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 SEPTEMBER 30, 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 (Not Applicable)
the Yukon Territory (IRS Employer Identification No.)
(State or other jurisdiction
of incorporation or organization)
7961 Shaffer Parkway
Suite 5
Littleton, Colorado 80127
(Address of principal executive offices) (Zip Code)
(720) 981-1185
(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 October 30, 2000
-------------
VISTA GOLD CORP.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
(i) Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 3
(ii) Consolidated Statements of Loss for the three and nine months ended
September 30, 2000 and September 30, 1999 4
(iii) Consolidated Statements of Deficit for the three and nine months ended 4
September 30, 2000 and September 30, 1999
(iv) Consolidated Statements of Cash Flows for the three and nine months ended 5
September 30, 2000 and September 30, 1999
(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 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 2. CHANGES IN SECURITIES 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 17
EXHIBIT INDEX 18
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
SEPTEMBER 30 December 31
(U.S. DOLLARS IN THOUSANDS) 2000 1999
---------------------------- ---- ----
(Unaudited) (Audited)
ASSETS:
Cash and cash equivalents $ 638 $ 2,331
Marketable securities - 77
Accounts receivable 1,120 1,571
Gold inventory - 117
Supplies and other 599 1,187
--------------------------------
Current assets 2,357 5,283
Property, plant and equipment, net 26,724 28,124
Other assets 55 22
--------------------------------
Long-term assets 26,779 28,146
================================
Total assets $ 29,136 $ 33,429
================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 108 $ 744
Accrued liabilities and other 335 1,086
Current portion of long-term debt - Note 2 522 481
--------------------------------
Current liabilities 965 2,311
Long-term debt - Note 2 301 801
Accrued reclamation and closure costs 3,484 4,411
Other liabilities 9 17
--------------------------------
Long-term liabilities 3,794 5,229
--------------------------------
Total liabilities 4,759 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 (95,282) (93,776)
Currency translation adjustment (1,487) (1,481)
--------------------------------
Total shareholders' equity 24,377 25,889
================================
Total liabilities and shareholders' equity $ 29,136 $ 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 Nine Months Ended
September 30 September 30
------------ ------------
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 2000 1999 2000 1999
----------------------------------------------- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES:
Gold sales $ 696 $ 4,742 $ 3,312 $ 16,014
Other revenues 3 12 45 67
---------------------------------------------------------
Total revenues 699 4,754 3,357 16,081
COSTS AND EXPENSES:
Production costs 375 5,044 2,194 17,211
Depreciation, depletion and amortization 215 (159) 655 3,263
Provision for reclamation and closure costs - 91 15 182
Operating leases - - - 44
Mineral exploration, property evaluation and holding 336 997 1,481 2,188
costs
Corporate administration 282 153 741 693
Investor relations 13 38 187 231
Interest expense 25 342 94 913
Loss (gain) on disposal of assets 30 - (102) 5
Gain on sale of marketable securities - - (280) -
Equity in loss and impairment of Zamora Gold Corp. - - - 601
Other expense (income) 46 (2) (88) 22
---------------------------------------------------------
Total costs and expenses 1,322 6,504 4,897 25,353
Loss before taxes 623 1,750 1,540 9,272
Income taxes (recoveries) (33) 38 (33) 52
---------------------------------------------------------
Loss $ 590 $ 1,788 $ 1,507 $ 9,324
=========================================================
Weighted average shares outstanding 90,715,040 90,715,040 90,715,040 90,715,040
- --------------------------------------------------------------------------------------------------------------------
Loss per share $ 0.01 $ 0.02 $ 0.02 $ 0.10
- --------------------------------------------------------------------------------------------------------------------
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF DEFICIT
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
(U.S. DOLLARS IN THOUSANDS) 2000 1999 2000 1999
---------------------------- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Deficit, beginning of period $ 94,692 $ 73,612 $ 93,775 $ 66,076
Loss 590 1,788 1,507 9,324
------------------------------------------------------------------
Deficit, end of period $ 95,282 $ 75,400 $ 95,282 $ 75,400
==================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
- 4 -
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
----------------------------------------------------------------
(U.S. DOLLARS IN THOUSANDS) 2000 1999 2000 1999
--------------------------- ----- ---- ---- ----
----------------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (590) $ (1,788) $ (1,507) $ (9,324)
Depreciation, depletion and amortization 214 (159) 655 3,263
Amortization of hedging gains - - - (1,150)
