500 8.8 2.40 7,500 8.8
2.40 5,000 8.4 2.40 5,000 8.4
2.80 5,000 9.2 2.80 5,000 9.2
4.37 574,500 4.5 4.37 85,000 4.5
4.70 35,000 4.2 4.70 35,000 4.2
5.00 5,000 6.2 5.00 5,000 6.2
5.19 20,000 4.9 5.19 20,000 4.9
----- ------- ----- -------
$4.32 662,000 $4.19 172,500
===== ======= ===== =======
Under the Corporation's Stock Option Plan, 10,000 stock options (200,000 on a
pre-consolidation basis) were issued to directors of the Corporation in
March 2002. In addition, subject to regulatory and shareholder approval, 619,500
stock options (all on a post-consolidation basis) were issued to directors,
officers and employees in July 2002, half of which were vested immediately and
half of which will vest in July 2003. Had compensation been recorded using the
fair-value method for these stock option grants, the Corporation's loss and loss
per share for Canadian GAAP would have been adjusted to the pro forma amounts
indicated below:
YEAR ENDED DECEMBER 31, 2002
- -------------------------------------------------------------
Net loss--as reported (000's)...................... $(2,775)
Net loss--pro forma (000's)........................ (3,261)
Loss per share--as reported........................ $ (0.41)
Loss per share--pro forma.......................... $ (0.48)
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for the grants:
MARCH JULY DECEMBER
OPTIONS OPTIONS OPTIONS(1)
-------- -------- ----------
Expected volatility............................. 50.00% 50.00% 50.00%
Risk-free interest rate......................... 3.50% 3.50% 3.50%
Expected lives (years).......................... 5 3 3
Dividend yield.................................. 0% 0% 0%
(1) Options granted to non-employees
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
11. GOLD SALES AND PRODUCTION COSTS
Gold production has gradually declined since mining activities were suspended at
the Hycroft mine in 1998. Effective at the beginning of fiscal 2002, gold
production is considered incidental to the activities at the Hycroft mine, and
reporting the associated sales proceeds as revenue is no longer warranted.
Accordingly, proceeds from gold sales of approximately $0.6 million, are netted
against 'Exploration, property evaluation and holding costs.' Similarly, gold
production costs, which approximately offset the proceeds from gold sales, are
included in 'Exploration, property evaluation and holding costs.'
12. COST RECOVERIES RELATED TO USF&G LAWSUIT
The Corporation received from Golden Phoenix Minerals, Inc. (GPMI), the current
owner of the Mineral Ridge Mine, 628,931 common shares, valued at $220,000 at
the time of receipt, in consideration for benefits GPMI received as a direct
result of the Corporation's facilitation of the USF&G settlement (Note 5). In
addition, the final settlement amount for the USF&G lawsuit was approximately
$20,000 less than originally estimated and provided for.
13. COMMITMENTS AND CONTINGENCIES
The Corporation has provided a surety bond in the amount of $5.1 million to
ensure reclamation obligations under an approved reclamation plan at the Hycroft
mine. The Bureau of Land Management, Nevada State Office has requested an
additional bond of $443,279 for interim fluid management and it is probable that
the State will request that the Corporation increase the total surety bond
amount to an estimated $6.7 million, inclusive of the interim fluid management
bond. Furthermore, the Corporation has been requested to pledge collateral in
order to provide this surety bond. The amount and the nature of the collateral
will be subject to negotiation. There can be no assurance that the Corporation
will be successful in providing acceptable collateral and thus posting the
surety bond.
The $6.7 million surety bond estimate for the Hycroft mine includes scope of
work and pricing estimates which assume execution of the reclamation work under
the direction of the Bureau of Land Management. However, the Corporation assumes
that it will complete this reclamation itself after mining has been completed
and, based on this assumption, estimates that the work will be completed to
mandated standards for a total cost of $4.1 million as accrued in these
financial statements (Note 7).
14. FINANCIAL INSTRUMENTS
The recorded value of the Corporation's cash and cash equivalents, accounts
receivable and accounts payable and accrued liabilities and other, approximate
their fair values due to the relatively short periods to maturity. At
December 31, 2002, the fair value of marketable securities is $135,000.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
6. CAPITAL STOCK (CONTINUED)
OPTIONS OUTSTANDING
- ------------------------------------------------------------------------------------------------------------
NUMBER WEIGHTED- WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
EXERCISE PRICES DEC. 31, 2000 REMAINING EXERCISE PRICE DEC. 31, 2000 EXERCISE PRICE
(CDN.$) (000)'S CONTRACTUAL LIFE (CDN.$) (000)'S (CDN.$)
- --------------------- -------------- ---------------- -------------- -------------- --------------
$0.07 275 10 years $ 0.07 275 $ .07
$0.235 - 0.25.. 1,483 6.5 years $0.238 1,382 $0.253
----- ------ ----- ------
1,758 $0.212 1,657 $0.223
===== ====== ===== ======
7. COMMITMENTS AND CONTINGENCIES
(a) On August 25, 2000, United States Fidelity & Guarantee Company ("USF&G")
filed an action in the United States District Court against Vista Gold,
Vista Gold Holdings, Inc., Stockscape.com Technologies, Inc., Cornucopia
Resources, Inc., Red Mountain Resources, Inc. and Touchstone
Resources, Inc. This action involves a General Contract of Indemnity in
connection with the posting of a reclamation bond for mining activities by
Mineral Ridge Inc. at Silver Peak, Nevada. In the action, USF&G seeks to
compel all of the defendants to post additional collateral for the bond in
the total amount of $793,583. Neither Vista Gold nor Vista Gold
Holdings, Inc. was a party to the General Contract of Indemnity and both
have denied any liability in connection therewith.
In November 2000, the parties stipulated to an agreed upon discovery plan
and scheduling order. The maximum potential exposure to the Corporation is
the additional collateral requested in the amount of $793,583, together with
the attorneys' fees and costs related to the defense of the action. Other
defendants, if found to be jointly liable, could reduce the amount for which
the Corporation has exposure.
8.AS OTHERWISE STATED.
15. SUPPLEMENTAL CASH FLOW DISCLOSURE AND MATERIAL NON-CASH TRANSACTIONS
As of December 31, 2002 and 2001, all of the Corporation's cash was held in
liquid bank deposits.
YEARS ENDED
DECEMBER 31
------------------------------
SUPPLEMENTAL CASH FLOW DISCLOSURE ($ 000'S) 2002 2001 2000
1999 1998- ------------------------------------------- -------- -------- --------
Cash paid (received) during the year for:
Interest.................................................... $14 $21 $114 $1,146 $451
Income taxes................................................ -- -- (33) 196 --
47
NOTES
NON-CASH CONSIDERATION GIVEN DURING 2002
---------------------------------------------------------
FUTURE SETTLEMENT
EQUITY EQUITY FUTURE CASH OF A
MATERIAL NON-CASH TRANSACTIONS ($000'S) UNITS UNITS(1) PAYMENTS(2) LIABILITY TOTAL
- --------------------------------------- -------- -------- ----------- ---------- --------
INVESTING ACTIVITIES:
Paredones Amarillos.......................... $1,212 $ -- $320 $ -- $1,532
Maverick Springs............................. 500 500 -- -- 1,000
Mountain View................................ 200 -- -- -- 200
Asset disposal............................... -- -- -- (103) (103)
------ ---- ---- ----- ------
$1,912 $500 $320 $(103) $2,629
====== ==== ==== ===== ======
(1) Included in PAYABLES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
9.BE SETTLED WITH EQUITY
(2) Included in ACCRUED LIABILITIES AND OTHER
There were no significant non-cash transactions during the year's ended
December 31, 2001 and 2000.
