UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, | ||
OR | ||
□ |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-9025
VISTA GOLD CORP.
(Exact Name of Registrant as Specified in its Charter)
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British Columbia |
| 98-0542444 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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Suite 5, 7961 Shaffer Parkway |
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Littleton, Colorado |
| 80127 |
(Address of Principal Executive Offices) |
| (Zip Code) |
(720) 981-1185
(Registrant’s Telephone Number, including Area Code)
Indicate by checkmark whether the registrant (1) 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 such filing requirements for the past 90 days. Yes ☒No □
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒No □
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer □ Accelerated Filer ☒ Non-Accelerated Filer □
Smaller Reporting Company □ Emerging Growth Company □
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes □ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 99,412,007100,145,811 common shares, without par value, outstanding as of October 17, 2017.22, 2018.
VISTA GOLD CORP.
(An Exploration Stage Enterprise)
FORM 10-Q
For the Quarter Ended September 30, 20172018
2
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
VISTA GOLD CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in U.S. dollars and in thousands, except shares)
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| September 30, |
| December 31, |
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| September 30, |
| December 31, |
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| 2017 |
| 2016 |
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| 2018 |
| 2017 |
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Assets: |
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Current assets: |
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Cash and cash equivalents |
| $ | 1,248 |
| $ | 1,904 |
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| $ | 1,163 |
| $ | 1,431 |
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Short-term investments (Note 2) |
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| 16,658 |
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| 21,975 |
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Other investments, at fair value (Note 2) |
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| 4,136 |
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| 4,994 |
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Short-term investments (Note 3) |
| 9,029 |
| 15,144 |
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Other investments, at fair value (Note 3) |
| 5,500 |
| 3,746 |
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Other current assets |
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| 528 |
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| 648 |
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| 227 |
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| 794 |
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Total current assets |
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| 22,570 |
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| 29,521 |
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| 15,919 |
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| 21,115 |
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Non-current assets: |
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Mineral properties (Note 3) |
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| 3,874 |
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| 3,874 |
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Plant and equipment, net (Note 4) |
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| 7,754 |
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| 8,213 |
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Mineral properties (Note 4) |
| 2,471 |
| 2,471 |
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Plant and equipment, net (Note 5) |
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| 7,389 |
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| 7,555 |
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Total non-current assets |
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| 11,628 |
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| 12,087 |
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| 9,860 |
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| 10,026 |
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Total assets |
| $ | 34,198 |
| $ | 41,608 |
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| $ | 25,779 |
| $ | 31,141 |
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Liabilities and Shareholders' Equity: |
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Current liabilities: |
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Accounts payable |
| $ | 479 |
| $ | 252 |
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| $ | 217 |
| $ | 830 |
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Accrued liabilities and other |
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| 722 |
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| 481 |
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| 493 |
| 986 |
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Provision for environmental liability |
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| 260 |
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| 350 |
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| 242 |
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| 242 |
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Total current liabilities |
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| 1,461 |
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| 1,083 |
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| 952 |
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| 2,058 |
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Total liabilities |
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| 1,461 |
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| 1,083 |
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| 952 |
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| 2,058 |
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Commitments and contingencies – (Note 6) |
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Commitments and contingencies – (Note 7) |
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Shareholders' equity: |
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Common shares, no par value - unlimited shares authorized; shares outstanding: 2017 - 99,412,007 and 2016 - 97,786,608 (Note 5) |
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| 455,859 |
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| 455,443 |
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Accumulated other comprehensive income/(loss) |
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| (5) |
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| 15 |
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Common shares, no par value - unlimited shares authorized; shares outstanding: 2018 - 100,089,561 and 2017 - 99,412,007 (Note 6) |
| 456,730 |
| 456,053 |
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Accumulated other comprehensive loss |
| — |
| (2) |
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Accumulated deficit |
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| (423,117) |
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| (414,933) |
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| (431,903) |
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| (426,968) |
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Total shareholders' equity |
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| 32,737 |
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| 40,525 |
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| 24,827 |
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| 29,083 |
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Total liabilities and shareholders' equity |
| $ | 34,198 |
| $ | 41,608 |
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| $ | 25,779 |
| $ | 31,141 |
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Approved by the Board of Directors
Racy A. S
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/s/ Tracy A. Stevenson Tracy A. Stevenson Director | /s/ John M. Clark John M. Clark Director |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
VISTA GOLD CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS)
(Dollar amounts in U.S. dollars and in thousands, except share and per share data)
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| Three Months Ended September 30, |
| Nine Months Ended September 30, |
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| Three Months Ended September 30, |
| Nine Months Ended September 30, |
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| 2017 |
| 2016 |
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| 2016 |
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| 2017 |
| 2018 |
| 2017 |
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Operating expense: |
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Exploration, property evaluation and holding costs |
| $ | (1,635) |
| $ | (1,168) |
| $ | (4,695) |
| $ | (2,979) |
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| $ | (960) |
| $ | (1,635) |
| $ | (3,560) |
| $ | (4,695) |
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Corporate administration |
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| (823) |
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| (581) |
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| (2,619) |
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| (2,319) |
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| (969) |
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| (823) |
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| (3,280) |
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| (2,619) |
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Depreciation and amortization |
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| (137) |
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| (144) |
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| (455) |
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| (431) |
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| (12) |
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| (137) |
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| (252) |
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| (455) |
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Gain on disposal of mineral property, net (Note 3) |
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| 358 |
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| 150 |
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Gain on disposal of mineral properties, net (Note 4) |
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| 358 |
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Total operating expense |
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| (2,595) |
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| (1,893) |
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| (7,411) |
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| (5,579) |
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| (1,941) |
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| (2,595) |
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| (7,092) |
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| (7,411) |
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Non-operating income/(expense): |
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Gain/(loss) on other investments (Note 2) |
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| (78) |
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| (234) |
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| (858) |
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| 3,586 |
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Research and development grant, net (Note 9) |
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| — |
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| — |
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| 744 |
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(Loss)/gain on other investments (Note 3) |
| (274) |
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| (78) |
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| 1,754 |
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| (858) |
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Interest income |
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| 38 |
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| 20 |
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| 117 |
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| 45 |
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| 72 |
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| 38 |
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| 322 |
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| 117 |
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Other income/(expense) |
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| (20) |
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| 24 |
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| (32) |
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| 44 |
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| 81 |
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| (20) |
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| 83 |
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| (32) |
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Total non-operating income/(expense) |
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| (60) |
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| (190) |
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| (773) |
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| 4,419 |
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| (121) |
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| (60) |
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| 2,159 |
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| (773) |
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Net loss |
| $ | (2,655) |
| $ | (2,083) |
| $ | (8,184) |
| $ | (1,160) |
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| $ | (2,062) |
| $ | (2,655) |
| $ | (4,933) |
| $ | (8,184) |
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Other comprehensive loss: |
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Unrealized fair value increase/(decrease) on available-for-sale securities |
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| 1 |
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| 7 |
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| (20) |
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| 71 |
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Unrealized fair value increase/ (decrease) on available-for-sale securities |
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| 1 |
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| — |
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| (20) |
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Comprehensive loss |
| $ | (2,654) |
| $ | (2,076) |
| $ | (8,204) |
| $ | (1,089) |
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| $ | (2,062) |
| $ | (2,654) |
| $ | (4,933) |
| $ | (8,204) |
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Basic: |
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Weighted average number of shares outstanding |
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| 98,993,395 |
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| 92,543,232 |
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| 98,363,761 |
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| 86,135,588 |
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| 99,805,266 |
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| 98,993,395 |
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| 99,600,267 |
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| 98,363,761 |
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Net loss per share |
| $ | (0.03) |
| $ | (0.02) |
| $ | (0.08) |
| $ | (0.01) |
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| $ | (0.02) |
| $ | (0.03) |
| $ | (0.05) |
| $ | (0.08) |
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Diluted: |
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Weighted average number of shares outstanding |
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| 98,993,395 |
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| 92,543,232 |
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| 98,363,761 |
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| 86,135,588 |
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| 99,805,266 |
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| 98,993,395 |
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| 99,600,267 |
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| 98,363,761 |
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Net loss per share |
| $ | (0.03) |
| $ | (0.02) |
| $ | (0.08) |
| $ | (0.01) |
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| $ | (0.02) |
| $ | (0.03) |
| $ | (0.05) |
| $ | (0.08) |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
VISTA GOLD CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollar amounts in U.S. dollars and in thousands)
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| Accumulated other |
| Total |
