UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------
COMMISSION FILE NUMBER 1-9025
VISTA GOLD CORP.
(Exact name of registrant as specified in its charter)
Continued under the laws of the Yukon Territory (Not Applicable)
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 3000
370 Seventeenth Street
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(303) 629-2450
(Registrant's telephone number, including area code)
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
90,715,040
--------------
Common Shares, without par value, outstanding at May 11, 2000
---------------
VISTA GOLD CORP.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
(i) Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 3
(ii) Consolidated Statements of Loss for the three months
ended March 31, 2000 and March 31, 1999 4
(iii) Consolidated Statements of Deficit for the three months
ended March 31, 2000 and March 31, 1999 4
(iv) Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and March 31, 1999 5
(v) Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
In this Report, unless otherwise indicated, all dollar amounts are
expressed in United States dollars.
- 2 -
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA GOLD CORP.
CONSOLIDATED BALANCE SHEETS
MARCH 31 December 31
(U.S. DOLLARS IN THOUSANDS) 2000 1999
--------------------------- ---------- -----------
(Unaudited) (Audited)
ASSETS:
Cash and cash equivalents $ 1,625 $ 2,331
Marketable securities - 77
Accounts receivable 1,405 1,571
Gold inventory 71 117
Supplies and other 1,116 1,187
------- --------
Current assets 4,217 5,283
Property, plant and equipment, net 27,564 28,124
Other assets 85 22
------- --------
Long-term assets 27,649 28,146
------- --------
Total assets $31,866 $ 33,429
------- --------
------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 262 $ 744
Accrued liabilities and other 747 1,086
Current portion of long-term debt - Note 2 494 481
------- --------
Current liabilities 1,503 2,311
Long-term debt - Note 2 672 801
Accrued reclamation and closure costs 3,938 4,411
Other liabilities 14 17
------- --------
Long-term liabilities 4,624 5,229
------- --------
Total liabilities 6,127 7,540
Capital stock, no par value per share:
Preferred - unlimited shares authorized; no shares outstanding
Common - unlimited shares authorized; shares outstanding:
2000 and 1999 - 90,715,040 121,146 121,146
Deficit (93,938) (93,776)
Currency translation adjustment (1,469) (1,481)
------- --------
Total shareholders' equity 25,739 25,889
------- --------
Total liabilities and shareholders' equity $31,866 $ 33,429
------- --------
------- --------
Nature of operations and going concern - Note 1
Commitments and contingencies - Note 3
Approved by the Board of Directors
/s/ DAVID R. SINCLAIR /s/ KEITH STEEVES
- ---------------------- ----------------------
David R. Sinclair Keith Steeves
Chairman Director
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
- 3 -
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF LOSS
Three Months Ended
March 31
---------------------------
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 2000 1999
---------------------------------------------- ----------- -----------
(Unaudited) (Unaudited)
REVENUES:
Gold sales $ 1,398 $ 6,410
Other revenues 19 24
----------- -----------
Total revenues 1,417 6,434
COSTS AND EXPENSES:
Production costs 1,080 6,531
Depreciation, depletion and amortization 221 1,508
Provision for reclamation and closure costs 10 29
Mineral exploration, property evaluation and holding costs 503 540
Corporate administration 245 388
Investor relations 40 39
Interest expense 36 270
Loss (gain) on disposal of assets (142) -
Loss (gain) on sale of marketable securities (280) -
Equity in loss and impairment of Zamora Gold Corp. - 143
Other expense (income) (134) 17
----------- -----------
Total costs and expenses 1,579 9,465
Net loss before taxes (162) (3,031)
Income taxes - 14
----------- -----------
Net loss $ (162) $ (3,045)
----------- -----------
----------- -----------
Weighted average shares outstanding 90,715,040 90,715,040
- ---------------------------------------------------------------------------------------------
Net loss per share $ (0.00) $ (0.03)
- ---------------------------------------------------------------------------------------------
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF DEFICIT
Three Months Ended
March 31
---------------------------
(U.S. DOLLARS IN THOUSANDS) 2000 1999
--------------------------- ----------- -----------
(Unaudited) (Unaudited)
Deficit, beginning of period $(93,776) $(66,076)
Net loss (162) (3,045)
-------- --------
Deficit, end of period $(93,938) $(69,121)
-------- --------
-------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
- 4 -
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31
-------------------------
(U.S. DOLLARS IN THOUSANDS) 2000 1999