16. INCOME TAXES
(a) A reconciliation of the combined Canadian federal and provincial income
taxes at statutory rates and the Corporation's effective income tax expenses
(recovery) is as follows:
YEARS ENDED DECEMBER 31
------------------------------
2002 2001 2000 1999 1998
-------- -------- --------
Income taxes at statutory rates............................. $ (5,959) $(12,440) $ (661)$(1,141) $(1,412) $(5,959)
Increase (decrease) in taxes from:
Permanent differences..................................... 2 2 (149) (84) (125)
U.S. Alternative Minimum Tax.............................. -- -- 141
Differences in foreign tax rates.......................... 198 270 2,214 1,592 (77)
Prior year's losses of a subsidiary applied for tax
purposes................................................ -- -- (1,685)
Benefit of losses not recognized.......................... 941 1,140 3,894 10,932 2,548
Large Corporations Tax.................................... -- -- (33)
-- 30
-------- -------- ------- $ (33)------- -------
$ -- $ 171
======== ========-- $ (33)
======= ======= =======
The significant components of the Corporation's future tax assets are as
follows:
2000
--------
Future income tax assets
Excess tax value over carrying value of property, plant
and equipment........................................... 9,649
Operating loss carryforward............................... 15,672
Accrued reclamation provision............................. 1,111
--------
26,432
Valuation allowance for future tax assets................... (26,432)
--------
Total....................................................... --
========
The Corporation has incurred income tax losses in prior periods of
$42.2 million, which may be carried forward and applied against future taxable
income when earned.
4847
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
9.AS OTHERWISE STATED.
16. INCOME TAXES (CONTINUED)
(b) Future income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the company's future tax assets as at December 31, are as follows:
DECEMBER 31
-------------------
FUTURE INCOME TAX ASSETS 2002 2001
- ------------------------ -------- --------
Excess tax value over carrying value of property, plant and
equipment................................................. $ 9,152 $ 9,383
Operating and capital loss carryforwards.................... 15,606 15,859
Accrued reclamation provision............................... 1,404 1,057
-------- --------
26,162 26,299
Valuation allowance for future tax assets................... (26,162) (26,299)
-------- --------
Total....................................................... -- --
======== ========
(c) The Corporation has available income tax losses of $43.8 million, which
may be carried forward and applied against future taxable income when earned.
The losses expire as follows:
CANADA UNITED STATES TOTAL
-------- ------------- --------
2001........................................................2003........................................................ $ 742409 $ 1,2955,418 $ 2,037
2002........................................................ 454 1,358 1,812
2003........................................................ 428 5,418 5,8465,827
2004........................................................ 1,7631,684 1,373 3,1363,057
2005........................................................ 7,9817,621 -- 7,9817,621
2006........................................................ 655625 -- 655625
2007........................................................ 495456 -- 495456
2008........................................................ --458 388 388846
2009........................................................ --911 11 11922
2010........................................................ -- 5,106 5,106
2011........................................................ -- 9,415 9,415
2019........................................................ -- 5,301 5,301
2020........................................................ -- 310 310
2021........................................................ -- 1,965 1,965
2022........................................................ -- 2,327 2,327
------- ------- -------
$12,518 $29,665 $42,183$12,164 $31,614 $43,778
======= ======= =======
10.17. RETIREMENT PLANS
The Corporation sponsors a qualified tax-deferred savings plan in accordance
with the provisions of Section 401(k) of the U.S. Internal Revenue Service code,Code, which
is available to permanent U.S. employees. The Corporation makes contributions of
up to 4% of eligible employees' salaries. The Corporation's contributions were
as follows: 2002--$20,796; 2001--$28,764; and 2000--$56,000; 1999--$126,000; and
1998--$179,000.
4956,000.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
11.AS OTHERWISE STATED.
18. SEGMENT INFORMATION
The Corporation operates in theCorporation's core business is evaluating, acquiring, exploring and
improving gold mining industry in the United States, and
has exploration and potential development propertiesprojects. These activities
are focused principally in the United States, CanadaNorth and LatinSouth America. Its major product and only identifiable segment is gold, andSubstantially all gold revenues and operatingrelated
costs are derived in the United States.
2000 1999 1998
-------- -------- --------
Gold revenues
U.S....................................................... $3,757 $19,496 $37,083
Operating (loss) profit(1)
U.S....................................................... $ 330 $(5,779) $ 268
- ------------------------
(1) Includes goldThe Corporation reported no revenues less mining operations, depreciation, depletionin
2002; all 2001 and amortization, provision for reclamation2000 revenues were earned in the United States. Geographic
segmentation of capital assets is provided in Notes 3 and closure costs, and operating
leases.
2000 1999 1998
-------- -------- --------
Assets by geographic region
Canada.................................................... $ 57 $ 406 $ 973
U.S....................................................... 6,321 11,329 44,594
Latin America............................................. 10,854 21,694 35,311
------- ------- -------
$17,232 $33,429 $80,878
======= ======= =======
12.4.
19. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The significant differences between generally accepted accounting principles
("GAAP")(GAAP) in Canada and in the United States, as they relate to these financial
statements are as follows:
(a) Under Canadian corporate law, the Corporation underwent a capital
reduction in connection with the amalgamation of Granges and Hycroft
whereby share capital and contributed surplus were reduced to eliminate
the consolidated accumulated deficit of Granges as of December 31, 1994,
after giving effect to the estimated costs of the amalgamation. Under
U.S. corporate law, no such transaction is available and accordingly is
not allowed under U.S. GAAP.
(b) In 1999 and 2000 the carrying values of certain long-lived assets exceeded their
respective undiscounted cash flows. Following Canadian GAAP, the carrying
values were written down using the undiscounted cash flow method. Under
U.S. GAAP, the carrying values were written down to their fair values
using the discounted cash flow method, giving rise to a difference in the
amounts written down.
Amortization of the remaining carrying valueswhen properties are in subsequent periodsproduction, following Canadian GAAP,
mustwould be reduced to reflect the difference in the amounts written down
following U.S. GAAP.
(c) Under U.S. GAAP, items such as foreign exchange gains and losses and
unrealized gains and losses on marketable
securities are required to be shown separately in the derivation of
comprehensive income.
(d) In 2000 and 2001 the Corporation recognized revenue upon adsorption of
gold onto carbon. In accordance with U.S. GAAP, revenue is not recorded
before title is passed. In 2002, proceeds from gold sales of $150,000
were recognized for U.S. GAAP and credited to 'Exploration, property
evaluation and holding costs'.
(e) Special warrants issued to the agent as compensation for its services in
connection with the March 2002 Debenture Offering (Note 8) are valued and
included as a financing cost of the related debentures. The conversion
feature of the Debenture Offering (the Beneficial Conversion Feature) was
in the money at the date of issue. The debentures were fully converted on
September 19, 2002 (Note 8); accordingly the fair value of the Beneficial
Conversion Feature is recognized as a charge to net loss and as an
addition to contributed surplus.