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| Accumulated other |
| Total |
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| Common |
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| Accumulated |
| comprehensive |
| shareholders' |
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| Common |
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| Accumulated |
| comprehensive |
| shareholders' |
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| shares |
| Amount |
| deficit |
| income/(loss) |
| equity |
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| shares |
| Amount |
| deficit |
| income/(loss) |
| equity |
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Balances at December 31, 2015 |
| 82,883,562 |
| $ | 438,900 |
| $ | (411,800) |
| $ | (35) |
| $ | 27,065 |
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Units issued (net of offering costs of $1,425) |
| 12,362,500 |
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| 15,883 |
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| — |
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| — |
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| 15,883 |
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Shares issued (RSUs vested/options exercised) |
| 2,540,546 |
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| 15 |
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| — |
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| — |
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| 15 |
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Stock-based compensation |
| — |
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| 645 |
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| — |
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| — |
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| 645 |
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Other comprehensive income |
| — |
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| — |
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| — |
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| 50 |
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| 50 |
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Net loss |
| — |
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| — |
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| (3,133) |
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| — |
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| (3,133) |
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Balances at December 31, 2016 |
| 97,786,608 |
| $ | 455,443 |
| $ | (414,933) |
| $ | 15 |
| $ | 40,525 |
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| 97,786,608 |
| $ | 455,443 |
| $ | (414,933) |
| $ | 15 |
| $ | 40,525 |
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Shares issued (RSUs vested, net of shares withheld) |
| 1,625,399 |
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| (264) |
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| — |
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| — |
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| (264) |
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| 1,625,399 |
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| (264) |
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| — |
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| — |
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| (264) |
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Stock-based compensation |
| — |
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| 680 |
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| — |
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| — |
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| 680 |
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| — |
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| 874 |
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| — |
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| — |
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| 874 |
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Other comprehensive loss |
| — |
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| — |
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| — |
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| (20) |
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| (20) |
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| — |
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| — |
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| — |
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| (17) |
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| (17) |
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Net loss |
| — |
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| — |
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| (8,184) |
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| — |
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| (8,184) |
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| — |
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| — |
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| (12,035) |
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| — |
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| (12,035) |
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Balances at September 30, 2017 |
| 99,412,007 |
| $ | 455,859 |
| $ | (423,117) |
| $ | (5) |
| $ | 32,737 |
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Balances at December 31, 2017 |
| 99,412,007 |
| $ | 456,053 |
| $ | (426,968) |
| $ | (2) |
| $ | 29,083 |
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Cumulative adjustment related to Accounting Standard Update 2016-01 |
| — |
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| — |
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| (2) |
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| 2 |
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| — |
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Adjusted balance at January 1, 2018 |
| 99,412,007 |
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| 456,053 |
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| (426,970) |
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| — |
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| 29,083 |
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Shares issued (RSUs vested, net of shares withheld) |
| 637,554 |
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| (122) |
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| — |
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| (122) |
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Shares issued (exercise of stock options) |
| 40,000 |
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| 16 |
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| — |
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| 16 |
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Stock-based compensation |
| — |
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| 855 |
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| — |
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| 855 |
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Option amendment (Note 6) |
| — |
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| (72) |
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| — |
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| (72) |
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Net loss |
| — |
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| — |
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| (4,933) |
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| (4,933) |
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Balances at September 30, 2018 |
| 100,089,561 |
| $ | 456,730 |
| $ | (431,903) |
| $ | — |
| $ | 24,827 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
VISTA GOLD CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in U.S. dollars and in thousands)
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| Nine months ended September 30, |
| Nine months ended September 30, | ||||||||||
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| 2017 |
| 2016 |
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| 2018 |
| 2017 |
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Cash flows from operating activities: |
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Net loss for the period |
| $ | (8,184) |
| $ | (1,160) |
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| $ | (4,933) |
| $ | (8,184) |
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Adjustments to reconcile net income/(loss) for the period to net cash used in operations: |
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Adjustments to reconcile net loss for the period to net cash used in operations: |
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Depreciation and amortization |
|
| 455 |
|
| 431 |
|
|
| 252 |
|
| 455 |
|
Stock-based compensation |
|
| 680 |
|
| 476 |
|
|
| 855 |
|
| 680 |
|
Gain on disposal of mineral property |
|
| (358) |
|
| (150) |
|
|
| — |
|
| (358) |
|
(Gain)/loss on other investments |
|
| 858 |
|
| (3,586) |
|
|
| (1,754) |
|
| 858 |
|
Change in working capital account items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets |
|
| 104 |
|
| 65 |
|
|
| 411 |
|
| 104 |
|
Accounts payable, accrued liabilities and other |
|
| 378 |
|
| (200) |
|
|
| (1,178) |
|
| 378 |
|
Net cash used in operating activities |
|
| (6,067) |
|
| (4,124) |
|
|
| (6,347) |
|
| (6,067) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of marketable securities |
|
| 156 |
|
| — |
| |||||||
Disposition of short-term investments, net of acquisitions |
|
| 5,317 |
|
| (11,486) |
|
|
| 6,115 |
|
| 5,317 |
|
Additions to plant and equipment |
|
| — |
|
| (35) |
|
|
| (86) |
|
| — |
|
Proceeds from option/sale agreements, net |
|
| 358 |
|
| 150 |
|
|
| — |
|
| 358 |
|
Net cash provided by/(used in) investing activities |
|
| 5,675 |
|
| (11,371) |
| |||||||
Net cash provided by investing activities |
|
| 6,185 |
|
| 5,675 |
| |||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from equity financings, net |
|
| — |
|
| 15,883 |
| |||||||
Payment of taxes from withheld shares |
|
| (264) |
|
| — |
|
|
| (122) |
|
| (264) |
|
Proceeds from exercise of stock options |
|
| — |
|
| 15 |
|
|
| 16 |
|
| — |
|
Net cash provided by/(used in) financing activities |
|
| (264) |
|
| 15,898 |
| |||||||
Net cash used in financing activities |
|
| (106) |
|
| (264) |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
| (656) |
|
| 403 |
| |||||||
Net decrease in cash and cash equivalents |
|
| (268) |
|
| (656) |
| |||||||
Cash and cash equivalents, beginning of period |
|
| 1,904 |
|
| 902 |
|
|
| 1,431 |
|
| 1,904 |
|
Cash and cash equivalents, end of period |
| $ | 1,248 |
| $ | 1,305 |
|
| $ | 1,163 |
| $ | 1,248 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
VISTA GOLD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All dollar amounts in U.S dollars and in thousands, except per share, per ounce and per option amounts unless otherwise noted)
1. Nature of Operations and Basis of Presentation
Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration, and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration. We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work.
The Company’s flagship asset is its 100% owned Mt Todd gold project (“Mt Todd”) in the Northern Territory (“NT”) Australia. We are currently completing metallurgical and other engineering studies that we believe will lead to improved gold recovery and production costs. This new information , together with the most current economic factors, will be used to update the Mt Todd Preliminary Feasibility Study (completed May 2013is the largest undeveloped gold project in Australia. In January 2018, the Company received authorization for the last major environmental permit and amended July 2014) (“PFS”we announced the positive results of an updated preliminary feasibility study (the “PFS”). for Mt Todd. Subsequently, Vista has completed additional metallurgical testing, including ongoing fine grinding evaluations, which demonstrate further improvements in gold recovery. With these important milestones and subsequent project improvements complete, Vista is in a better position to identify and pursue those strategic alternatives that may provide the best opportunity for shareholders to realize fair value for Mt Todd. We also hold 4.2%7.8 million shares of the outstanding common shares in the capital of Midas Gold Corp. (“Midas Gold Shares”), a non-core project in Mexico and royalty interests in the United States and Indonesia.
The interim Condensed Consolidated Financial Statements (“interim statements”) of the Company are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended December 31, 20162017 as filed with the United States Securities and Exchange Commission and Canadian securities regulatory authorities on February 22, 2017March 6, 2018 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by United States generally accepted accounting principles have been condensed or omitted.
References to C$ refer to Canadian currency, A$ are to Australian currency and $ are to United States currency.
2. Significant Accounting Policies
Revenue Recognition
New FASB guidance issued under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, is effective for interim and annual periods beginning after December 15, 2017. Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. This includes significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.
Effective January 1, 2018, the Company adopted the new guidance retrospectively. The Company performed an assessment of the revised guidance and the impacts on the Company’s Consolidated Financial Statements and disclosures. We also evaluated the potential for future variable consideration from option payments, net smelter return royalties (“NSR”), and other production related payments, and determined that there is no impact to the Company’s current accounting. The Company determined that the adoption of this guidance will primarily impact the timing of revenue recognition on certain option agreements based on the Company’s determination of when control is transferred for accounting purposes. Based on the contracts outstanding as of December 31, 2017, there was no cumulative effect adjustment required to be recognized at January 1, 2018. Under the Company’s adoption approach, results for reporting periods beginning after January 1, 2018, will be presented in the Consolidated Financial Statements under the new guidance, while prior period amounts will not be adjusted and continue to be reported under the guidance in effect for those periods.
7
Currently, proceeds received from option agreements are ascribed to recovery of the carrying value of the related project until the carrying value reaches zero. After that, any additional proceeds received will be recognized as a contract liability until control has transferred to the buyer or the related contract has terminated. None of the projects which could provide the Company with future variable consideration are currently in production, and in all cases, we believe there is low probability of future production from these projects. Accordingly, the Company believes its NSRs and other production related payments are fully constrained, and the Company did not record a receivable for them. When it becomes probable that a project which could provide the Company with an NSR or other production related payments could begin production, the Company will evaluate the accounting treatment at that time.
Lease Accounting
In February 2016 the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for interim and annual periods beginning after December 15, 2018. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Based upon our initial review, we expect to recognize additional operating liabilities of approximately $125 to $225 on adoption, with corresponding ROU assets of the same amount, based on the present value of the remaining lease payments.
Nonemployee Share-Based Payments
The FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting. ASU No. 2018-07, supersedes the guidance for equity-based payments to non-employees (Topic ASC 505-50). Under the new standard, an entity should treat equity-based payments to nonemployees the same as stock-based compensation to employees in most cases. The new guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. Effective July 1, 2018, the Company adopted the new guidance. The Company performed an assessment of the standard and the impacts on the Company’s Consolidated Financial Statements and disclosures. Based on our analysis, adoption of the standard will not materially change the Company’s expense recognition and disclosures.
3. Short-term and Other Investments
Short-term investments
As of September 30, 20172018 and December 31, 2016,2017, the amortized cost basis of our short-term investments was $16,658$9,029 and $21,975,$15,144, respectively. The amortized cost basis approximates fair value at September 30, 20172018 and December 31, 2016.2017. Short-term investments at September 30 2017, 2018 and December 31, 2016 2017 are comprised of U.S. government treasury bills and/or notes, all of which have maturity dates on the date of purchase greater than 90 days but less than one year.
Other investments - Midas Gold Shares
Upon initial recognition of our investment in the Midas Gold Shares, we elected to apply the fair value option, and as such, the investment in Midas Gold Shares is recorded at fair value in the Condensed Consolidated Balance Sheets. Subsequent changes in fair value are recorded in the Condensed Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss) in the period in which they occur.