Provision for reclamation and closure costs - 91 15 182
Loss (gain) on sale of assets 30 - (102) 5
Equity in loss and impairment of Zamora Gold Corp. - - - 601
Loss (gain) on currency translation (5) 2 (5) 60
Other non-cash items (3) (3) (9) (9)
----------------------------------------------------------------
(354) (1,857) (953) (6,372)
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Marketable securities - - 77 14
Accounts receivable 661 (818) 451 (873)
Gold inventory - 394 117 3,615
Supplies and other 253 640 589 3,037
Accounts payable (99) (87) (512) (664)
Accrued liabilities and other (95) 39 (543) (8)
Reclamation and closure costs (162) (379) (852) (1,314)
----------------------------------------------------------------
204 2,068 (1,626) (2,565)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment 5 (273) (112) (1,897)
Proceeds from disposal of assets 224 - 537 86
Investment in and advances to Zamora Gold Corp. - - - (30)
Other assets 7 126 (34) 137
----------------------------------------------------------------
236 (147) 391 (1,704)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt - - - 1,500
Repayment of debt (225) (93) (458) (481)
----------------------------------------------------------------
(225) (93) (458) 1,019
Net increase (decrease) in cash and cash equivalents 215 (2,308) (1,693) (3,250)
Cash and cash equivalents, beginning of period 423 3,844 2,331 4,786
----------------------------------------------------------------
Cash and cash equivalents, end of period $ 638 $ 1,536 $ 638 $ 1,536
===============================================================
Supplemental cash flow information
Cash paid during the year for:
Interest paid $25 $338 $99 $904
Income taxes paid (recovered) - 38 - 38
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 production 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 nine months
ended September 30, 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 $0.6 million as
of September 30, 2000. If the current depressed market for gold prices
continues, it may be necessary for the Corporation to modify its 2001
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
or joint ventures with other companies and the sale of property interests or
surplus assets. 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. As of September 30, 2000, Hycroft had repaid $0.8 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 September 30,
2000, the Corporation had no outstanding hedging contracts or other hedging
commitments.
On August 25, 2000 United States Fidelity and Guaranty Company (USF&G)
brought a claim in the United States District Court of Nevada against the
Corporation and various other defendants for approximately $800,000, which it
alleges is the deficiency between the face amount of the $1.6 million
reclamation bond it issued for the Mineral Ridge Mine and the collateral it
holds from Mineral Ridge Resources Inc. The claim alleges that the
Corporation is liable to USF&G as an indemnitor under the bond and the
Corporation denies that it has any liability. An Emergency Motion for
- 6 -
Preliminary Injunction filed by USF&G on the 7th of September to compel
performance and the posting of additional collateral by Vista Gold and other
defendants under the same claim was denied by the court on October 16, 2000
on the basis that there was no evidence of Vista Gold ever agreeing to be
bound as an indemnitor. The ultimate outcome is not determinable at this time.
4. GEOGRAPHIC AND SEGMENT INFORMATION
The Corporation operates in the gold mining industry in the United States,
and has exploration and development properties in Canada and 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
SEPTEMBER 30 December 31
2000 1999
---- ----
(Unaudited) (Audited)
U.S. $ 5,697 $ 6,870
Latin America 21,027 21,254
------------ -----------
Total property, plant and equipment, net $ 26,724 $ 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 interests.
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 Nine Months Ended
September 30 September 30
------------ ------------
(U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 2000 1999 2000 1999
----------------------------------------------- ----- ----- ----- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net loss - Canadian GAAP $ (590) $ (1,788) $ (1,507) $ (9,324)
Amortization reduction (d) - 135 99 633
Other comprehensive income (e) - - - 22
-------------------------- --------------------------
Net loss - U.S. GAAP (590) (1,653) (1,408) (8,669)
Other comprehensive income (e) - - - (22)
-------------------------- --------------------------
Comprehensive loss - U.S. GAAP $ (590) $ (1,653) $ (1,408) $ (8,691)
========================== ==========================
Basic loss per share - U.S. GAAP $ (0.01) $ (0.02) $ (0.02) $ (0.09)
- --------------------------------------------------------------------------------------------------------------------
The significant differences in the consolidated balance sheets relative to U.S.
GAAP were:
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 December 31, 1999
------------------ -----------------
PER CDN. PER U.S. Per Cdn. Per U.S.