(f) As described in note 2(d), the Corporation has reclassified an amount of
$1.485 million from accumulated other comprehensive loss to deficit. The
Company believes that this adjustment is not material as it has no impact
on net income or cash flows for any of the periods presented.
(g) In accordance with U.S. GAAP, exploration, mineral property evaluation,
holding costs, option payments and related acquisition costs for mineral
properties acquired under an option agreement are expensed as incurred.
When proven and probable reserves are determined for a property and a
bankable feasibility study is completed, then subsequent exploration and
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
19. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
development costs on the property would be capitalized. Total capitalized
cost of such properties is measured periodically for recoverability of
carrying value under SFAS No. 144.
The significant differences in the consolidated statements of loss relative to
U.S. GAAP were:
YEAR END DECEMBER 31
------------------------------
(U.S. $ 000/S, EXCPET PER SHARE DATA) 2002 2001 2000
- ------------------------------------- -------- -------- --------
Net loss--Canadian GAAP..................................... $(2,775) $(3,275) $(13,209)
Impairment of mineral properties (b)........................ -- -- (7,637)
Amortization reduction (b).................................. -- -- 99
Unrealized loss on marketable securities (c)................ 85 -- --
Revenue recognition (d)..................................... -- 81 (172)
Cumulative impact of adopting SAB 101 (d)................... -- -- (59)
Exploration, property evaluation and holding costs (d,g).... (87) -- --
Financing costs (e)......................................... (222) -- --
Beneficial conversion feature (e)........................... (2,774) -- --
------- ------- --------
Net loss--U.S. GAAP....................................... (5,773) (3,194) (20,978)
Unrealized (loss) gain on marketable securities (c)......... (85) -- 144
------- ------- --------
Comprehensive loss--U.S. GAAP............................. $(5,858) $(3,194) $(20,834)
======= ======= ========
Basic and diluted loss per share (restated--Note 8)--U.S.
GAAP...................................................... $ (0.85) $ (0.70) $ (4.63)
The significant differences in the consolidated balance sheets as at
December 31, 2002 and 2001 relative to U.S. GAAP were:
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 DECEMBER 31, 2001
------------------------------- ---------------------------------
PER CDN. CDN/U.S. PER U.S. PER CDN. CDN./U.S. PER U.S.
(U.S. $ 000'S) GAAP ADJ. GAAP GAAP ADJ. GAAP
- -------------- -------- -------- --------- --------- --------- ---------
Current assets (d)............ $ 4,105 $ -- $ 4,105 $ 1,155 $ (150) $ 1,005
Property, plant and
equipment (b,g)............. 16,583 (7,874) 8,709 12,734 (7,637) 5,097
-------- -------- --------- --------- -------- ---------
Total assets................ $ 20,688 $ (7,874) $ 12,814 $ 13,889 $ (7,787) $ 6,102
======== ======== ========= ========= ======== =========
Current liabilities........... 598 -- 598 1,354 -- 1,354
Long term liabilities......... 4,665 -- 4,665 3,134 -- 3,134
-------- -------- --------- --------- -------- ---------
Total liabilities........... 5,263 -- 5,263 4,488 -- 4,488
Capital stock (a)............. 129,575 76,754 206,329 121,146 76,754 197,900
Special warrants (e).......... -- 222 222 -- -- --
Contributed surplus (a,c)..... -- 5,560 5,560 -- 2,786 2,786
Warrants and options.......... 370 -- 370 -- -- --
Other comprehensive loss
(c)......................... -- (85) (85) -- -- --
Deficit (a,b,d,f,g)........... (114,520) (90,325) (204,845) (111,745) (87,327) (199,072)
-------- -------- --------- --------- -------- ---------
Total shareholders'
equity.................... 15,425 (7,874) 7,551 9,401 (7,787) 1,614
-------- -------- --------- --------- -------- ---------
Total liabilities &
shareholders' equity........ $ 20,688 $ (7,874) $ 12,814 $ 13,889 $ (7,787) $ 6,102
======== ======== ========= ========= ======== =========
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
12. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
(d) The Corporation recognizes revenue upon adsorption of gold onto carbon.
US GAAP under SAB 101, the revenue recognition standard introduced
effective January 1, 2000, requires that revenue not be recorded before
title is passed.
The significant differences in the consolidated statements of loss relative to
U.S. GAAP were as follows:
YEAR ENDED DECEMBER 31
------------------------------
2000 1999 1998
-------- -------- --------
Loss for the year--Canadian GAAP............................ $(13,209) $(27,700) $(1,640)
Impairment of mineral properties (b)........................ (7,637) 13,248 --
Amortization reduction (b).................................. 99 736 3,201
Revenue Recognition (d)..................................... (172) -- --
Cumulative impact of adopting SAB 101 (d)................... (59) -- --
-------- -------- -------
Earnings (loss) for the year before comprehensive income
adjustments............................................... (20,978) (13,716) 1,561
Unrealised (gains) losses on marketable securities (c)...... 144 (21) (132)
-------- -------- -------
Comprehensive income (loss)................................. $(20,834) $(13,737) $ 1,429
======== ======== =======
Earnings (loss) per share before adoption of SAB 101........ $ (0.23) $ (0.15) $ (0.02)
======== ======== =======
Earnings (loss) per share before comprehensive income
adjustments............................................... $ (0.23) $ (0.15) $ (0.02)
======== ======== =======
The significant differences in the balance sheets as at December 31, 2000 and
1999 relative to U.S. GAAP were:
2000 1999
--------------------------------- --------------------------------
PER CDN. CDN./U.S. PER U.S. PER CDN. CDN./U.S. PER U.S.
GAAP ADJ. GAAP GAAP ADJ. GAAP
--------- --------- --------- -------- --------- ---------
Current assets................. $ 1,320 $ (231) $ 1,089 $ 5,283 $ -- $ 5,283
Property, plant and equipment
(b).......................... 15,912 (7,637) 8,275 28,146 (99) (28,047)
Common shares (a).............. 121,146 76,754 197,900 121,146 76,754 197,900
Contributed surplus (a)........ -- 2,786 2,786 -- 2,786 2,786
Deficit (a, b, d).............. (106,985) (87,408) (194,393) (93,776) (79,639) (173,415)
Other comprehensive income..... -- -- -- -- (144) (144)
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
12.AS OTHERWISE STATED.
19. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY UNDER U.S. GAAP
NUMBER OF CUMULATIVEWARRANTS AND OTHER COMMON SHARETOTAL
CAPITAL SPECIAL CONTRIBUTED TRANSLATION COMPREHENSIVE SHARES CAPITALSHAREHOLDERS'
(U.S. $ 000'S) STOCK WARRANTS OPTIONS SURPLUS ADJUSTMENT DEFICIT INCOME
----------LOSS EQUITY
- -------------- -------- ----------- ------------------- -------- -------- --------- ------------- -------------
Balance at December 31, 1997..................... 89,152,540 197,624 2,786 (1,360) (161,260) 9
Shares issued on
acquisition of Mineral
Ridge Inc. (Notes 1 and
3)....................... 1,562,500 2761999.......... $197,900 $ -- $ -- $2,786 $(174,900) $ -- $25,786
Net Loss.............................. -- (20,978)
-------- ---- ---- ------ --------- ---- -------
Balance at December 31, 2000.......... $197,900 $ -- $ -- $2,786 $(195,878) $ -- $ 4,808
Net Loss.............................. -- -- -- -- Currency translation
adjustment...............(3,194) --
-------- ---- ---- ------ --------- ---- -------
Balance at December 31, 2001.......... $197,900 $ -- $ -- (180)$2,786 $(199,072) $ -- --
Comprehensive income (c)...$ 1,614
See Note 8............................ 8,429 -- -- -- -- --
(132)
Earnings...................Special warrants (e).................. -- 222 -- -- -- --
1,561Contributed surplus (e)............... -- ---------- -------- ------ ------- --------- -----
Balance at December 31,
1998..................... 90,715,040 197,900 2,786 (1,540) (159,699) (123)
Currency translation
adjustment...............-- 2,774 -- --
Warrants & options.................... -- -- 370 -- -- --
59 -- --
Comprehensive income (c)...Other comprehensive loss (e).......... -- -- -- -- -- (21)(85)
Net Loss...................Loss.............................. -- -- -- -- (13,716)(5,773) --
---------- -------- ---- ---- ------ ------- --------- --------- -------
Balance at December 31, 1999..................... 90,715,040 197,900 2,786 (1,481) (173,415) (144)
Currency translation
adjustment............... -- -- -- (7) -- --
Comprehensive income (c)... -- -- -- -- -- 144
Net Loss................... -- -- -- -- (20,978) --
---------- -------- ------ ------- --------- -----
Balance at December 31,
2000..................... 90,715,040 $197,900 $2,786 $(1,488) $(194,393)2002.......... $206,329 $222 $370 $5,560 $(204,845) $(85) $ 0
==========7,551
======== ==== ==== ====== ======= ========= ========= =======
STOCK BASED COMPENSATION PLANS
The Corporation applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans in its U.S. GAAP presentations. If
compensation cost for the Corporation's stock-based compensation plans had been
determined based on the fair value at the grant dates for awards under the plans
consistent with the method described in SFAS No. 123, the Corporation'sCorporation would have
recorded compensation expense of $486,000, $20,000 and $15,000 in 2002, 2001 and
2000 respectively. Accordingly, the consolidated net loss and loss per share
under U.S. GAAP would have been
increased to the pro forma amounts indicated below:
(U.S. $ 000'S, EXCEPT PER SHARE DATA) 2002 2001 2000
1999 1998- ------------------------------------- -------- -------- --------
Net earnings (loss)loss under U.S. GAAP.................GAAP As reported $(5,773) $(3,194) $(20,978) $(13,716) $1,561
Pro forma (6,259) (3,214) (20,993) (14,077) 1,229
Loss per share under U.S. GAAP...................... As reported (0.23) (0.15) 0.02$ (0.85) $ (0.70) $ (4.63)
Pro forma (0.23) (0.16) 0.02(0.93) (0.71) (4.63)
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
12. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
The fair value of each option grant is estimated on the date of grant for all
plans using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 2000, 19992002, 2001 and 1998:2000:
2002 2001 2000
1999 1998----------- -------- -------------- --------- ---------
Expected volatility.................................... 61.9% 61.9%volatility................... 50.0% 75.0% 61.9%
Risk-free interest rate................................rate............... 3.5% 5.0% 5.09% to 5.74%
4.81% 5.46%
Expected lives.........................................lives (years)................ 3 to 5 2 years 4.5 years 4.5 years2
Dividend yield.........................................yield........................ 0% 0% 0%
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, theThe FASB has issued SFAS No. 133,143, "Accounting for Derivative
InstrumentsAsset Retirement Obligations."
This statement addresses financial accounting and Hedging Activities", which is effectivereporting for all fiscal years
commencing after June 15, 2000. SFAS No. 133obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. It requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded eacha liability for an
asset retirement obligation be recognized in the period in current earnings or other
comprehensive income, depending on whetherwhich it is incurred
if a derivative is designatedreasonable estimate of
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
19. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. The corporation is
analyzing the impact of SFAS No. 143 and expects that the impact on the
Corporation's consolidated financial position or result of operations will not
be material when the company adopts the standard on January 1, 2003.
The CICA has approved, subject to written ballot, a hedge transactionnew Handbook section, "Asset
Retirement Obligations," to replace the current guidance on future removal and
if itsite restoration costs included in the CICA accounting standard 3061, "Property,
Plant and Equipment." The standard, which is similar to SFAS 143, is effective
for years beginning on or after January 1, 2004. The standard requires
recognition of a liability at its fair value for the typeobligation associated with
the retirement of hedge transaction. At
December 31, 2000,a tangible long-lived asset. A corresponding asset retirement
cost would be added to the carrying amount of the related asset and amortized to
expense over the useful life of the asset. The company is analyzing the impact
of this new standard, which will be adopted on January 1, 2003.
The Accounting Standards Board of the Canadian Institute of Chartered
Accountants (CICA) has issued CICA 3063 "Impairment of Long-Lived Assets". This
statement establishes standards for the recognition, measurement and disclosure
of the impairment of long-lived non-monetary assets, including property, plant
and equipment, intangible assets with finite useful lives, deferred
pre-operating costs and long-term prepaid assets. The corporation does not
expect that the implementation of these guidelines will have a material impact
on its consolidated financial position or results of operations.
20. RELATED PARTY TRANSACTIONS
PAREDONES AMARILLOS
In August 2002, the Corporation didacquired 100% of the shares of Minera Paredones
Amarillos S.A. de C.V. from Viceroy Resource Corporation (Viceroy). The
Corporation and Viceroy had a common director at the time of the transaction.
The Corporation paid to Viceroy Cdn $1.0 million (approximately U.S. $641,000)
at closing, together with 303,030 equity units priced at Cdn $4.95
(approximately U.S. $3.17), being 90% of the weighted average closing price of
the Corporation's common shares on the five trading days immediately preceding
the date of the definitive purchase agreement, with each unit comprised of one
common share and one two-year warrant to purchase one common share at a price of
Cdn $6.88 (approximately U.S. $4.40), or 125% of the weighted average closing
price of the Corporation's common shares on the five trading days immediately
preceding the date of the definitive purchase agreement. A final cash payment of
Cdn $0.5 million (approximately U.S. $320,000) is due in August 2003.
MAVERICK SPRINGS
In November, 2002, the Corporation entered into a non-binding letter of intent
to grant to Silver Standard Resources Inc., (Silver Standard) an option to
acquire the Corporation's interest in the silver resources hosted in the
Maverick Springs project in Nevada. The Corporation and Silver Standard have a
common director. Under the terms of the proposed agreement, which is subject to
regulatory approvals and the completion of a definitive agreement, the
Corporation will retain its 100% interest in the gold resources, Silver Standard
will pay the Corporation $1.5 million over four years including a cash payment
of $300,000 at closing. The remaining $1.2 million will be used to fund
exploration programs, land holding costs and option payments on the Maverick
Springs project. An amount of $188,890 in exploration programs has been incurred
by the Corporation in 2002, which will be recoverable from Silver Standard on
completion of this agreement. Silver Standard and the Corporation will jointly
manage exploration of the Maverick
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT AS OTHERWISE STATED.