78
VISTA GOLD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All dollar amounts in U.S dollars and in thousands, except per share, per ounce and per option amounts unless otherwise noted)
The following table summarizes our investment in Midas Gold Shares as of September 30, 20172018 and December 31, 2016.2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2017 |
| December 31, 2016 |
|
| September 30, 2018 |
| December 31, 2017 |
| ||||
Fair value at beginning of period |
| $ | 4,994 |
| $ | 1,798 |
|
| $ | 3,746 |
| $ | 4,994 |
|
Gain/(loss) during the period |
|
| (858) |
|
| 3,196 |
|
|
| 1,754 |
|
| (1,248) |
|
Fair value at end of period |
| $ | 4,136 |
| $ | 4,994 |
|
| $ | 5,500 |
| $ | 3,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Midas Gold Shares held at the end of the period |
|
| 7,802,615 |
|
| 7,802,615 |
|
|
| 7,802,615 |
|
| 7,802,615 |
|
3.4. Mineral Properties
|
|
|
|
|
|
|
|
|
| At September 30, 2017 |
| At December 31, 2016 |
| ||
Mt Todd, Australia |
| $ | 2,146 |
| $ | 2,146 |
|
Guadalupe de los Reyes, Mexico |
|
| 1,728 |
|
| 1,728 |
|
|
| $ | 3,874 |
| $ | 3,874 |
|
Long Valley Claims
During the nine months ended September 30, 2017, we sold our Long Valley unpatented mining claims located in California for consideration, net of transaction costs, of $358 which was paid at closing; a future payment of $500 one month after the start of commercial production; a future payment of $500 on or prior to the first anniversary of the start of commercial production; and a net smelter return royalty (“NSR”) on any future production from said claims at a variable rate between 0.5% and 2.0% depending on the average gold price realized. This sale resulted in a realized gain of $358 for the nine months ended September 30, 2017.
Utah Claims
During the nine months ended September 30, 2016, we sold our unpatented mining claims located in Utah for $150 and a 2% NSR on any future production from said claims. This sale resulted in a realized gain of $150 for the nine months ended September 30, 2016.
4. Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| September 30, 2017 |
| December 31, 2016 |
| |||||||||||||||||||||
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
| ||
|
| Cost |
| depreciation |
| Net |
| Cost |
| depreciation |
| Net |
|
| At September 30, 2018 |
| At December 31, 2017 |
| ||||||||
Mt Todd, Australia |
| $ | 5,654 |
| $ | 4,400 |
| $ | 1,254 |
| $ | 5,654 |
| $ | 3,944 |
| $ | 1,710 |
|
| $ | 2,146 |
| $ | 2,146 |
|
Guadalupe de los Reyes, Mexico |
|
| — |
|
| — |
|
| — |
|
| 14 |
|
| 11 |
|
| 3 |
|
|
| 325 |
|
| 325 |
|
Corporate, United States |
|
| 333 |
|
| 333 |
|
| — |
|
| 333 |
|
| 333 |
|
| — |
| |||||||
Used mill equipment, Canada |
|
| 6,500 |
|
| — |
|
| 6,500 |
|
| 6,500 |
|
| — |
|
| 6,500 |
| |||||||
|
| $ | 12,487 |
| $ | 4,733 |
| $ | 7,754 |
| $ | 12,501 |
| $ | 4,288 |
| $ | 8,213 |
|
| $ | 2,471 |
| $ | 2,471 |
|
8
VISTA GOLD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All dollar amounts in U.S dollars and in thousands, except per share, per ounce and per option amounts unless otherwise noted)
5. Common Shares
Warrants
Warrant activity is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
| Weighted |
|
|
|
| |
|
|
|
| average |
| average |
|
|
|
| |
|
| Warrants |
| exercise price |
| remaining life |
|
|
|
| |
|
| outstanding |
| per share |
| (yrs.) |
| Intrinsic value |
| ||
As of December 31, 2016 |
| 6,514,625 |
| $ | 1.92 |
| 2.6 |
| $ | — |
|
As of September 30, 2017 |
| 6,514,625 |
| $ | 1.92 |
| 1.9 |
| $ | — |
|
Stock-Based Compensation
Under our Stock Option Plan (the “Plan”) and our Long-Term Equity Incentive Plan (the “LTIP”), we may grant options and/or restricted stock units (“RSUs”) or restricted stock awards to our directors, officers, employees and consultants. The combined maximum number of our common shares (“Common Shares”) that may be reserved for issuance under the Plan and the LTIP is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis at any one time. Options and RSUs under the Plan and LTIP, respectively, are granted from time to time at the discretion of the Board of Directors of the Company (“Board”), with vesting periods and other terms as determined by the Board.
During the year ended December 31, 2016, the Company adopted, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (Accounting Standards Update 2016-09), which included our election to change our accounting policy from estimating forfeiture rates to accounting for forfeitures as they occur. Stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
| ||||
Stock options |
| $ | 8 |
| $ | 7 |
| $ | 32 |
| $ | 12 |
|
Restricted stock units |
|
| 245 |
|
| 161 |
|
| 648 |
|
| 464 |
|
|
| $ | 253 |
| $ | 168 |
| $ | 680 |
| $ | 476 |
|
As of September 30, 2017, stock options and RSUs had unrecognized compensation expense of $12 and $838, respectively, which is expected to be recognized over a weighted average period of 1.2 and 1.5 years, respectively.
Stock Options
A summary of options under the Plan as of September 30, 2017 is set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average |
| Weighted average |
| Aggregate |
| ||
|
| Number of |
| exercise price |
| remaining |
| intrinsic |
| ||
|
| options |
| per option |
| contractual term | �� | value |
| ||
Outstanding - December 31, 2016 |
| 1,544,500 |
| $ | 1.05 |
| 1.8 |
| $ | 626 |
|
Expired |
| (200,000) |
|
| 3.14 |
|
|
|
|
|
|
Outstanding - September 30, 2017 |
| 1,344,500 |
| $ | 0.74 |
| 1.2 |
| $ | 417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - September 30, 2017 |
| 1,098,250 |
| $ | 0.82 |
| 1.2 |
| $ | 318 |
|
9
VISTA GOLD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All dollar amounts in U.S dollars and in thousands, except per share, per ounce and per option amounts unless otherwise noted)
A summary of our unvested stock options as of September 30, 2017 is set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
| Weighted |
| average |
| |
|
|
|
| average |
| remaining |
| |
|
|
|
| grant-date |
| amortization |
| |
|
| Number of |
| fair value |
| period |
| |
|
| options |
| per option |
| (Years) |
| |
Unvested - December 31, 2016 |
| 296,250 |
| $ | 0.30 |
| 1.2 |
|
Vested |
| (50,000) |
|
| 0.69 |
|
|
|
Unvested - September 30, 2017 |
| 246,250 |
| $ | 0.22 |
| 1.2 |
|
Restricted Stock Units
The following table summarizes the RSUs outstanding under the LTIP as of September 30, 2017:
|
|
|
|
|
|
|
|
|
|
| Weighted average |
| |
|
| Number |
| grant-date fair |
| |
|
| of units |
| value per unit |
| |
Unvested - December 31, 2016 |
| 2,668,387 |
| $ | 0.49 |
|
Cancelled/forfeited |
| (441,084) |
|
| 0.34 |
|
Vested, net of shares withheld |
| (1,625,399) |
|
| 0.38 |
|
Granted |
| 966,003 |
|
| 0.79 |
|
Unvested - September 30, 2017 |
| 1,567,907 |
| $ | 0.83 |
|
A portion of the RSU awards vest on a fixed future date provided the recipient continues to be affiliated with Vista on that date. Other RSU awards vest subject to certain performance and market criteria, including the accomplishment of certain corporate objectives and the Company’s share price performance. The minimum vesting period for RSUs is one year.
During the nine months ended September 30, 2017, the Company withheld shares equivalent to the employee withholding tax obligation which resulted from RSUs vesting in the period. Shares withheld are considered cancelled/forfeited.
6. Commitments and Contingencies
Our exploration and development activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. As such, the future expenditures that may be required for compliance with these laws and regulations cannot be predicted. We conduct our operations in an effort to minimize effects on the environment and believe our operations are in compliance with applicable laws and regulations in all material respects.
Under our agreement with the Jawoyn Association Aboriginal Corporation (the “JAAC”), we must offer the JAAC the opportunity to establish a joint venture with Vista holding a 90% participating interest and the JAAC holding a 10% participating interest in the mining licenses associated with Mt Todd. In addition, the JAAC will be entitled to an annual cash payment, or payment in kind, equal to 1% of the value of the annual gold production from the current mining licenses, and a 1% NSR on other metals, subject to a minimum payment of A$50 per year.
During November 2015, we entered into a two-year lease agreement to store our used mill equipment. Monthly rent for the term of the lease is C$18 ($14).
10
VISTA GOLD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All dollar amounts in U.S dollars and in thousands, except per share, per ounce and per option amounts unless otherwise noted)
7. Fair Value Accounting
The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at September 30, 2017 |
| |||||||
|
| Total |
| Level 1 |
| Level 3 |
| |||
Marketable securities |
| $ | 88 |
| $ | 88 |
| $ | — |
|
Other investments (Midas Gold Shares) |
|
| 4,136 |
|
| 4,136 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at December 31, 2016 |
| |||||||
|
| Total |
| Level 1 |
| Level 3 |
| |||
Marketable securities |
| $ | 109 |
| $ | 109 |
| $ | — |
|
Other investments (Midas Gold Shares) |
|
| 4,994 |
|
| 4,994 |
|
| — |
|
Used mill equipment (non-recurring) |
|
| 6,500 |
|
| — |
|
| 6,500 |
|
Our marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market. Marketable securities are included in other current assets on the Condensed Consolidated Balance Sheets for each period presented.
The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 2016 was based on an independent third-party valuation. As of September 30, 2017, an independent third-party evaluation was not deemed necessary. The mill equipment is included in plant and equipment on the Condensed Consolidated Balance Sheets for each period presented.
There have been no transfers between levels in 2017, nor have there been any changes in valuation techniques.
8. Geographic and Segment Information
The Company has one reportable operating segment. We evaluate, acquire, explore and advance gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions. These activities are currently focused principally in Australia. We reported no revenues during the three and nine months ended September 30, 2017 and 2016. Geographic location of mineral properties and plant and equipment is provided in Notes 3 and 4, respectively.
9. Research and Development Grant
During the nine months ended September 30, 2016, the Company received Research & Development (“R&D”) Tax Incentive refunds, net of costs to prepare and file, paid under the Australian Government’s R&D Tax Incentive Program, a program designed to encourage industry to engage in R&D activities that benefit Australia. The R&D Tax Incentive Program is a self-assessment process, and as such, the Australian Government has the right to review the qualifying programs and expenditures for a period of four years. As of September 30, 2017, the Australian Government has not initiated a formal review.