--------------------------- ----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (162) $(3,045)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES:
Depreciation, depletion and amortization 221 1,508
Deferral of hedging gains - 348
Provision for reclamation and closure costs 10 29
Reclamation and closure costs (392) (536)
Gain on sale of assets (142) -
Equity in loss and impairment of Zamora Gold Corp. - 143
Loss on currency translation 13 25
Other non-cash items (3) (2)
------ -------
(455) (1,530)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Marketable securities 77 17
Accounts receivable 166 (1,727)
Gold inventory 47 2,476
Supplies and other 71 (125)
Accounts payable (359) (825)
Accrued liabilities and other (134) (119)
------ -------
Net cash provided by (used in) operating activities (587) 1,833
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (116) (380)
Proceeds from disposal of assets 176 83
Investment in and advances to Zamora Gold Corp. - (14)
Other assets (64) 77
------ -------
Net cash used in investing activities (4) (234)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (115) (343)
------ -------
Net cash used in financing activities (115) (343)
Net decrease in cash and cash equivalents (706) (2,410)
Cash and cash equivalents, beginning of period 2,331 4,786
------ -------
Cash and cash equivalents, end of period $1,625 $ 2,376
------ -------
------ -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
- 5 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands unless specified otherwise)
1. NATURE OF OPERATIONS AND GOING CONCERN
(a) NATURE OF OPERATIONS
Vista Gold Corp. (the "Corporation") is engaged in gold mining and related
activities in the United States, Canada, and Latin America, including
exploration, extraction, processing and reclamation. Gold bullion is the
Corporation's principal product, which is a commodity produced throughout the
world.
The consolidated financial statements of Vista Gold Corp. for the three
months ended March 31, 2000 have been prepared in accordance with accounting
principles generally accepted in Canada by the Corporation without audit. In
the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to fairly present the interim financial
information set forth herein, have been made. The results of operations for
interim periods are not necessarily indicative of the operating results of a
full year or of future years.
(b) GOING CONCERN
These consolidated financial statements have been prepared on the basis of
accounting principles applicable to a going concern that assumes the
realization of assets and the discharge of liabilities in the normal course
of business. The Corporation's consolidated cash balance was $1.6 million as
of March 31, 2000. Management estimates consolidated total cash expenditures
of $1.4 million for remainder of the year 2000. If the current depressed
market for gold prices continues, it may be necessary for the Corporation to
modify its 2000 operating plan to achieve further reductions in operating and
general and administrative expenses.
The Corporation relies on the Hycroft mine as its only current source of
operating cash flows. Mining activities at Hycroft were suspended in 1998.
The Hycroft mine is currently producing gold from ore previously mined and
placed on the leach pads. However, the remaining ounces of gold on the leach
pads are decreasing and as a result, the rate of gold production will
continue to decrease throughout the year 2000. The Corporation is
investigating the economic feasibility of restarting the Hycroft mine and
developing the Amayapampa project in Bolivia, both of which are dependent
upon the Corporation's ability to raise additional capital.
The Corporation's ability to continue as a going concern is dependent upon
obtaining additional capital. Management is actively pursuing additional
sources of capital, including debt financing, the issuance of equity, mergers
with other companies, and the sale of property interests. In the event that
management is unable to obtain additional capital, there is substantial doubt
about the ability of the Corporation to continue as a going concern. These
financial statements do not give effect to any adjustments, which may be
necessary should the Corporation be unable to continue as a going concern.
2. LONG-TERM DEBT
In April 1999, Hycroft Resources & Development, Inc. ("Hycroft"), a
wholly-owned subsidiary of the Corporation, entered into a debt agreement
with Finova Capital Corporation through which Hycroft received $1.5 million
in cash. The interest rate on the loan is 10.61 percent and the loan is
collateralized by certain mobile equipment assets at Hycroft. The repayment
terms of the loan require 36 equal monthly installments, which commenced in
May 1999. At March 31, 2000, Hycroft had repaid $0.4 million of the debt, and
the current portion of the Hycroft long-term debt was $0.5 million.