20. RELATED PARTY TRANSACTIONS (CONTINUED)
Springs project through a management committee, with the Corporation as
operator. The Corporation will have 45% of the vote on the committee, Silver
Standard will have a 55% vote. After Silver Standard has completed its
$1.5 million in payments to the Corporation, costs will be shared by the two
corporations on the same ratio as established for operation of the management
committee, subject to standard dilution provisions. The definitive agreement has
not have any derivative instruments or
hedging activities.
13.yet been finalized.
21. SUBSEQUENT EVENTS
In(A) LONG VALLEY ACQUISITION
On January 2001,22, 2003, the Corporation realizedpaid to Standard the first $100,000
installment for the purchase of the Long Valley project (Note 3).
(B) PRIVATE PLACEMENT
On February 7, 2003, the Corporation completed a $3.4 million private placement
financing. The gross proceeds were placed in escrow pending shareholder
approval. On February 27, 2003, at a Special General Meeting of the
Shareholders, shareholders voted in favor of the financing and on February 28,
2003, the gross proceeds were released to the Corporation from escrow.
Through the private placement, the Corporation raised proceeds, net proceeds of
$1.8 million fromcommissions and costs, of approximately $3.0 million. The private placement
consisted of the sale of four haul trucks from1.4 million special warrants, each priced at $2.43. The
special warrants were automatically converted into equity units upon shareholder
approval. Each equity unit consists of one common share and a warrant,
exercisable over a four-year period, to purchase one common share for $3.14
during the Hycroft mine,first year, $3.56 during the second year, $3.92 during the third year
and $4.28 during the fourth year. Starting on the second anniversary of which $0.6 million was used
to retire a long-term equipment loan (note 4).
In March 2001,the
closing of this private placement, if the common shares of the Corporation soldtrade
at a hydraulic shovelvalue of 150% or more of the respective exercise price for net proceedsa period of $0.8 million.
53
15
consecutive trading days on the American Stock Exchange, then the Corporation
has the option to request that the warrants be exercised. If the warrants are
not exercised within 15 business days following this request, they will be
cancelled. A 10% cash finder's commission was paid in connection with the
private placement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
53
PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
DIRECTORS
TheInformation concerning the Corporation's directors will be contained in the
Corporation's definitive Proxy Statement to be filed pursuant to Regulation 14A
promulgated under the Securities Exchange Act of Vista Gold are elected each year at1934 for the annual general meeting2003 Annual
General Meeting of shareholdersShareholders (the "Proxy Statement") under the caption
"Particulars of Matters to be Acted Upon--Election of Directors" and hold office until their successors are elected or appointed.
The present directors of Vista Gold, together withis
incorporated herein by reference.
Information concerning the location of their
residences, age, length of service and business experience, are described below.
NAME, RESIDENCE, PRINCIPAL OCCUPATION,
POSITION AND AGE DIRECTOR SINCE BUSINESS OR EMPLOYMENT
- ---------------- ------------------ ----------------------------------------------
DAVID R. SINCLAIR.............. May 1, 1995 Chartered Accountant; Corporate Director;
Nanoose Bay, British Columbia Director, Cominco Ltd., a mining company.
DIRECTOR AND CHAIRMAN
Age - 71
ROSS J. BEATY.................. November 12, 1996 Geologist; Chairman of Pan American Silver
Vancouver, British Columbia Corp., a mining company, 1994 to present;
DIRECTOR AND VICE CHAIRMAN formerly, President of Equinox
Age - 49 Resources Ltd., a mining company.
RONALD J. MCGREGOR............. May 19, 1999 President and Chief Executive Officer from
Littleton, Colorado September 2000 to present; Vice President,
DIRECTOR Development and Operations of the Corporation
Age - 53 from July 1, 1996 to September 8, 2000;
Metallurgist, Vice President, Project
Development of Cambior USA Inc., a mining
company, from 1991 to 1996. Vice President,
Project Development of Westmont Mining Inc.
from 1984 to 1991.
MICHAEL B. RICHINGS............ May 1, 1995 Mining engineer; formerly, President and Chief
Littleton, Colorado Executive Officer of the Corporation from
DIRECTOR June 1995 to September 2000; formerly,
Age - 56 President of Atlas Corporation, a mining
company, from January 1995 to May 1995; Group
Executive and President of Lac Minerals Ltd.
South America, a mining company, from 1993 to
1995; Vice President of Operations of Atlas
Corporation from 1990 to 1992.
54
NAME, RESIDENCE, PRINCIPAL OCCUPATION,
POSITION AND AGE DIRECTOR SINCE BUSINESS OR EMPLOYMENT
- ---------------- ------------------ ----------------------------------------------
C. THOMAS OGRYZLO.............. March 8, 1996 President and Chief Executive Officer Canatec
Toronto, Ontario Development Corporation, a resource management
DIRECTOR and development company; Previously from
Age - 61 March 8, 1996, President and Chief Executive
Officer of Black Hawk Mining Inc. and its
subsidiary, Triton Mining Corporation. Both
companies are gold producers; formerly,
President of Kilborn SNC-Lavalin Inc.; and
President of the Kilborn Group of Companies,
providing engineering and construction
services.
KEITH E. STEEVES............... September 29, 1995 Chartered Accountant; Consultant; Director of
Richmond, British Columbia Teck Corporation and Cross Lake
DIRECTOR Minerals Ltd., mining companies; formerly,
Age - 68 Senior Vice President, Commercial of Teck
Corporation, a mining company.
ALAN G. THOMPSON............... December 1, 1989 Businessman; President and Chief Executive
West Vancouver, Officer of A.G.T. Financial Corporation, an
British Columbia investment company.
DIRECTOR
Age - 73
PETER WALTON................... May 24, 1989 Self-employed business consultant.
West Vancouver,
British Columbia
DIRECTOR
Age - 71
NoneCorporation's executive officers is furnished in
Part I hereof under a separate unnumbered caption ("Executive Officers of the
aboveCorporation").
Information concerning certain filing obligations under the federal securities
laws applicable to directors has entered into any arrangement or understanding
with any other person pursuant to which he was or is to be elected as a director
of Vista Gold or a nominee of any other person, except as disclosed herein.
EXECUTIVE OFFICERS
Theand executive officers of Vista Gold are appointed bythe Corporation, and
hold office at the
pleasureholders of more than 10% of the Board of Directors of Vista Gold. The executive officers of
Vista Gold during 2000, together with their age, length of serviceCorporation's common shares, will be contained
in the Proxy Statement under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" and business
experience, are described below.
NAME, POSITION AND AGE HELD OFFICE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ---------------------- ------------------ ----------------------------------------------
RONALD J. MCGREGOR............. September 8, 2000 President and Chief Executive Officer of Vista
PRESIDENT, CHIEF EXECUTIVE Gold from September 8, 2000 to present; Vice
OFFICER AND DIRECTOR President Development and Operations for Vista
Age - 53 Gold from July 1, 1996 to September 8, 2000;
Vice President Project Development, Cambior
USA Inc., a mining company.