11
VISTA GOLD CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(All dollar amounts in U.S dollars and in thousands, except per share, per ounce and per option amounts unless otherwise noted)
10. Subsequent Event
During October 2017, we entered into an agreement (the “Option Agreement”) to option our interest in the Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico (the “GdlR Project”) to Minera Alamos Inc. and its subsidiary Minera Alamos de Sonora S.A. de C.V. (“Minera Alamos”).
Pursuant to the terms of the Option Agreement, we have granted Minera Alamos an exclusive right and option right to earn a 100% interest in the GdlR Project by:
· | making payments totaling $6,000 comprised of a payment of $1,500 made at the execution of the Option Agreement (“Option Grant Date”); two successive payments of $1,500 each to be made at the one-year and two-year anniversaries of the Option Grant Date; and a final $1,500 payment to be made before the four-year anniversary of the Option Grant Date; |
· | maintaining the concessions comprising the GdlR Project in good standing; |
· | fulfilling all of our obligations to the Ejido La Tasajera (the “Ejido”) as set out in the temporary occupation contract between us and the Ejido; |
· | granting us a capped NSR |
· | granting us a perpetual NSR |
· | granting us the right to assume a 49% non-carried interest in an underground project if Minera Alamos decides to develop an underground mine at the GdlR Project (the “Back-in Right”). |
The Option Agreement provides that all cash payments are non-refundable and optional to Minera Alamos, and in the event Minera Alamos fails to pay any of the required amounts as set out in the Option Agreement, or fails to comply with its other obligations, the Option Agreement will terminate and Minera Alamos will have no interest in the GdlR Project. Provided it is not in breach of the Option Agreement, Minera Alamos may at its discretion advance the above payment schedule.
Subject to Minera Alamos timely making all the option payments, and fulfilling its other obligations with respect to the Option Agreement, we will transfer 100% of the ownershipshares of the Company’s 100% owned subsidiary Minera Gold Stake S.A. de C.V., the entity which owns the GdlR Project, to Minera Alamos and the Open-Pit NSR and Underground NSR will be granted to us.
9
If Minera Alamos discovers, and decides to develop, an underground mine at the GdlR Project and we exercise the Back-in Right, we and Minera Alamos have agreed to form a joint venture to develop and operate the underground mine. If the joint venture is formed, the Underground NSR will terminate.
The Company has determined that control of the GdlR Project has not been transferred for accounting purposes. The first option payment of $1,500 received in October 2017 has been accounted for as reduction to carrying value. Subsequent option payments received, if any, will be accounted for as further reductions to carrying value. After the carrying value has been reduced to zero, remaining option payment proceeds, if any, will be recognized as a contract liability until control of the GdlR Project has transferred to the buyer or the Option Agreement has been terminated. In addition, in accordance with our policy, potential royalty revenue and future option payments have been fully constrained. See also Note 10.
Long Valley Claims
During the three months ended March 31, 2017, we sold our Long Valley unpatented mining claims located in California for consideration, net of transaction costs, of $358 which was paid at closing; a future payment of $500 one month after the start of commercial production; a future payment of $500 on or prior to the first anniversary of the start of commercial production; and a NSR on any future production from said claims at a variable rate between 0.5% and 2.0% depending on the average gold price realized. This NSR is fully constrained. The Company has determined that control of the Long Valley claims were transferred to the buyer at the time of sale for accounting purposes. This sale resulted in a realized gain of $358.
5. Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018 |
| December 31, 2017 |
| ||||||||||||||
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||
|
| Cost |
| depreciation |
| Net |
| Cost |
| depreciation |
| Net |
| ||||||
Mt Todd, Australia |
| $ | 5,719 |
| $ | 4,830 |
| $ | 889 |
| $ | 5,646 |
| $ | 4,591 |
| $ | 1,055 |
|
Corporate, United States |
|
| 333 |
|
| 333 |
|
| — |
|
| 333 |
|
| 333 |
|
| — |
|
Used mill equipment, Canada |
|
| 6,500 |
|
| — |
|
| 6,500 |
|
| 6,500 |
|
| — |
|
| 6,500 |
|
|
| $ | 12,552 |
| $ | 5,163 |
| $ | 7,389 |
| $ | 12,479 |
| $ | 4,924 |
| $ | 7,555 |
|
6. Common Shares
Warrants
Warrant activity is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
| Weighted |
|
|
|
| |
|
|
|
| average |
| average |
|
|
|
| |
|
| Warrants |
| exercise price |
| remaining life |
|
|
|
| |
|
| outstanding |
| per share |
| (yrs.) |
| Intrinsic value |
| ||
As of December 31, 2017 |
| 6,514,625 |
| $ | 1.92 |
| 1.6 |
| $ | — |
|
As of September 30, 2018 |
| 6,514,625 |
| $ | 1.92 |
| 0.9 |
| $ | — |
|
Stock-Based Compensation
Under the Company’s stock option plan (the “Plan”), we may grant options to purchase common shares of the Company (“Common Shares”) to our directors, officers, employees and consultants. The maximum number of our Common Shares that may be reserved for issuance under the Plan, together with RSUs currently outstanding under the LTIP, is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis at any one time. Options under the Plan are granted from time to time at the discretion of the Board, with vesting periods and other terms as determined by the Board.
10
Stock-based compensation expense for the three and nine months ended September 30, 2018 and 2017 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
Stock options |
| $ | 107 |
| $ | 8 |
| $ | 307 |
| $ | 32 |
|
Restricted stock units |
|
| 164 |
|
| 245 |
|
| 548 |
|
| 648 |
|
|
| $ | 271 |
| $ | 253 |
| $ | 855 |
| $ | 680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phantom units (Discussed below) |
|
| 11 |
|
| — |
|
| 11 |
|
| — |
|
As of September 30, 2018, stock options, RSUs, and phantom units had unrecognized compensation expense of $223, $324, and $122 respectively, which is expected to be recognized over a weighted average period of 1.2, 0.9, and 1.8 years, respectively.
Stock Options
A summary of options under the Plan as of September 30, 2018 is set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average |
| Weighted average |
| Aggregate |
| ||
|
| Number of |
| exercise price |
| remaining |
| intrinsic |
| ||
|
| options |
| per option |
| contractual term |
| value |
| ||
Outstanding - December 31, 2017 |
| 1,144,500 |
| $ | 0.42 |
| 1.15 |
| $ | 346 |
|
Granted |
| 1,142,000 |
|
| 0.71 |
|
|
|
|
|
|
Exercised |
| (40,000) |
|
| 0.40 |
|
|
|
|
|
|
Outstanding - September 30, 2018 |
| 2,246,500 |
| $ | 0.57 |
| 2.51 |
| $ | 130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - September 30, 2018 |
| 1,240,581 |
| $ | 0.52 |
| 1.71 |
| $ | 94 |
|
A summary of our unvested stock options as of September 30, 2018 is set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
| Weighted |
| average |
| |
|
|
|
| average |
| remaining |
| |
|
|
|
| grant-date |
| amortization |
| |
|
| Number of |
| fair value |
| period |
| |
|
| options |
| per option |
| (Years) |
| |
Unvested - December 31, 2017 |
| 246,250 |
| $ | 0.22 |
| 0.99 |
|
Granted |
| 1,142,000 |
|
| 0.45 |
|
|
|
Vested |
| (382,331) |
|
| 0.45 |
|
|
|
Unvested - September 30, 2018 |
| 1,005,919 |
| $ | 0.39 |
| 1.24 |
|
No stock options were granted for the nine months ended September 30, 2017. The fair value of stock options granted during the nine months ended September 30, 2018 to employees, directors and consultants was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions:
2018 | |||
Expected volatility | 76.2 | % | |
Risk-free interest rate | 2.7 | % | |
Expected life (years) | 5 | ||
Dividend yield | — | ||
Forfeiture assumption | — | % |
11
Option Amendment
In July 2018, the Company amended certain 2013 stock option agreements, expiring December 30, 2018 subject to the potential for a temporary extension under the terms of the Plan, for seven executives and directors (the “Option Amendment”). The amendment provides each grantee the opportunity to receive a cash buyout of certain vested, unexercised 2013 options in lieu of exercising the option to purchase shares. This cash buyout is based on the intrinsic value of each option at the time of the buyout. As a result of this modification, the Company will account for these options as awards classified as liabilities with $72 included in current liabilities. The options were previously accounted for as awards classified as equity. The Company recognized no additional compensation expense for these options in the nine months ended September 30, 2018.
Restricted Stock Units
The following table summarizes the RSUs outstanding under the LTIP as of September 30, 2018:
|
|
|
|
|
|
|
|
|
|
| Weighted average |
| |
|
| Number |
| grant-date fair |
| |
|
| of RSUs |
| value per RSU |
| |
Unvested - December 31, 2017 |
| 1,567,907 |
| $ | 0.85 |
|
Cancelled/forfeited |
| (246,683) |
|
| 0.90 |
|
Vested, net of shares withheld |
| (637,554) |
|
| 0.88 |
|
Granted |
| 319,000 |
|
| 0.75 |
|
Unvested - September 30, 2018 |
| 1,002,670 |
| $ | 0.78 |
|
A portion of the RSU awards vest on a fixed future date provided the recipient continues to be affiliated with Vista on that date. Other RSU awards vest subject to certain performance and market criteria, including the accomplishment of certain corporate objectives and the Company’s share price performance. The minimum vesting period for RSUs is one year.
During the nine months ended September 30, 2018, the Company withheld shares with an equivalent value to meet the employee withholding tax obligations which resulted from RSUs that vested in the period. Shares withheld are considered cancelled/forfeited.
New RSUs will not be granted under the LTIP until the allocation of such awards is duly approved by the shareholders of the Company.
Phantom Units
|
|
|
|
|
|
|
|
|
| Weighted average |
|
|
| Number of |
| remaining |
|
|
| phantom units |
| contractual term |
|
Unvested - December 31, 2017 |
| — |
|
|
|
Granted |
| 265,000 |
|
|
|
Unvested - September 30, 2018 |
| 265,000 |
| 1.75 |
|
The Company granted a total of 265,000 phantom units to certain employees during the nine months ended September 30, 2018. The value of each unit is equal to the Company’s share price on the vesting date and is payable in cash. The phantom units vest on fixed future dates provided the recipient continues to be affiliated with Vista on those dates. The company will account for these units as awards classified as liabilities with $11 included in current liabilities as of September 30, 2018. The Company recognized $11 of compensation expense for these options in the nine months ended September 30, 2018.