3. COMMITMENTS AND CONTINGENCIES
As part of its gold hedging program, the Corporation enters into agreements
with major financial institutions to deliver gold. Realization under these
agreements is dependent upon the ability of those financial institutions to
perform in accordance with the terms of the agreements. At March 31, 2000,
the Corporation had no outstanding hedging contracts or other hedging
commitments.
- 6 -
4. GEOGRAPHIC AND SEGMENT INFORMATION
The Corporation operates in the gold mining industry in the United States, and
has exploration and development properties in Latin America. Its major product
and only identifiable segment is gold, and all gold revenues and operating costs
are derived in the United States.
PROPERTY, PLANT AND EQUIPMENT, NET, BY GEOGRAPHIC REGION
MARCH 31 December 31
2000 1999
----------- -----------
(Unaudited) (Audited)
U.S. $ 6,529 $ 6,870
Latin America 21,035 21,254
------- -------
Total property, plant and equipment, net $27,564 $28,124
======= =======
5. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The significant differences between generally accepted accounting principles
("GAAP") in Canada and in the United States are as follows:
(a) Under Canadian corporate law, the Corporation underwent a capital reduction
in connection with the amalgamation of Granges Inc. (predecessor of the
Corporation) and Hycroft whereby share capital and contributed surplus were
reduced to eliminate the consolidated accumulated deficit of Granges as of
December 31, 1994, after giving effect to the estimated costs of the
amalgamation. Under U.S. corporate law, no such transaction is available
and accordingly is not allowed under U.S. GAAP.
(b) Under Canadian GAAP, the amalgamation of Granges and Hycroft was treated in
a manner similar to a pooling of interests. Under U.S. GAAP, the
amalgamation did not meet the conditions for a pooling of interest.
Accordingly, the transaction is treated as a purchase under U.S. GAAP, with
the excess of purchase price over the net book value of Hycroft's net
assets allocated to mineral properties.
(c) In 1995, the United States Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", effective for fiscal years beginning after
December 15, 1995. SFAS No. 121 requires that long-lived assets and
associated intangibles be written down to their fair values whenever an
impairment review indicates that the carrying value cannot be recovered on
an undiscounted cash flow basis.
In 1996, under U.S. GAAP, the carrying value of the Hycroft mine, including
the excess of proceeds over the net book value from (b) above, exceeded the
undiscounted cash flow. Accordingly, the Hycroft mine carrying value was
written down to fair value using the discounted cash flow method following
U.S. GAAP.
(d) In 1997, the carrying values of certain long-lived assets exceeded their
respective undiscounted cash flows. Following Canadian GAAP, the carrying
values were written down using the undiscounted cash flow method. Under
U.S. GAAP, as discussed in (c) above, the carrying values were written down
to their fair values using the discounted cash flow method, giving rise to
a difference in the amounts written down.
Amortization of the remaining carrying values in subsequent periods
following Canadian GAAP must be reduced to reflect the difference in the
amounts written down following U.S. GAAP.
(e) Under U.S. GAAP, items such as foreign exchange gains and losses and
unrealized gains and losses on marketable securities are required to be
shown separately in the derivation of comprehensive income.
- 7 -
The significant differences in the consolidated statements of earnings (loss)
relative to U.S. GAAP were as follows:
CONSOLIDATED STATEMENTS OF LOSS
Three Months Ended
March 31
---------------------------
2000 1999
----------- -----------
(Unaudited) (Unaudited)
Net loss - Canadian GAAP $ (162) $(3,045)
Amortization reduction (d) 82 329
Other comprehensive income (e) - (146)
-----------------------
Net loss - U.S. GAAP (80) (2,862)
Other comprehensive income (e) - 146
-----------------------
Comprehensive loss - U.S. GAAP $ (80) $(2,716)
=======================
Basic loss per share - U.S. GAAP $(0.00) $ (0.03)
- ---------------------------------------------------------------------
The significant differences in the consolidated balance sheets relative to
U.S. GAAP were:
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 December 31, 1999
------------------------------------- -------------------------------------
PER CDN. PER U.S. Per Cdn. Per U.S.