55
NAME, POSITION AND AGE HELD OFFICE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ---------------------- ------------------ ----------------------------------------------
ROBERT L. FOLEN................ September 15, 2000 Vice President Finance of Vista Gold from
VICE PRESIDENT FINANCE September 15, 2000 to present. Accounting
Age - 49 Manager of Hycroft Resources and
Development Inc. and Mineral Ridge
Resources Inc., from October 1998 to
September 2000; Accounting Manager of Hayden
Hill Mine, Sleeper Mine, and Wind Mountain
Mine for Amax Gold Inc., from December 1994 to
September 1998.
MICHAEL B. RICHINGS............ June 1, 1995 President and Chief Executive Officer of Vista
DIRECTOR AND FORMER PRESIDENT Gold from June 1995 to September 8, 2000;
AND CHIEF EXECUTIVE OFFICER. Mining engineer; President of Atlas
RESIGNED AS PRESIDENT AND CHIEF Corporation, a mining company, from
EXECUTIVE OFFICER AS OF January 1995 to May 1995; Group Executive and
SEPTEMBER 8, 2000 President of Lac Minerals Ltd. South America,
Age - 56 a mining company, from 1993 to 1995; Vice
President of Operations of Atlas Corporation
from 1990 to 1992.
ROGER L. SMITH................. March 6, 1998 Vice President Finance of Vista Gold from
FORMER VICE PRESIDENT FINANCE March 1998 to September 15, 2000; Corporate
(RESIGNED AS OF SEPTEMBER 15, Controller of Vista Gold from December 1995 to
2000) March 1998; Vice President Finance of Ramrod
Age - 43 Gold (U.S.A.) Inc., a mining company, from
May 1994 to December 1995; Vice President
Finance of Westmont Gold Inc., a mining
company from July 1991 to May 1994.
WILLIAM F. SIRETT.............. January 1, 1996 Lawyer; Partner, Borden Ladner Gervais LLP, a
SECRETARY law firm.
Age - 50
None of the above executive officers has entered into any arrangement or
understanding with any other person pursuant to which he was or is to be elected
as an executive officer of Vista Gold or a nominee of any other person.
EXECUTIVE AND AUDIT COMMITTEES
Vista Gold does not have an executive committee. Vista Gold is required to have
an audit committee under section 173 of the BUSINESS CORPORATIONS ACT (Yukon
Territory). Vista Gold's audit committee consists of the following directors:
David R. Sinclair, Keith E. Steeves, Peter Walton and Alan G. Thompson.incorporated herein by reference.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
DuringInformation concerning this item will be contained in the financial year ended December 31, 2000,Proxy Statement under
the aggregate cash
compensation paid by the Corporation to all directorscaption "Executive Compensation" and officers of Vista
Gold, as a group was $464,732. This sum includes compensation paid to executive
officers pursuant to the cash incentive plan and retirement savings plan
described below.
Information specified in this Item for individually named directors and officers is incorporated herein by reference from pages 6 to 14 of the Management Information
and Proxy Circular prepared in connection
56
with Vista Gold's Annual General Meeting to be held on May 18, 2001, filed with
the Securities and Exchange Commission concurrently with the filing of this
report.
Pursuant to the terms of the Corporation's incentive policy adopted by the
Corporation in 1989 or certain employment contracts, executive officers and
senior employees of the Corporation are eligible to receive incentive payments.
The Corporation did not make any incentive payments to executive officers or
senior employees under this plan in 2000. Any incentive payments are awarded at
the discretion of the Board of Directors based on recommendations from the
compensation committee. There is no established formula utilized in determining
these incentive payments. The award of incentive payments is motivated by the
Corporation's desire to reward past services rendered to the Corporation and to
provide an incentive for continued service to the Corporation. Incentive
payments to be made during 2001, which may include amounts related to
performance during a portion of 2000, have not yet been determined. The
Corporation has not made any restricted stock awards during the last three
fiscal years.
During the fiscal year ended December 31, 2000, the Corporation set aside or
accrued a total of $13,246 to provide pension, retirement or similar benefits
for directors or officers of Vista Gold pursuant to plans provided or
contributed to by the Corporation. As a part of the aggregate cash compensation
disclosed above, the Corporation sponsors a qualified tax-deferred savings plan
in accordance with the provisions of section 401(k) of the United States
Internal Revenue Service Code which is available to permanent United
States-based employees. Under the terms of this plan, the Corporation makes
contributions of up to 4% of eligible employees' salaries. In addition, the
Corporation contributes between 2% and 4% of permanent Canadian-based employees'
salaries, including executive officers, depending on length of service and to a
maximum of Cdn.$3,500 per year, to the individual's registered retirement
savings plan. There are no other such plans to which the Corporation made any
contribution in relation to its directors or officers in 2000.reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information specifiedExcept as to the information concerning securities authorized for issuance under
equity compensation plans, which is furnished in Item 5 of Part II hereof under
the caption "Equity Compensation Plan Information", the information concerning
this Item for individually named directorsitem will be contained in the Proxy Statement under the caption "Ownership
of the Corporation's Common Shares" and officers is incorporated herein by reference from pages 3 to 5 and 12 to 13 of the Management
Information and Proxy Circular prepared in connection with Vista Gold's Annual
General Meeting to be held on May 18, 2001, filed with the Securities and
Exchange Commission concurrently with the filing of this report.reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 2000, there have been no transactions, or seriesInformation concerning this item will be contained in the Proxy Statement under
the captions "Interest of similar transactions,
or any currently proposed transactions or seriesManagement and Others in Material Transactions" and
"Indebtedness of similar transactions,Directors and Senior Officers" and is incorporated herein by
reference.
ITEM 14. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Based on their evaluation as of a date within 90 days prior to which Vista Gold or anythe filing date
of its subsidiaries was or is a party in whichthis Annual Report on Form 10-K, the amount involved exceeds $60,000 and in which any director orCorporation's principal executive
officer any nominee for election as a director, any security holder knownand principal financial officer have concluded that the Corporation's
disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934 (the "Exchange Act")) are effective to
ensure that information required to be disclosed by the Corporation in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.
(B) CHANGES IN INTERNAL CONTROLS.
There were no significant changes in the Corporation's internal controls or in
other factors that could significantly affect these controls subsequent to the
Corporation to own of record or beneficially more than 5% of the Corporation's
Common Shares, any member of the immediate family of any of the foregoing
persons, had or will have a direct or indirect material interest.
During 2000, there were and are no relationships regarding directors or nominees
for director as stipulated by this item and no director or executive officer,
nominee for election as a director, any memberdate of their immediate family orevaluation, including any corporation or organization in which any of them, directly or indirectly,
beneficially owns 10% or more of any class of equity securities was indebtedcorrective actions with regard to
Vista Gold.
57significant deficiencies and material weaknesses.
54
PART IV
ITEM 14.15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
DOCUMENTS FILED AS PART OF REPORT
FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation are filed as
part of this report:
1. Report of Independent Accountants dated February 23, 2001.28, 2003.
2. Consolidated Balance Sheets--At December 31, 20002002 and 1999.2001.
3. Consolidated Statements of Loss--Years ended December 31, 2000, 1999,2002, 2001, and
1998.2000.