12
7. Commitments and Contingencies
Our exploration and development activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. As such, the future expenditures that may be required for compliance with these laws and regulations cannot be predicted. We conduct our operations in an effort to minimize effects on the environment and believe our operations are in compliance with applicable laws and regulations in all material respects.
Under our agreement with the Jawoyn Association Aboriginal Corporation (the “JAAC”), we have agreed to offer the JAAC the opportunity to establish a joint venture with Vista holding a 90% participating interest and the JAAC holding a 10% participating interest in Mt Todd. In addition, the JAAC will be entitled to an annual cash payment, or payment in kind, equal to 1% of the value of the annual gold production from the current mining licenses, and a 1% NSR on other metals, subject to a minimum payment of A$50 per year.
8. Fair Value Accounting
The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at September 30, 2018 |
| |||||||
|
| Total |
| Level 1 |
| Level 3 |
| |||
Marketable securities |
| $ | 14 |
| $ | 14 |
| $ | — |
|
Other investments (Midas Gold Shares) |
|
| 5,500 |
|
| 5,500 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at December 31, 2017 |
| |||||||
|
| Total |
| Level 1 |
| Level 3 |
| |||
Marketable securities |
| $ | 90 |
| $ | 90 |
| $ | — |
|
Other investments (Midas Gold Shares) |
|
| 3,746 |
|
| 3,746 |
|
| — |
|
Used mill equipment (non-recurring) |
|
| 6,500 |
|
| — |
|
| 6,500 |
|
Our marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market. Marketable securities are included in other current assets on the Condensed Consolidated Balance Sheets for each period presented.
The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 2017 was based on an independent third-party valuation. As of September 30, 2018, an independent third-party evaluation was not deemed necessary. The mill equipment is included in plant and equipment on the Condensed Consolidated Balance Sheets for each period presented.
There have been no transfers between levels in 2018, nor have there been any changes in valuation techniques.
9. Geographic and Segment Information
The Company has one reportable operating segment. We evaluate, acquire, explore and advance gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions. These activities are currently focused principally in Australia. We reported no revenues during the three and nine months ended September 30, 2018 and 2017. Geographic location of mineral properties and plant and equipment is provided in Notes 4 and 5, respectively.
13
10. Subsequent Event
During October 2018, the Company agreed to extend the due date for the second $1,500 option payment for the Guadalupe de los Reyes project by six months to April 23, 2019. As consideration for the deferral, the Company will receive an additional $150 in cash, $50 of which was paid to the Company on October 24, 2018 and $100 of which Mineral Alamos has agreed to pay by January 23, 2019. In addition, Minera Alamos will pay interest at a rate of 1.5% per month on the unpaid balance of the $1,500 beginning January 24, 2019.
14
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2017,2018, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States. This discussion and analysis contains forward-looking statements and forward-looking information that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors. See section heading “Note Regarding Forward-Looking Statements” below.
All dollar amounts stated herein are in U.S. dollars in thousands, except per share and per ounce amounts and currency exchange rates unless specified otherwise. References to C$ refer to Canadian currency, A$ are to Australian currency and to $ are to United States currency.
Overview
Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration. We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. We do not currently generate cash flows from mining operations.
The Company’s flagship asset is its 100% owned Mt Todd gold project (“Mt Todd” or the “Project”) in the Northern Territory (“NT”) Australia. We are currently completing metallurgical and other engineering studies that we believe will lead to improved gold recovery and production costs. This new information, together with the most current economic factors, will be used to update the Mt Todd Preliminary Feasibility Study (completed May 2013 and amended July 2014) (“PFS”).
As one ofis the largest undeveloped single-deposit gold projectsproject in Australia,Australia. In January 2018, the Company received authorization for the last major environmental permit and we believeannounced the positive results of the updated PFS for Mt ToddTodd. See “Project Updates” below for a summary of the PFS results. Subsequently, Vista has completed additional metallurgical testing, including ongoing fine grinding evaluations, which demonstrate further improvements in gold recovery. With these important milestones and subsequent project improvements complete, Vista is in a better position to identify and pursue those strategic alternatives that may provide the potentialbest opportunity for shareholders to generate significantrealize fair value for us. We have identified several potential paths which we believe will be beneficial to us and our shareholders. Our strong working capital position provides the flexibility to advance the Mt Todd project to take advantage of its strong strategic position.Todd.
Results from Operations
Summary
Through September 30, 2017, we continued to effectively execute a strategy of strict cost control while completing selected discretionary programs that are expected to add value to Mt Todd. As a result of an equity financing completed in 2016, we believe we are well funded, and we have no debt.
Consolidated net loss for the three months ended September 30, 2018 and 2017 was $2,062 and 2016 was $2,655 or $0.02 and $2,083 or $0.03 and $0.02 per share, respectively. Consolidated net loss for the nine months ended September 30, 2018 and 2017 was $4,933 and 2016 was $8,184 or $0.05 and $1,160 or $0.08 and $0.01 per share, respectively. The principal components of these year-over-year changes are discussed below.
Exploration, property evaluation and holding costs
Exploration, property evaluation and holding costs were $1,635$960 and $1,168$1,635 during the three months ended September 30, 20172018 and 2016,2017, respectively, and $4,695$3,560 and $2,979$4,695 for the nine months ended September 30, 20172018 and 2016,2017, respectively. These costs are predominantly associated with Mt Todd.Todd and are comprised of fixed costs and discretionary costs. For the three and nine months ended September 30, 20172018 and 2016,2017, our fixed costs (which include cash expenditures necessary to ensure that we preserve our property rights and meet all of our safety, regulatory and environmental responsibilities) were substantially unchangedtrended approximately 20% higher in 2018 compared to the same period over period, consistentin 2017 as baseline monitoring activities have been introduced as part of our compliance with our expectations. The magnitudethe terms of discretionary program spending during the threepermit granted under the Australian Environmental Protection and nine Biodiversity Conservation Act of 1999 (“EPBC”) in January 2018. In addition, we have added site employees to complement site environmental, maintenance and exploration activities. We expect 2018 fixed
13
15
costs, in Australian dollar terms, to continue to trend 20% to 25% (approximately A$650 to A$800) higher than 2017 fixed costs.
The magnitude of discretionary program spending during the three and nine months ended September 30, 20172018 was significantly higherlower than the discretionary program spending during the three and nine months ended September 30, 2016,2017. The principal 2018 program was the drilling of four additional PQ core holes designed to extract approximately 6 tonnes of higher-grade material from the Batman pit, for the completion of two additional 2.5 tonne bulk HPGR crushing, XRT and this trend is expectedlaser sorting tests using the same equipment as previous test work; and a single 1 tonne sample for completing an HPGR test with a competing HPGR manufacturer. The two 2.5 tonne tests were conducted to continue through 2017.confirm the efficiency of sorting higher-grade ores and to develop feasibility-level data demonstrating the relationship between grind size and recovery over a wide range of sample head grades. The material 2017 discretionary programs included: the completion of the drilling program to generate the 20 tonne sample for useused in the ore sorting testing program; the ore sorting testing program and subsequent metallurgical studies including grinding studies to confirm the potential for improved gold recoveries;recoveries and preparation of the startdraft mine management plan. Based on these studies, the Company completed the PFS, the results of which were announced during the first quarter of 2018. See “Project Updates” below for a summary of the PFS update; and preparation of a draft Mine Management Plan (“MMP”). results. We expect 2018 discretionary costs, in Australian dollar terms, to be 45% to 50% (approximately A$2,000 to A$2,250) lower than 2017 discretionary costs.
Corporate administration
Corporate administration costs were $823$969 and $581$823 during the three months ended September 30, 20172018 and 2016,2017, respectively, and $2,619$3,280 and $2,319$2,619 for the nine months ended September 30, 2018 and 2017, respectively. Higher 2018 fixed costs were incurred principally as a result of the completion of the Mt Todd PFS update, which affected investor relations, regulatory and 2016, respectively. Cost increasescompensation costs. In addition, insurance coverage was increased in 2018, resulting in higher 2018 insurance costs. We expect 2018 fixed costs to trend approximately 15% - 20% (approximately $450 to $600) higher than 2017 primarily resulted from non-cash stock-based compensation and added marketing programs. Stock-based compensation is higher in 2017 mainly due to a change in accounting policy (see Note 5) and increases in grant date fair values per RSU.fixed costs.
Gain on disposal of mineral property
Long Valley claims
During the ninethree months ended September 30,March 31, 2017, we sold our Long Valley unpatented mining claims located in California for consideration, net of transaction costs, of $358 which was paid at closing; a future payment of $500 one month after the start of commercial production; a future payment of $500 on or prior to the first anniversary of the start of commercial production; and a net smelter return royalty (“NSR”) on any future production from said claims at a variable rate between 0.5% and 2.0% depending on the average gold price realized. This sale resulted in a realized gain of $358 for the nine months ended September 30, 2017.$358.
Utah claims
During the nine months ended September 30, 2016, we sold our unpatented mining claims located in Utah for $150 and a 2% NSR on any future production from said claims. This sale resulted in a realized gain of $150 for the nine months ended September 30, 2016.
Non-operating income and expenses
Gain/(loss) on other investments
Gain/(loss) on other investments was $(78)$(274) and $(234)$(78) for the three months ended September 30, 20172018 and 2016,2017, respectively, and $(858)$1,754 and $3,586$(858) for the nine months ended September 30, 20172018 and 2016,2017, respectively. These amounts are the result of changes in fair value of the common shares we hold in Midas Gold Corp. (“Midas Gold Shares”).
Research and development grant
During the nine months ended September 30, 2016, the Company received $744, net of costs to prepare and file, from the Australian Government related to R&D activities at Mt Todd. These refunds are related to costs we incurred during the 2014 fiscal year for qualifying R&D programs. Grants in 2017, if any, are not expected to be material.