GAAP ADJ. GAAP GAAP Adj. GAAP
-------- -------- --------- -------- -------- ---------
Current assets $ 4,217 $ - $ 4,217 $ 5,283 $ - $ 5,283
Property, plant and equipment (d) 27,649 (261) 27,388 28,146 (343) 27,803
------------------------------------- -------------------------------------
$ 31,866 $ (261) $ 31,605 $ 33,429 $ (343) $ 33,086
===================================== =====================================
Current liabilities $ 1,503 $ - $ 1,503 $ 2,311 $ - $ 2,311
Long-term debt 686 - 686 801 - 801
Provision for reclamation and
future closure costs 3,938 - 3,938 4,428 - 4,428
------------------------------------- -------------------------------------
6,127 - 6,127 7,540 - 7,540
Common shares (a, b) 121,146 76,754 197,900 121,146 76,754 197,900
Contributed surplus (a) - 2,786 2,786 - 2,786 2,786
Retained deficit (a, b, c, d) (93,938) (79,657) (173,595) (93,776) (79,739) (173,515)
Accumulated comprehensive income - (144) (144) - (144) (144)
Currency translation adjustment (1,469) - (1,469) (1,481) - (1,481)
------------------------------------- -------------------------------------
$ 31,866 $ (261) $ 31,605 $ 33,429 $ (343) $ 33,086
===================================== =====================================
- 8 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in thousands, unless specified otherwise)
This discussion should be read in conjunction with the consolidated financial
statements of Vista Gold Corp. (the "Corporation") for the three months ended
March 31, 2000 and 1999 and the notes thereto, which have been prepared in
accordance with accounting principles generally accepted in Canada without
audit.
INTRODUCTION
During the three months ended March 31, 2000, the Corporation had one gold
producing mine located in Nevada and one development project located in
Bolivia.
At the Hycroft mine in Nevada, mining activities were suspended in December
1998 because of the continued depression in gold prices. Gold processing and
recovery at the Hycroft mine will continue from ore previously mined and
placed on the leach pads during 2000 and into 2001. Hycroft mine gold
production for 2000 is estimated to be approximately 12,000 ounces.
In Bolivia, a feasibility study on the Amayapampa project was recently
completed. The Corporation has been in discussions with various lenders
regarding the debt-financing component for the project and is exploring
alternatives to complete the total financing package.
In 1998, the Corporation acquired the Mineral Ridge mine, a gold property
also located in Nevada. In 1999, after efforts to recommence mining and
processing activities at the Mineral Ridge mine were unsuccessful, the
Mineral Ridge mine applied for protection under the U.S. Bankruptcy Code in
order to begin the process of a permanent cessation of all mining activities.
Accordingly, effective December 1999, the Corporation ceased consolidating
its investment in Mineral Ridge Resources Inc.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 VS. THREE MONTHS ENDED MARCH 31, 1999
Net losses for the three months ended March 31, 2000 were $0.2 million as
compared to net losses of $3.0 million for the same period in 1999. The
primary reasons for the decrease in net losses were the lower levels of
activity at the Hycroft mine and the discontinuance of operations at the
Mineral Ridge mine, which had significant start up expenses in 1999 and is no
longer being consolidated.
Gold sales of $1.4 million for the three months ended March 31, 2000
decreased $5.0 million from the same period in 1999. The decrease in gold
sales was directly related to gold production, which decreased 14,333 ounces
from 1999, and a $49 decrease in the average gross price realized per ounce
of gold sold. Gold production and gold prices were as follows:
Three Months Ended
March 31
------------------
2000 1999
----- ------
Hycroft mine gold production (ounces) 4,927 15,770
Mineral Ridge mine gold production (ounces) - 3,490
----- ------
4,927 19,260
===== ======
Average gross realized price per ounce $ 284 $ 333
Average spot price per ounce $ 290 $ 287
At the Hycroft mine, the decrease in gold production was attributable to the
suspension of mining activities in December 1998. All subsequent Hycroft gold
production has been, and will be, from ore previously mined and placed on the
leach pads. As the mine continues to produce gold, the remaining ounces on
the leach pads will decrease. During this process, the rate of gold
production will decline until the recoverable gold ounces on the leach pads
have been produced.