4. Consolidated Statements of Deficit--Years ended December 31, 2000, 1999,
1998.2002, 2001 and
2000.
5. Consolidated Statements of Cash Flows--Years ended December 31, 2000, 1999,2002, 2001,
and 1998.2000.
6. Notes to Consolidated Financial Statements.
See "Item 8. Consolidated Financial Statements and Supplementary Data".
FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed as part of this report because such
schedules are not applicable or the required information is shown in the
consolidated financial statements or notes thereto. See "Item 8. Consolidated
Financial Statements and Supplementary Data".
55
EXHIBITS
The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------------------------
3.01 Articles of Continuation filed as Exhibit 2.01 to the
Form 20-F for the period ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
3.02 By-Law No. 1 of Vista Gold filed as Exhibit 2.01 to the
Form 20-F for the period ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
3.03 Share Certificate of Vista Gold (File No. 1-9025)
3.04 Amended By-Law No. 1 of Vista Gold (File No.1-9025)
10.01 Lease and Option dated July 1, 1985 between Henry C.
Crofoot, trustee, and Hycroft Resources--DevelopmentResources - Development Inc.
(Crofoot Patented Claims), as amended, filed as
Exhibit 10.8 to Granges' Registration Statement on
Form S-1, as amended, and incorporated herein by reference
(File No. 33-17974)
10.02 Lease and Option dated July 1, 1985, between Henry C.
Crofoot, trustee, and Hycroft Resources--DevelopmentResources - Development Inc.
(Crofoot Unpatented Claims), as amended, filed as
Exhibit 10.9 to Granges' Registration Statement on
Form S-1, as amended, and incorporated herein by reference
(File No. 33-17974)
10.03 Lewis Mine Lease and Assignment Agreement included in the
Assignment of Mining Lease dated January 23, 1987 among
Standard Slag Company, Hycroft Lewis, Hycroft Resources
Corporation and Granges, filed as Exhibit 10.7 to Granges'
Registration Statement on Form S-1, as amended, and
incorporated herein by reference (File No. 33-17974)
10.03 Lewis Mine Lease and Assignment Agreement included in the
Assignment of Mining Lease dated January 23, 1987 among
Standard Slag Company, Hycroft Lewis, Hycroft Resources
Corporation and Granges, filed as Exhibit 10.7 to Granges'
Registration Statement on Form S-1, as amended, and
incorporated herein by reference (File No. 33-17974)
58
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10.04 Amendment Agreement dated January 14, 1988, among Henry C.
Crofoot et al and Hycroft Resources--DevelopmentResources - Development Inc. filed
as Exhibit 10.13 to Granges' Annual Report on Form 10-K
for the fiscal year ended December 31, 1988, as amended, and
incorporated herein by reference (File No. 1-9025)
10.05 Lewis Hycroft Agreement dated January 10, 1989, among Frank
W. Lewis, Hycroft Lewis and Hycroft
Resources--DevelopmentResources - Development Inc. filed as Exhibit 10.16
to Granges' Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, as amended, and incorporated herein
by reference (File No. 1-9025)
10.06 Second Amendment Agreement dated March 3, 1989, among Henry
C. Crofoot et al and Hycroft Resources--DevelopmentResources - Development Inc.
filed as Exhibit 10.24 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by reference (File
No. 1-9025)
10.07 Second Lewis-Hycroft Agreement dated March 15, 1991 among
Frank W. Lewis, Granges, Hycroft
Resources--DevelopmentResources - Development Inc. and Hycroft Lewis filed as
Exhibit 10.20 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by reference (File
No. 1-9025)
10.08 Third Amendment Agreement dated August 16, 1991 among Henry
C. Crofoot et al, Hycroft Resources & Development Inc. and
Blackrock Properties, Inc. filed as Exhibit 10.25 to the
Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.09 Agreement dated May 13, 1994 between Granges and Atlas
Corporation filed as Exhibit 2.01 to the Form 20-F for the
period ended December 31, 1994 and incorporated herein by
reference (File No.1-9025)
56
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
10.10 Purchase and Sale Agreement dated June 24, 1994 between
Granges and Hudson Bay Mining and Smelting Co., Limited
filed as Exhibit 10.10 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by reference (File
No. 1-9025)
10.11 Amalgamation Agreement dated February 24, 1995 between
Granges and Hycroft Inc. included in the Joint Management
Information Circular of Granges and Hycroft Inc. filed as
Exhibit 20.1 to the Form 8-K dated May 1, 1995 and
incorporated herein by reference (File No. 1-9025)
10.12 Agreement dated February 24, 1995 between Granges and Atlas
Corporation filed as Exhibit 2.03 to the Form 20-F for the
period ended December 31, 1994 and incorporated herein by
reference (File No. 1-9025)
10.13 Employment Agreement dated June 1, 1995 between Granges and
Michael B. Richings filed as Exhibit 10(i) to the Form 10-Q
for the quarterly period ended June 30, 1995 and
incorporated herein by reference (File No. 1-9025)
10.14 Private Placement Subscription Agreement dated August 25,
1995 between Granges and Zamora filed as Exhibit 10.10
to the Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.15 Letter of Intent between Granges and Atlas Corporation dated
as of October 4, 1995 to enter into an Exploration Joint
Venture Agreement filed as Exhibit 10.14 to the Form 20-F/A
for the year ended December 31, 1994 and incorporated
herein by reference (File No. 1-9025)
59
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10.16 Registration Agreement between Granges and Atlas Corporation
dated as of November 10, 1995 filed as Exhibit 10.12
to the Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.17 Indemnification Agreement between Granges and Atlas
Corporation dated as of November 10, 1995 filed as
Exhibit 10.13 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by reference (File
No. 1-9025)
10.18 Commitment letter dated November 14, 1995 between Granges
and Deutsche Bank AG filed as Exhibit 10.09 to the
Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.19 Exploration and Purchase Option Agreement effective June 7,
1996 between Granges and L.B. Mining filed as Exhibit 2.01
to the Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
10.20 Special Warrant Indenture dated June 7, 1996 between Granges
and Montreal Trust filed as Exhibit 2.02 to the Form 20-F
for the year ended December 31, 1997 and incorporated herein
by reference (File No. 1-9025)
10.21 Warrant Indenture dated June 7, 1996 between Granges and
Montreal Trust filed as Exhibit 2.03 to the Form 20-F
for the year ended December 31, 1997 and incorporated herein
by reference (File No. 1-9025)
10.22 Stock Option Plan of Vista Gold dated November 1996 (File
No. 1-9025)
10.23 Supplemental Warrant Indenture made as of November 1, 1996
between Vista Gold and Montreal Trust with respect to the
Warrant Indenture dated April 25, 1996 between Granges and
Montreal Trust filed as Exhibit 1.01 to the Form 20-F
for the year ended December 31, 1997 and incorporated
herein by reference (File No. 1-9025)
57
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
10.24 Supplemental Warrant Indenture made as of November 1, 1996
between Vista Gold and Montreal Trust with respect to the
Warrant Indenture dated June 7, 1996 between Granges and
Montreal Trust filed as Exhibit 1.02 to the Form 20-F
for the year ended December 31, 1997 and incorporated
herein by reference (File No. 1-9025)
10.25 Establishment of Operating Credit Facility dated
November 22, 1996 from The Bank of Nova Scotia to Vista Gold
and accepted by Vista Gold on November 26, 1996 filed as