Financial Position, Liquidity and Capital Resources
Operating activities
Net cash used in operating activities was $6,067$6,347 and $4,124$6,067 for the nine months ended September 30, 2018 and 2017, and 2016, respectively. Cash usedThe increased use of cash in 2016 is net of grants totaling $744 from2018 was driven mainly by the Government of Australia related to R&D expenditures we incurred in 2014. No similar grants were received in 2017. Fluctuationsreduction in accounts payable partiallyand accrued liabilities during the first quarter. Relatively high discretionary program activity and completion of the Mt Todd PFS, in particular, resulted in higher than normal accounts payable at the end of 2017.
1416
offset other factors that contributed to the period over period change which are discussed in “Results from Operations” above.
Investing activities
Net cash of $6,185 and $5,675 for the nine months ended September 30, 2018 and 2017, respectively, was provided primarily by the disposition of short-term investments, net of acquisitions foracquisitions.
Financing activities
During the nine months ended September 30, 2017.
Net2018, in lieu of issuing common shares of the Company on vesting of RSUs, cash of $11,371$122 was utilizedused for the net purchasepayment of short-term investments, netrelated employee withholding tax obligations. $16 was received from the exercise of dispositions for the nine months ended September 30, 2016.
Financing activitiesstock options.
Net cash of $264 for the nine months ended September 30, 2017 was utilized for the payment of certain employee withholding tax obligations in lieu of the issuance of common shares.
Net cash of $15,898 was primarily provided by the public offering we closed in August of 2016, pursuant to which we sold 12,362,500 units (the “Units”), which included 1,612,500 Units issued pursuant to the full exercise of the underwriters’ over-allotment option, for net proceeds of $15,883 (the “2016 Offering”). Each Unit consisted of one common share in the capital of the Company (“Common Share”) and one-half of one Common Share purchase warrant (each full warrant, a “2016 Warrant”). Each 2016 Warrant entitles the holder thereof to purchase one Common Share at a price of $1.92 per Common Share (subject to adjustment in certain circumstances) and is exercisable for a period of 36 months from the closing of the 2016 Offering.
Liquidity and capital resources
Our cash and short-term investments as of September 30, 20172018 decreased to $17,906$10,192 from $23,879$16,575 at December 31, 20162017 due mainly to expenditures for operating activities.activities and the reduction of payables. Our net working capital decreased to $21,109 as$14,967 at September 30, 20172018 from $28,438$19,057 at December 31, 20162017 due mainly to the decrease in cash and short-term investments to fund operating activities, and the decreasepartially offset by an increase in the market value of our Midas Gold Shares.
We believe that our existing working capital, coupledtogether with potential future sources of non-dilutive financing, will be sufficient to coverfully fund our currently planned fixed costs and project activities for several years. Our fixed costs include cash expenditures necessary to ensure that we preserve our property rights and meet all of our safety, regulatory and environmental responsibilities. We also believe that we can fund all of the critical milestones, including permitting and feasibility studies, necessary to advance the Mt Todd gold project to the point of a development decision. discretionary programs into 2020.
Potential future sources of non-dilutive financing include the sale of non-core assets such as our used mill equipment and future option payments for the Guadalupe de los Reyes gold/silver project; and, depending on market conditions, the sale of some or all of our remaining Midas Gold Shares. We do not currently expect that R&D grants from the Australian Government will be a material source of near term funding.
The continuing long-term viability of the Company is dependent upon our ability to secure sufficient funding and ultimately to generate future profits from operations or sales of assets. The underlying value and recoverability of the amounts shown as mineral properties and plant and equipment in our Condensed Consolidated Balance Sheets are dependent on our ability to fund exploration and development activities that could lead to profitable production or proceeds from the disposition of these assets.
15
Fair Value Accounting
The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at September 30, 2017 |
|
| Fair value at September 30, 2018 |
| ||||||||||||||
|
| Total |
| Level 1 |
| Level 3 |
|
| Total |
| Level 1 |
| Level 3 |
| ||||||
Marketable securities |
| $ | 88 |
| $ | 88 |
| $ | — |
|
| $ | 14 |
| $ | 14 |
| $ | — |
|
Other investments (Midas Gold Shares) |
|
| 4,136 |
|
| 4,136 |
|
| — |
|
|
| 5,500 |
|
| 5,500 |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair value at December 31, 2016 |
|
| Fair value at December 31, 2017 |
| ||||||||||||||
|
| Total |
| Level 1 |
| Level 3 |
|
| Total |
| Level 1 |
| Level 3 |
| ||||||
Marketable securities |
| $ | 109 |
| $ | 109 |
| $ | — |
|
| $ | 90 |
| $ | 90 |
| $ | — |
|
Other investments (Midas Gold Shares) |
|
| 4,994 |
|
| 4,994 |
|
| — |
|
|
| 3,746 |
|
| 3,746 |
|
| — |
|
Used mill equipment (non-recurring) |
|
| 6,500 |
|
| — |
|
| 6,500 |
|
|
| 6,500 |
|
| — |
|
| 6,500 |
|
17
Our marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market. Marketable securities are included in other current assets on the Condensed Consolidated Balance Sheets for each period presented.
The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 20162017 was based on an independent third-party valuation. As of September 30, 2017,2018, an independent third-party evaluation was not deemed necessary. The used mill equipment is included in plant and equipment on the Condensed Consolidated Balance Sheets for each period presented.
There have been no transfers between levels in 2017,2018, nor have there been any changes in valuation techniques.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Contractual Obligations
During November 2015, we entered into a two-year lease agreement to store our used mill equipment. Monthly rent for the termWe have no material contractual obligations as of the lease is C$18 ($14). This lease agreement was subsequently extended for an additional year on substantially the same terms.September 30, 2018.
Project Updates
Mt Todd Gold Project, Northern Territory, Australia
The following scientific and technical disclosuresinformation about Mt Todd havehas been reviewed and approved by Mr. John Rozelle, Senior Vice President of Vista. Mr. Rozelle is a qualified person as defined by Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
In late 2016,January 2018, we completedannounced the results of an updated preliminary feasibility study (the “PFS”) for Mt Todd project (the “Project”). The PFS is based on the results of a comprehensive review of the Project and the re-design of elements of the process area optimization studies that indicated that selectively screeningflow sheet, incorporating automated sorting and rejecting sub-economic, coarse crusher product prior to grinding could be expected to producecircuit design changes. The process improvement efforts have resulted in reduced operating costs, increased gold recovery and higher gold recoveries and lower process area operating costs. These results warranted additional metallurgical test work. Accordingly,production at Mt Todd. Management believes that the design changes have resulted in December 2016, we initiatedsignificantly improved Project economics compared to the previous preliminary feasibility study, at a drill program to generate approximately 20 tonnes of large diameter (3.75 inch diameter) core from the Batman deposit, which was completed in January 2017. $1,300/oz gold price.
The core comprised four 5-tonne bulk samples of ore representing different partsPFS evaluates two development scenarios: a 50,000 tpd project that develops more of the deposit. The samples were crushedMt Todd resource and screened at 5/8" (16 mm) at an HPGR test facility. Crushing was completedgenerates a larger Net Present Value (“NPV”) (the “Base Case”); and a smaller and higher-grade 33,000 tpd project (the “Alternate Case”).
Highlights of the PFS Base Case are presented in late June 2017 and approximately 18% of each High Pressure Grinding Roll (“HPGR”)-crushed sample was retained as plus 5/8" material (“coarse fraction”). The coarse fraction was then subjectedthe table below:
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@ $1,300/oz Au |
| Years 1-5 |
| Life of Mine (13 years) |
| |||||
Average Milled Grade (g Au/t) |
|
| 0.98 |
|
|
|
| 0.82 |
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|
Payable Gold Annual Average (000's ozs) |
|
| 479 |
|
|
|
| 382 |
|
|
Payable Gold Total (000's ozs) |
|
| 2,397 |
|
|
|
| 4,956 |
|
|
Gold Recovery |
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| 86.4 | % |
|
|
| 85.8 | % |
|
Cash Costs ($/oz) |
| $ | 571 |
|
|
| $ | 645 |
|
|
Strip Ratio (waste:ore) |
|
| 2.8 |
|
|
|
| 2.5 |
|
|
Initial Capital ($ millions) |
|
|
|
|
|
| $ | 839 |
|
|
Pre-tax NPV 5% ($ millions) |
|
|
|
|
|
| $ | 1,178 |
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After-tax NPV 5% ($ millions) |
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|
|
|
|
| $ | 679 |
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IRR (Pre-tax/After-tax) |
|
|
|
|
|
|
| 27.3 / 20.5 | % |
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After-tax Payback (Production Years) |
|
|
|
|
|
|
| 3.2 |
|
|
1618
Note: Economics presented using $1,300/oz gold and a flat $0.80 USD : $1.00 AUD exchange rate and assumes deferral of certain Northern Territory tax obligations as well as realization of equipment salvage values at the end of the mine life.
The following table illustrates the sensitivity of the Base Case after-tax economics to two-step automatedvariable gold prices and foreign exchange assumptions:
Foreign Exchange (US$/AUD) | Gold Price | |||||||||
$1,100 | $1,200 | $1,300 | $1,400 | $1,500 | ||||||
IRR | NPV5
| IRR | NPV5
| IRR | NPV5
| IRR | NPV5
| IRR | NPV5
| |
0.70 | 15.9% | $439 | 20.5%* | $632* | 24.9% | $825 | 29.1% | $1,016 | 33.2% | $1,208 |
0.75 | 13.8% | $366 | 18.3% | $559 | 22.6% | $752 | 26.8% | $944 | 30.8% | $1,136 |
0.80 | 11.9% | $292 | 16.3% | $486 | 20.5%† | $679† | 24.6% | $872 | 28.6% | $1,063 |
0.85 | 10.1% | $222 | 14.3% | $412 | 18.5% | $606 | 22.5% | $799 | 26.4% | $991 |
0.90 | 8.3% | $150 | 12.5% | $339 | 16.6% | $532 | 20.6% | $726 | 24.4% | $918 |
* Approximate current conditions †Assumptions used in the PFS |
Note: Changes in foreign exchange rates are only applied to operating costs and not applied to either initial or sustaining capital costs.