- 9 -
The cost of mining operations decreased $5.4 million to $1.1 million for the
three months ended March 31, 2000. Significant cost reductions resulted from
the suspension of mining activities at the Hycroft and Mineral Ridge mines.
Mine operating costs were as follows:
Three Months Ended
------------------
2000 1999
------ ------
Hycroft mine operating costs $1,080 $5,228
Mineral Ridge mine operating costs - 1,303
------ ------
$1,080 $6,531
====== ======
At the Hycroft mine, mining activities were suspended in December 1998, and
as a result, there were no mining costs during the three months ended March
31, 2000. Processing and other operating costs decreased significantly during
this period reflecting reduced levels of operating activities and lower gold
production. During the quarter ended March 31, 2000, the cash operating cost
per ounce was $217 as compared to $332 for the same period in 1999.
Depreciation, depletion and amortization ("DD&A") for the first quarter of
2000 decreased significantly from the same period in 1999. At the Hycroft
mine, a significant portion of the property, plant and equipment is amortized
using the units of production method of depreciation based on proven and
probable reserves. Those assets have been fully amortized and, as a result,
DD&A at the mine is minimal.
The provision for reclamation and closure costs for the three months ended
March 31, 2000 was nominal and relatively unchanged from 1999. At the Hycroft
mine, reclamation and closure costs were fully accrued in 1998 and no further
provisions are anticipated.
Mineral exploration, property evaluation and holding costs for the three
months ended March 31, 2000 of $0.5 million were relatively unchanged from
the same period in 1999. The 2000 costs included $0.2 million in holding
costs for the Corporation's Bolivian properties, $0.2 million in exploration
expenditures at the Hycroft mine and $0.1 million in other exploration and
evaluation expenditures.
Corporate administration and investor relations expenditures decreased 33
percent from the first quarter of 1999, as the Corporation continued to
minimize its corporate overhead expenses. Interest expense decreased from
$0.3 million in the first quarter of 1999 to a $36,000 in the first quarter
of 2000, reflecting the Corporation's lower average debt balance.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's consolidated cash balance on March 31, 2000 was $1.6
million, a decrease of $0.7 million from December 31, 1999. Operating
activities used $0.6 million and financing activities used $0.1 million of
cash.
At the Hycroft mine, operating activities for the first three months of 2000
generated $0.3 million of cash before reclamation expenditures of $0.4
million. The Corporation's Bolivian holding costs and corporate overhead
costs each required $0.2 million during the first quarter of 2000. Net cash
used for operating activities during the first three months of 2000 was as
follows:
2000
-----
Hycroft mine $(128)
Bolivian holding costs (224)
Corporate administration and investor relations (235)
-----
$(587)
=====
Net investing activities during the first three months of 2000 were nominal,
as the proceeds received from the sale of surplus mining equipment at the
Hycroft mine were approximately the same amount as the additions to property,
plant and equipment during the period.
- 10 -
In April 1999, the Hycroft mine entered into a debt agreement with Finova
Capital Corporation through which Hycroft received $1.5 million in cash. The
interest rate on the loan is 10.61 percent and the loan is collateralized by
certain mobile equipment assets at the Hycroft mine. The repayment terms of
the loan require 36 equal monthly installments, which commenced in May 1999,
and the Hycroft mine repaid $0.1 million of the outstanding debt balance
during the first quarter of 2000.
RECLAMATION AND ENVIRONMENTAL COSTS
Management estimates the reclamation and closure costs for the Corporation's
Hycroft mine to be $3.9 million. These costs were charged to earnings over
the life of the mining activity and the provision to date is $3.9 million. In
April 1995, the Nevada Bureau of Land Management ("BLM") approved an amended
Hycroft mine reclamation plan that included the Brimstone deposit, and a
surety bond in the amount of $5.1 million was posted to secure reclamation
obligations under the plan. During the first three months of 2000, the
Corporation incurred $0.4 million in reclamation and closure-related
expenditures at the Hycroft mine.
REGULATORY COMPLIANCE AND OTHER MATTERS
During the first three months of 2000, there were no material environmental
incidents or non-compliance events with any applicable environmental or other
regulations.