Exhibit 2.05 to the Form 20-F for the year ended
December 31, 1997 and incorporated herein by reference (File
No. 1-9025)
10.26 Termination Agreement dated January 10, 1997 between Granges
(U.S.) Inc. and Atlas filed as Exhibit 1.03 to the
Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
10.27 Credit Agreement dated as of February 20, 1997 between The
Bank of Nova Scotia and Hycroft Inc. filed as Exhibit 2.06
to the Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
10.28 Guaranty dated as of February 20, 1997 by Vista Gold in
favor of The Bank of Nova Scotia filed as Exhibit 2.07
to the Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
60
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10.29 Amendment No. 1 dated as of September 30, 1997 between The
Bank of Nova Scotia and Hycroft Inc. Credit Agreement dated
as of February 20, 1997 between The Bank of Nova Scotia and
Hycroft Inc. filed as Exhibit 1.01 to the Form 20-F for the
year ended December 31, 1998 and incorporated herein by
reference (File No. 1-9025)
10.30 Letter Agreement of Private Placement dated April 24, 1998
between Zamora and Gribipe and Amendment dated June 1, 1998
to Letter Agreement of Private Placement Agreement dated
April 24, 1998 (File No. 1-9025)
10.31 Share Purchase Agreement dated October 21, 1998 among
Cornucopia Resources Ltd., Cornucopia Resources Inc., Vista
Gold Holdings Inc. and Vista Gold (File No. 1-9025)
10.32 Restated and Amended Loan Agreement dated as of October 21,
1998 between Mineral Ridge Inc. and Dresdner Bank AG,
New York and Grand Cayman Branches (File No. 1-9025)
10.33 Stock Option Plan of Vista Gold dated November 1996 as
amended in November 1998 (File No. 1-9025)
10.34 Loan and Security Agreement dated as of April 12, 1999
between Hycroft Resources & Development, Inc. and Finova
Capital Corporation. (File No. 1-9025)
10.35 Voluntary Petition under Chapter 11 of the U.S. Bankruptcy
Code dated December 10, 1999 filed by Mineral Ridge
Resources Inc. (File No. 1-9025)
10.36 Sale Agreement dated January 31, 2000 on one hand between
David O'Connor and Vista Gold and on the other hand Empresa
Minera Multiple Capacirca. (File No. 1-9025)
10.37 Employment Agreement dated September 8, 2000 between Vista
Gold and Ronald J. McGregor. 11.01 Statement of Computation of Per Share Earnings of(File No. 1-9025)
10.38 Agency Agreement dated February 1, 2002 between Vista Gold
24.01and Global Resource Investments Ltd. (File No. 1-9025)
10.39 Amendment Agreement dated March 18, 2002 between Vista Gold
and Global Resource Investments Ltd. (File No. 1-9025)
21 Subsidiaries of the Corporation
58
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
23 Consent of PricewaterhouseCoopers LLP, independent auditors
24 Powers of Attorney
99.01 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
99.02 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
REPORTS ON FORM 8-K
The following reports were filed under cover of Form 8-K during the quarter
ended December 31, 2000:2002:
1. Report dated NovemberOctober 8, 20002002, as amended under cover of Form 8-K/A filed as
of October 31, 2002, pursuant to Item 5, regarding the Corporation's resultscompletion of the
acquisition of the Maverick Springs and Mountain View gold projects.
2. Report dated November 5, 2002, pursuant to Item 5, regarding the completion
of technical studies on the Maverick Springs and Mountain View gold
projects.
3. Report dated November 7, 2002, pursuant to Item 5, regarding the letter of
intent to grant an option for the quarter ended September 30, 2000.
SUPPLEMENTAL INFORMATION
Additional information, including directors' and officers' remuneration and
indebtedness, principal holderssilver resources at the Maverick Springs
project.
4. Report dated November 20, 2002, pursuant to Item 5, regarding acquisition of
an option to acquire the Long Valley gold project; the Corporation's securities, optionsthird
quarter results; and resignation of a director.
5. Report dated December 16, 2002, pursuant to purchase securities and interestsItem 5, regarding a
$2.3 million private placement.
6. Report dated December 16, 2002, pursuant to Item 5, regarding the results of
insiders in material transactions, where
applicable, is contained inexploration drilling at the Management Proxy and Information Circular for
the annual general meeting of shareholders held on May 18, 2001.
61Maverick Springs project.
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VISTA GOLD CORP.
Dated: March 26, 200119, 2003 By: /s//S/ RONALD J. MCGREGOR
---------------------------------------------------------------------------------------
Ronald J. McGregor,
PRESIDENT AND CHIEF EXECUTIVE OFFICERPresident and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
Dated: March 26, 200119, 2003 By: /s//S/ RONALD J. MCGREGOR
---------------------------------------------------------------------------------------
Ronald J. McGregor,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
President and Chief Executive Officer
(Principal Executive Officer)
Dated: March 26, 200119, 2003 By: /s/ ROBERT L. FOLEN
------------------------------------------
Robert L. Folen
VICE PRESIDENT FINANCE/S/ JOHN F. ENGELE
---------------------------------------------
John F. Engele
Vice President Finance and Chief Financial
Officer (Principal Financial and Accounting
Officer)
62
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
- --------- -------- ----
*
------------------------------------------- Chairman of the Board and
Director March 26, 2001
David R. Sinclair Director
*
------------------------------------------- Vice-Chairman of the Board and March 26, 2001
Ross J. Beaty Director
/s/ RONALD J. MCGREGOR
------------------------------------------- President and Chief Executive March 26, 200119, 2003
- --------------------------------------
Ronald J. McGregor
Officer and Director
*
------------------------------------------- Director March 26, 200119, 2003
- --------------------------------------
John M. Clark
* Director March 19, 2003
- --------------------------------------
C. Thomas Ogryzlo
* ------------------------------------------- Director March 26, 200119, 2003
- --------------------------------------
Michael B. Richings
* ------------------------------------------- Director March 26, 2001
Alan G. Thompson
*
------------------------------------------- Director March 26, 2001
Peter Walton
*
------------------------------------------- Director March 26, 2001
Keith Steeves19, 2003
- --------------------------------------
Robert A. Quartermain
* On his own behalf and pursuantPursuant to a Power of Attorney dated March 26, 2001,10, 2003, the undersigned by signing
his name hereby signs this report in the name and on behalf of the foregoing
directors.
/S/ RONALD J. MCGREGOR
- --------------------------------------------
RONALD J. MCGREGOR
60
CERTIFICATION
I, Ronald J. McGregor, certify that:
1. I have reviewed this annual report on Form 10-K of Vista Gold Corp.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Dated: March 19, 2003 /s/ RONALD J. MCGREGOR
------------------------------------------------------------------------------------------------------
Ronald J. McGregor,
President and Chief Executive Officer
(Principal Executive Officer)
6361
CERTIFICATION
I, John F. Engele, certify that:
1. I have reviewed this annual report on Form 10-K of Vista Gold Corp.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Dated: March 19, 2003 /s/ JOHN F. ENGELE
-----------------------------------------------------------
John F. Engele,
Vice President Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
62