Highlights of the PFS Alternate Case are presented in the table below:
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@ $1,300/oz Au |
| Years 1-5 |
| Life of Mine (11 years) | |||||||
Average Milled Grade (g Au/t) |
|
| 0.95 |
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|
|
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| 0.90 |
|
Payable Gold Annual Average (000's ozs) |
|
| 302 |
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|
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| 273 |
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Payable Gold Total (000's ozs) |
|
| 1,509 |
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|
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| 3,003 |
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Gold Recovery |
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| 86.4 | % |
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|
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| 85.5 | % |
Cash Costs ($/oz) |
| $ | 581 |
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| $ | 593 |
|
Strip Ratio (waste:ore) |
|
| 1.7 |
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|
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| 1.7 |
|
Initial Capital ($ millions) |
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|
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| $ | 641 |
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Pre-tax NPV 5% ($ millions) |
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|
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|
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|
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| $ | 722 |
|
After-tax NPV 5% ($ millions) |
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|
|
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|
|
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| $ | 418 |
|
IRR (Pre-tax/After-tax) |
|
|
|
|
|
|
|
|
| 23.4 / 17.8 | % |
After-tax Payback (Production Years) |
|
|
|
|
|
|
|
|
| 3.6 |
|
Note: Economics presented using $1,300/oz gold and a flat $0.80 USD : $1.00 AUD exchange rate and assumes deferral of certain Northern Territory tax obligations as well as realization of equipment salvage values at the end of the mine life.
For additional information on Mt Todd, see our technical report entitled “NI 43-101 Technical Report Mt Todd Gold Project 50,000 tpd Preliminary Feasibility Study Northern Territory, Australia” with an effective date of January 24, 2018 and an issue date of March 2, 2018. See Cautionary Note to Investors regarding Estimates of Mineral Reserves and Resources below.
Also in January 2018, we announced that the “authorization of a controlled activity” at Mt Todd, as required under the EPBC, as it relates to the Gouldian Finch, has been approved by the Australian Commonwealth Department of Environment and Energy. With this authorization, Vista has all the major environmental approvals necessary to allow development of Mt Todd.
During the nine months ended September 30, 2018, we completed four additional PQ core holes designed to extract approximately 6 tonnes of higher-grade material from the Batman pit, for the completion of two additional 2.5 tonne bulk HPGR crushing, XRT and laser sorting tests using the same equipment as previous test work; and a single 1 tonne sample for completing an HPGR test with a competing HPGR manufacturer. The two 2.5 tonne tests were conducted to confirm the efficiency of sorting higher-grade ores. We are completing additional feasibility-study-level grinding tests with the manufacturers of the secondary grinding mills in order to obtain material for ongoing metallurgical studies and
19
specific operating data for future design and evaluation work. Similar tests on low-grade samples were conducted earlier this year with Glencore, who manufacture the ISAMill referenced in the PFS, and with FLSmidth, who produce a competing mill known as a Vertimill. We have also completed additional testing with an impeller manufacturer in order to optimize the design of the leach tanks to achieve the lowest possible electrical power consumption at designed to separateslurry densities.
In August 2018, we completed tests of the gold-bearing sulfide minerals and quartz veining from non-gold bearing waste material.second stage grinding circuit undertaken, under the direction of Resource Development Inc. These tests were completed in early July 2017.
Followingsuggest that the sorting tests, the fine fraction from the HPGR crushing test (minus 5/8" material) together with the sorted coarse fraction were shippedMt Todd ore can be efficiently ground to a laboratory where grind-sizefiner final product size with lower power consumption than estimated in the PFS. Leaching the finer final product size material has again confirmed higher recoveries at finer grind sizes. Based on these initial results, we are now undertaking additional testing to: confirm results over a broad range of feed grades, justify design changes and leach recovery optimization and tailings characterization studies are being completed. Thesupport a possible update of the project economics. We believe that the results of these tests are expected to provide the design criteria to grind the ore finer for enhanced leaching and gold recovery.
Sorting the non-gold bearing waste material from the gold bearing material, after the HPGR and prior to the grinding circuit, would enable us to reduce the overall material going to theongoing grinding and leaching circuits, improve the grinding circuit head-grade and reduce operating costs. We believe these design changes cantests indicate that gold recoveries exceeding 90% may be implemented without materially changing the project’s capital requirements.
The Company expects to be able to announce the final results of the test work in the fourth quarter of 2017. The results of these tests are expected to confirm improved recoveries with fine grinding and provide the design criteriaachieved for the updated PFS. The PFS update is expected to include design changes incorporating an automated sorting circuit, two-stage grinding, current gold price and current foreign exchange rates. We believe the results of this study, when completed in the first quarter of 2018, will demonstrate a technically sound project with improved economics at current gold prices.
We also plan to complete a first draft of the MMP in the fourth quarter of 2017. The MMP is essentially the plan of operations, and is one of the final remaining major permits.
In May 2017, the Company executed an extension of its Mt Todd agreement with the Northern Territory of Australia. The agreement extends through December 31, 2023 and includes the option for an additional 3-year extension. Under the ongoing terms of the agreement, the Company holds the exclusive right to develop the Mt Todd gold project, as compared to 86.4% assumed in our January 2018 PFS. Analysis indicates that each 1% improvement in gold recoveries could add approximately 0.5% to Mt Todd’s after-tax IRR, and commitsapproximately $25 million to after-tax NPV5.
We are undertaking additional definition drilling at Quigleys, intended to investigate the appropriate care and managementpossibility of providing the site. Vista Gold, at its sole option, may elect to proceedmill with the development of the project by giving notice to the NT Government, which in turn will result in the transfer of NT-owned assets at Mt Todd and all pre-existing environmental liability forfuture supplemental higher-grade ore. We are also undertaking exploration programs on the Mt Todd project from the NTexploration licenses (each, an “EL”), designed to the Company. Prior to providing notice of its intention to mine, the Company retains no environmental liability for the conditioncontinue investigating some of the site prior to its involvement in 2006. known geophysical and geochemical anomalies.
Guadalupe de los Reyes Gold/Silver Project, Sinaloa, Mexico
During October 2017, we entered into an agreement (the “Option Agreement”) to option our interest in the Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico (the “GdlR Project”) to Minera Alamos Inc. and its subsidiary Minera Alamos de Sonora S.A. de C.V. (“Minera Alamos”).
Pursuant to the terms of the Option Agreement, we have granted Minera Alamos an exclusive right and option right to earn a 100% interest in the GdlR Project by:
· | making payments totaling $6,000 comprised of a payment of $1,500 made at the execution of the Option Agreement (“Option Grant Date”); two successive payments of $1,500 each to be made at the one-year and two-year anniversaries of the Option Grant Date; and a final $1,500 payment to be made before the four-year anniversary of the Option Grant Date; |
· | maintaining the concessions comprising the GdlR Project in good standing; |
· | fulfilling all of our obligations to the Ejido La Tasajera (the “Ejido”) as set out in the temporary occupation contract between us and the Ejido; |
· | granting us a capped NSR |
17
· | granting us a perpetual NSR |
· | granting us the right to assume a 49% non-carried interest in an underground project if Minera Alamos decides to develop an underground mine at the GdlR Project (the “Back-in Right”). |
The Option Agreement provides that all cash payments are non-refundable and optional to Minera Alamos, and in the event Minera Alamos fails to pay any of the required amounts as set out in the Option Agreement, or fails to comply with its other obligations, the Option Agreement will terminate and Minera Alamos will have no interest in the GdlR Project. Provided it is not in breach of the Option Agreement, Minera Alamos may at its discretion advance the above payment schedule.
Subject to Minera Alamos timely making all the option payments, and fulfilling its other obligations with respect to the Option Agreement, we will transfer 100% of the ownershipshares on the Company��s 100% owned subsidiary Minera Gold Stake
20
S.A. de C.V., the entity which owns the GdlR Project, to Minera Alamos and the Open-Pit NSR and Underground NSR will be granted to us.
If Minera Alamos discovers, and decides to develop, an underground mine at the GdlR Project and we exercise the Back-in Right, we and Minera Alamos have agreed to form a joint venture to develop and operate the underground mine. If the joint venture is formed, the Underground NSR will terminate. See also Note 10 of the Condensed Consolidated Financial Statements.
Certain U.S. Federal Income Tax Considerations
Vista has been a “passive foreign investment company” (“PFIC”) as defined under Section 1297 of the U.S. Internal Revenue Code of 1986, as amended, in recent years and expects to continue to be a PFIC in the future. Current and prospective United States shareholders should consult their tax advisors as to the tax consequences of PFIC classification and the U.S. federal tax treatment of PFICs. Additional information on this matter is included in Vista’s Annual Report on Form 10-K for the year ended December 31, 2016,2017, under “Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Certain United States Federal Income Tax Considerations for U.S. Residents.”