GOING CONCERN
The Corporation's consolidated cash balance was $1.6 million as of March 31,
2000. Management estimates consolidated total cash expenditures of $1.4
million for remainder of the year 2000. If the current depressed market for
gold prices continues, it may be necessary for the Corporation to modify its
2000 operating plan to achieve further reductions in operating and general
and administrative expenses.
The Corporation relies on the Hycroft mine as its only current source of
operating cash flows. Mining activities at Hycroft were suspended in 1998.
The Hycroft mine is currently producing gold from ore previously mined and
placed on the leach pads. However, the remaining ounces of gold on the leach
pads are decreasing and as a result, the rate of gold production will
continue to decrease throughout the year 2000. The Corporation is
investigating the economic feasibility of restarting the Hycroft mine and
developing the Amayapampa project in Bolivia, both of which are dependent
upon the Corporation's ability to raise additional capital.
The Corporation's ability to continue as a going concern is dependent upon
obtaining additional capital. Management is actively pursuing additional
sources of capital, including debt financing, the issuance of equity, mergers
with other companies, and the sale of property interests. In the event that
management is unable to obtain additional capital, there is substantial doubt
about the ability of the Corporation to continue as a going concern.
OUTLOOK
At the Hycroft mine, gold production from ore previously mined and placed on
the leach pads is expected to be 12,000 ounces for the year. During 1999,
Hycroft mine gold production consistently exceeded expectations and as a
result, the Corporation conducted studies and a drilling program to determine
the extent of the remaining Brimstone gold resource. The studies indicated
that during the period of 1996 through 1998, gold production from the north
end of the Brimstone deposit exceeded planned production by 47,090 ounces, or
26%. The excess gold production was a result of mining more ore tons at a
higher average grade than predicted in the exploration reserve model. The
studies and drilling program resulted in a recalculated mineable reserve of
23.96 million tons of ore grading 0.021 ounces per ton containing 495,000
ounces of gold. The stripping ratio is expected to be 1.24 tons of waste to
each ton of ore.
The Corporation is currently completing a study to restart mining operations
at its Brimstone deposit. A positive result from the program could allow the
Hycroft mine to resume mining operations and gold production, provided that
the Corporation can obtain additional capital. Currently, the Corporation
plans to maintain the plant and facilities on a standby basis until
production can be restarted. In the short-term, the Corporation will continue
reclamation activities in areas that would not be affected by future
operations.
- 11 -
In Bolivia, the Corporation recently completed a feasibility study on the
Amayapampa project. Based on a gold price of $300 per ounce, the proven and
probable reserves at Amayapampa are calculated to be 9.3 million tonnes (10.2
million tons) grading 1.76 grams per tonne (0.051 ounces per ton) including
dilution, containing 526,000 ounces of gold. Within this reserve, an
optimized plan at a gold price of $325 per ounce will generate an after-tax
internal rate of return of 20%. The initial capital costs are estimated to be
$25.0 million, including working capital and a 20% contingency. The
Corporation has been in discussions with various lenders regarding the
debt-financing component for the project and is exploring alternatives to
complete the total financing package.
Management is attempting to further reduce its corporate overhead costs and
minimize discretionary expenditures in an effort to preserve capital. The
Corporation believes that it's current cash on hand together with estimated
revenues from the sale of gold production from ore previously mined and
placed on the leach pads at the Hycroft mine will be sufficient to fund
ongoing operating activities and maintain its properties for the next 12 to
14 months beyond which, if the Corporation is unable to raise additional
capital or the gold price does not improve significantly, the Corporation
will have to examine other alternatives including the disposal of surplus
assets at the Hycroft mine. Management believes the Corporation could raise
sufficient funds from the sale of surplus assets to repay its remaining
indebtedness related to the Hycroft mine of approximately $1.0 million and
continue to fund its ongoing activities and maintain its properties until
mid-2002. The Corporation will have to raise additional funds from external
sources in order to restart mining activities at the Hycroft mine or begin
construction and development activities at the Amayapampa project in Bolivia.
Accordingly, the Corporation is actively investigating various alternatives,
including debt financing, the issuance of equity, mergers with other
companies, and the sale of property interests. During 2000, the Corporation's
activities will focus on the advancement of its two development projects and
the preservation of its working capital resources.