Note Regarding Forward-Looking Statements
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and forward-looking information under Canadian securities laws that are intended to be covered by the safe harbor created by such legislation. All statements, other than statements of historical facts, included in this quarterly report on Form 10-Q, our other filings with the Securities and Exchange Commission and Canadian securities commissions and in press releases and public statements by our officers or representatives that address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements and forward-looking information, including, but not limited to, such things as those listed below:
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· | our belief that |
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· | our belief that the results of the current PFS |
18
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|
· | our plans and available funding to continue to identify and study potential Mt Todd optimizations, project improvements and efficiencies; |
· | our expectation that our fixed costs will be higher and our discretionary costs will be lower in 2018 than in 2017; |
· | our plans to identify and pursue strategic alternatives that may provide the best opportunity for shareholders to realize fair value for Mt Todd; |
· | the feasibility of Mt Todd; |
· | our belief that selectively screening and rejecting sub-economic material will improve gold recoveries and lower process operating costs at Mt Todd; |
· | our belief that these design changes can be implemented without materially changing the Project’s capital requirements; |
· | our belief that design changes have resulted in significantly improved Project economics compared to the previous preliminary feasibility study; |
· | our belief that the Mt Todd ore can be ground to a finer final product size with lower power consumption than previously estimated; |
· | our belief that gold recoveries at Mt Todd could exceed 90%; |
21
· | Our belief that each 1% improvement in gold recoveries could add approximately 0.5% to Mt Todd’s after-tax IRR, and approximately $25 million to after-tax NPV5. |
· | our belief that we will complete additional definition drilling at Quigleys and exploration programs on the ELs in 2018; |
· | our intention to investigate the possibility of providing the mill with future supplemental higher-grade ore from Quigleys; |
· | our belief that our existing working capital, coupled with potential future sources of non-dilutive financing will be sufficient to |
· | our |
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· | the potential monetization of our non-core assets, including our mill equipment which is for sale, and our Midas Gold |
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· | estimates of future operating and financial performance; |
· | potential funding requirements and sources of capital, including near-term sources of additional cash; |
· | our expectation that the Company will continue to incur losses and will not pay dividends for the foreseeable future; |
· | the timing, performance and results of feasibility studies; |
· | our potential entry into agreements to find, lease, purchase, option or sell mineral interests; |
· | our |
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· | plans and estimates concerning potential project development, including the use of high pressure grinding roll crushers and access to a water supply, as well as the ability to obtain all required permits; |
· | our belief that we are in compliance in all material respects with applicable laws and regulations including applicable mining, health, safety and environmental statutes and regulations in all of the jurisdictions in which we operate; |
· | our belief that we maintain reasonable amounts of insurance; |
· | estimates of mineral reserves and mineral resources; |
· | our intention to improve the value of our gold |
· | our belief that future exploration and development activities could lead to profitable production or proceeds from the sale of assets; |
· | potential changes in regulations or taxation initiatives; |
· | our expectation that we will continue to be a PFIC; |
· | the |
· | the |
19
· | the |
· | our belief that Minera Alamos will have no interest in the |
· |
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22
· | our belief that if we exercise the Guadalupe de los Reyes gold/silver project Back-in Right we will enter into a joint venture agreement on acceptable terms, if at |
· | preliminary estimates of the reclamation and other related costs associated with certain mining claims in British Columbia. |
Forward-looking statements and forward-looking information have been based upon our current business and operating plans, as approved by the Company’s Board of Directors; our cash and other funding requirements and timing and sources thereof; results of pre-feasibility and feasibility studies, mineral resource and reserve estimates, preliminary economic assessments and exploration activities; advancements of the Company’s required permitting processes; our experience working with our regulators; current market conditions and project development plans. The words “estimate,” “plan,” “anticipate,” “expect,” “intend,” “believe,” “will,” “may” and similar expressions are intended to identify forward-looking statements and forward-looking information. These statements involve known and unknown risks, uncertainties, assumptions and other factors which may cause our actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements and forward-looking information. These factors include risks such as:
· | pre-feasibility and feasibility study results and preliminary assessment results and the accuracy of estimates and assumptions on which they are based; |
· | resource and reserve estimate results, the accuracy of such estimates and the accuracy of sampling and subsequent assays and geologic interpretations on which they are based; |
· | technical and operational feasibility and the economic viability of deposits; |
· | our ability to obtain, renew or maintain the necessary authorizations and permits for Mt Todd, including its development plans and operating activities; |
· | the timing and results of a feasibility study |
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· | increased costs that affect our operations or our financial condition; |
· | our reliance on third parties to fulfill their obligations under agreements with us; |
· | whether projects not managed by us will comply with our standards or meet our objectives; |
· | a shortage of skilled labor, equipment and supplies; |
· | whether our acquisition, exploration and development activities, as well as the realization of the |
· | the lack of cash dividend payments by us; |
· | the success of future joint ventures, partnerships and other arrangements relating to our properties; |
· | perception of potential environmental impact of Mt Todd; |
· | known and unknown environmental and reclamation liabilities, including reclamation requirements at Mt Todd; |
· | our |
· | future water supply issues at Mt Todd; |
· | litigation or other legal claims; |
20
· | environmental lawsuits; |
· | lack of adequate insurance to cover potential liabilities; |
· | our ability to attract, retain and hire key personnel; |
· | fluctuations in the price of gold; |
23
· | volatility in our stock price and gold equities generally; |
· | our ability to raise additional capital or raise funds from the sale of non-core assets on favorable terms, if at all; |
· | industry consolidation which could result in the acquisition of a control position in the Company for less than fair value; |
· | inherent hazards of mining exploration, development and operating activities; |
· | the accuracy of calculations of mineral reserves, mineral resources and mineralized material and fluctuations therein based on metal prices, and inherent vulnerability of the ore and recoverability of metal in the mining process; |
· | changes in environmental regulations to which our exploration and development operations are subject; |
· | changes in climate change |
· | intense competition in the mining industry; |
· | potential challenges to the title to our mineral properties; |
· | evolving corporate governance and public disclosure regulations; |
· | tax initiatives on domestic and international levels; |
· | fluctuation in foreign currency values; |
· | fluctuation in the fair value or future cash flows of financial instruments; |
· | the continuing long-term viability of the Company is dependent upon securing sufficient funding; |
· | potential adverse findings in review of our Australian |
· | our likely status as a PFIC for U.S. federal tax purposes. |
For a more detailed discussion of such risks and other important factors that could cause actual results to differ materially from those in such forward-looking statements and forward-looking information, please see the risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2016,2017, under “Part I-Item 1A. Risk Factors”. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements and forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that these statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in the statements. Except as required by law, we assume no obligation to publicly update any forward-looking statements and forward-looking information, whether as a result of new information, future events or otherwise.
Cautionary Note to Investors Regarding Estimates of Mineral Reserves and Resources
Our technical report entitled “NI 43-101 Technical Report Mt Todd Gold Project 50,000 tpd Preliminary Feasibility Study Northern Territory, Australia” with an effective date of January 24, 2018 and an issue date of March 2, 2018 referenced herein uses the terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” as defined in Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the “CIM Definition Standards”). These definitions differ from the definitions in the United States Securities and Exchange Commission (“SEC”) Industry Guide 7 (“SEC Industry Guide 7”) under the United States Securities Act of 1933, as amended (the “Securities Act”). Under SEC Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves, the three-year historical average metal price is used in any reserve or cash flow analysis to designate reserves, and the primary environmental analysis or report must be filed with the appropriate governmental authority.
In addition, the technical report uses the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” which are defined in and required to be disclosed by NI 43-101; however,
24
these terms are not defined terms under SEC Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. Investors are cautioned not to assume that all or any part of a mineral deposit in these categories will ever be converted into reserves. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic, technical and legal feasibility. It cannot be assumed that all, or any part, of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically, technically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measures.
Accordingly, the technical report contains descriptions of our mineral deposits that may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Certain of the Company’s financial instruments are exposed to currency, credit and price risks. We do not currently hedge our exposure to any of these risks.
Currency risk
We are exposed to financial risk related to the fluctuation of foreign exchange rates. We operate in Australia and in the gold mining industry.United States. We are focused onreport our financial results in U.S. currency. A significant change in the evaluation, acquisition, explorationcurrency exchange rate between the Australian dollar and advancementthe U.S. dollar could affect our results of gold exploration,operations, financial position or cash flows.
We typically limit our holdings in Australian dollars to the amount required to fund approximately one month of operating activities.
Credit risk
Concentration of credit risk exists related to our cash and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash equivalents and short-term investments. Our Australian dollar cash is held in a major Australian chartered bank. Similarly, in the United States we hold U.S. dollar cash in a major U.S. bank. Our surplus cash is invested in government securities, principally notes and/or bills issued by the Treasury Department of the United States, and, occasionally notes and/or bills issued by the Government of Australia.
Other Price Risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices, other consideration.than those arising from interest rate risk or foreign exchange risk. The value of our properties andCompany’s investment in the common shares as well as our investment inof Midas Gold Shares, is closely relatedexposed to such risk.
Metal Price Risk
Changes in the market price of gold and changes in the price of gold could affect our ability to raise capital and couldsignificantly affect the value of and/or our ability to generate revenue from, these assets.
assets, including our shares of Midas Gold. Gold prices maycan fluctuate widely from timedue to time and are affected by numerous factors, including: expectations with respect tosuch as demand; forward selling by producers; central bank sales, purchases and lending; investor sentiment; the ratestrength of the U.S. dollar; inflation, exchange rates, interest rates,deflation, or other general price instability; geopolitical events; and 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
21
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. Because of these dynamics, it is extremely difficult to predict the future market value of gold with any certainty.levels.
Our principal gold project is located in Australia, consequently we are subject to Australian dollar currency fluctuations. We do not currently engage in currency hedging to offset any risk of currency fluctuations.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures.
At the end of the period covered by this quarterly report on Form 10-Q for the nine months ended September 30, 2017,2018, an evaluation was carried out under the supervision of and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended September 30, 20172018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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We are not aware of any material pending or threatened litigation or of any proceedings known to be contemplated by governmental authorities and/or other parties that are, or would be, likely to have a material adverse effect upon us or our operations, taken as a whole.
There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 20162017 as filed with the SEC and Canadian securities regulatory authorities on February 22, 2017.March 6, 2018.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURE.
We consider health, safety and environmental stewardship to be a core value for us.
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Pursuant to Section 1503(a) of the United States Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011 (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities under the regulation of the Federal Mine Safety and Health Administration (“MSHA”) under the United States Federal Mine Safety and Health Act of 1977 (the “Mine Act”). During the nine months ended September 30, 2017,2018, our U.S exploration properties were not subject to regulation by the MSHA under the Mine Act and consequently no disclosure is required under Section 1503(a) of the Dodd-Frank Act.
None.
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Exhibits
The following exhibits are filed as part of this report:
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Exhibit Number |
| Description | |
3.01 |
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3.02 |
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3.03 |
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4.01 |
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31.1* |
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31.2* |
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32.1* |
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32.2* |
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101.INS*(1) |
| XBRL Instance Document | |
101.SCH*(1) |
| XBRL Taxonomy Extension – Schema | |
101.CAL*(1) |
| XBRL Taxonomy Extension – Calculations | |
101.DEF*(1) |
| XBRL Taxonomy Extension – Definitions | |
101.LAB*(1) |
| XBRL Taxonomy Extension – Labels | |
101.PRE*(1) |
| XBRL Taxonomy Extension – Presentations |
* - Filed herewith
(1) | Submitted Electronically Herewith. Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of |
2328
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.
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| VISTA GOLD CORP. (Registrant) | |
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Dated: October | By: | /s/ Frederick H. Earnest |
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| Frederick H. Earnest, |
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| Chief Executive Officer |
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Dated: October | By: | /s/ John F. Engele |
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| John F. Engele |
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| Chief Financial Officer |
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|
|
|
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