- 12 -
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
COMMODITY PRICE RISK
The Corporation is engaged in gold mining and related activities, including
exploration, extraction, processing and reclamation. Gold bullion is the
Corporation's principal product. Changes in the price of gold could
significantly affect the Corporation's profitability and cash flows. Gold
prices may fluctuate widely from time to time. For a description of factors
that affect gold prices, see note 1(a) to the consolidated financial
statements for the year ended December 31, 1999 filed under "Form 10-K, Item
8. Consolidated Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements".
Using current 2000 estimates of production at an estimated average gold price
of $300 per ounce and management's estimate of expected operating expenses, a
$10 change in the gold price would result in an increase or decrease of
approximately $0.1 million in net income and cash flows.
The Corporation occasionally utilizes derivative commodity instruments to
manage the Corporation's exposure to the risks associated with fluctuations
in the price of gold by protecting the selling price of a portion of its
production. The commodity instruments are not used for trading purposes. The
market risk of these commodity instruments to the Corporation's cash flow is
related to the possible failure of all counterparties to honor their
contractual obligations. Precious metals contracts between the Corporation
and various counterparties involve the requirement that the Corporation
deliver gold to the counterparty at agreed-upon prices. If the counterparty
is unable to fulfill its purchase obligations, there is no guarantee that the
Corporation will be able to receive the agreed-upon sales price in the open
market. If the Corporation is unable to produce sufficient gold to meet its
hedging contract obligations, it may be obligated to purchase such gold in
the open market. For further information regarding the Corporation's hedging
program, see note 3 to the consolidated financial statements for the three
months ended March 31, 2000 under "Item 1. Financial Statements - Notes to
Consolidated Financial Statements".
At March 31, 2000, the Corporation had no outstanding hedging contracts or
other hedging commitments.
INTEREST RATE RISK
At March 31, 2000, the interest rate on the Corporation's long-term debt was
10.61%. The interest rate on this debt is fixed. Management does not believe
that the Corporation is exposed to major interest rate risk and the
Corporation does not utilize market risk sensitive instruments to manage its
exposure to this risk.
FOREIGN CURRENCY EXCHANGE RATE RISK
The price of gold is denominated in U.S. dollars, and all of the Corporation's
revenues and a significant majority of its expenses are incurred in U.S.
dollars. As a result, management does not believe that the Corporation is
exposed to significant foreign currency exchange rate risk and the Corporation
does not utilize market risk sensitive instruments to manage its exposure to
this risk.
- 13 -
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except as described below, the Corporation is not aware of any material pending
or threatened litigation or of any proceedings known to be contemplated by
governmental authorities which is, or would be, likely to have a material
adverse effect upon the Corporation or its operations, taken as a whole.
On December 10, 1999, Mineral Ridge Inc., a wholly owned subsidiary of Vista
Gold, voluntarily filed for protection under the U.S. Bankruptcy Code. See "Form
10-K, Item 2. Properties - Mineral Ridge Mine" for the year ended December 31,
1999.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.01 Statement re: Computation of per Share Earnings.
27.01 Financial Data Schedule.
99.01 First Quarter 2000 Report to Shareholders.
(b) Reports on Form 8-K
The following documents were filed under cover of Form 8-K
during the quarter ended March 31, 2000:
1. Report dated January 18, 2000 regarding an update
and 1999 gold production.
2. Report dated February 7, 2000 regarding agreements in
Bolivia.
3. Report dated March 27, 2000 regarding the
Corporation's results for the year ended December 31,
1999 and new ore reserves at the Hycroft mine.
- 14 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISTA GOLD CORP.
(Registrant)
Date: May 11, 2000 By: /s/ MICHAEL B. RICHINGS
-------------------------------------
Michael B. Richings
President and Chief Executive Officer
Date: May 11, 2000 By: /s/ ROGER L. SMITH
-------------------------------------
Roger L. Smith
Vice President Finance
- 15 -
EXHIBIT INDEX
Exhibit Number Description Page
- -------------- ----------- ----
11.01 Computation of per Share Earnings 17
27.01 Financial Data Schedule 18
99.01 First Quarter 2000 Report to Shareholders 19
- 16 -