GAAP ADJ. GAAP GAAP Adj. GAAP
---- --- ---- ---- --- ----
(Unaudited) (Audited)
Current assets $ 2,357 $ - $ 2,357 $ 5,283 $ - $ 5,283
Property, plant and equipment (d) 26,779 (244) 26,535 28,146 (343) 27,803
--------------------------------- ---------------------------------
$ 29,136 $ (244) $ 28,892 $ 33,429 $ (343) $ 33,086
================================= =================================
Current liabilities $ 965 $ - $ 965 $ 2,311 $ - $ 2,311
Long-term debt 310 - 310 801 - 801
Provision for reclamation and
future closure costs 3,484 - 3,484 4,428 - 4,428
--------------------------------- ---------------------------------
4,759 - 4,759 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) (95,282) (79,640) (174,992) (93,776) (79,739) (173,515)
Accumulated comprehensive income - (143) (143) - (144) (144)
Currency translation adjustment (1,487) - (1,487) (1,481) - (1,481)
--------------------------------- ---------------------------------
$ 29,136 $ (244) $ 28,892 $ 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 nine months ended
September 30, 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 nine months ended September 30, 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 during 2000 and into 2001 from ore previously
mined and placed on the leach pads. Hycroft mine gold production for 2000 is
estimated to be approximately 13,000 ounces (an increase of 1,000 ounces over
our previous estimate at the end of the second quarter).
In Bolivia, a feasibility study on the Amayapampa project has been 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 SEPTEMBER 30, 2000 VS. THREE MONTHS ENDED SEPTEMBER 30, 1999
Net losses for the three months ended September 30, 2000 were $0.6 million as
compared to net losses of $1.8 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 $0.7 million for the three months ended September 30, 2000
decreased $4.0 million from the same period in 1999. The decrease in gold sales
was primarily due to lower gold production, which decreased 13,876 ounces from
1999. The decrease in gold sales was partially due to $27 decrease in the
average gross price realized per ounce of gold sold. Gold production and gold
prices were as follows:
Three Months Ended
September 30
------------------------
2000 1999
---- ----
Hycroft mine gold production (ounces) 2,691 8,065
Mineral Ridge mine gold production (ounces) - 8,502
------ -------
2,691 16,567
Average gross realized price per ounce $ 259 $ 286
Average spot price per ounce $ 277 $ 259
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 -
Production costs decreased $4.7 million to $0.4 million for the three months
ended September 30, 2000 as compared to the same period in 1999. Significant
cost reductions resulted from the suspension of mining activities at the Hycroft
and Mineral Ridge mines. Production costs were as follows:
Three Months Ended
September 30
----------------------
2000 1999
---- ----
Hycroft mine production costs $375 $2,269
Mineral Ridge mine operating costs - 2,792
---- ------
$375 $5,061
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 September 30,
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 September 30, 2000, the cash operating cost
per ounce was $137 as compared to $301 for the same period in 1999.
Depreciation, depletion and amortization ("DD&A") for the third quarter of 2000
was $0.2 million as compared to a credit of $0.2 million in the same period in
1999. The credit in third quarter of 1999 included a $1.0 million adjustment to
the year to date DD&A of Mineral Ridge Resources. At the Hycroft mine, a
significant portion of the property, plant and equipment was 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
September 30, 1999 was $91,000. The $91,000 was reclamation and closure costs
for the Mineral Ridge Mine. At the Hycroft mine, reclamation and closure costs
were fully accrued in 1998 and no further provisions are anticipated, as a
result there was no reclamation provision for the three ended September 30,
2000.
Mineral exploration, property evaluation and holding costs for the three months
ended September 30, 2000 of $0.3 million were $0.6 million less than the same
period in 1999. The costs for the quarter ended September 30, 2000 included $0.1
million in holding costs for the Corporation's Bolivian properties and $0.2
million in exploration and holding costs at the Hycroft mine.
Corporate administration and investor relations expenditures were $0.3 million
for the three months ended September 30, 2000, $0.1 million higher than the same
quarter of 1999. Interest expense decreased from $94,000 in the third quarter of
1999 to $25,000 in the third quarter of 2000, reflecting the Corporation's lower
debt balance.
NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. NINE MONTHS ENDED SEPTEMBER 30, 1999
Net losses for the nine months ended September 30, 2000 were $1.5 million as
compared to net losses of $9.3 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 $3.3 million for the nine months ended September 30, 2000
decreased $12.7 million from the same period in 1999. The lower gold sales were
due to a decrease of 42,009 ounces of gold production and a $17 decrease in the
gross realized price per ounce from 1999. Gold production and gold prices were
as follows:
Nine Months Ended
September 30
------------------------
2000 1999
---- ----
Hycroft mine gold production (ounces) 11,830 33,939
Mineral Ridge mine gold production (ounces) - 19,900
------ ------
11,830 53,839
Average gross realized price per ounce $280 $297
Average spot price per ounce $282 $273
- 10 -
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.
Production costs decreased $15.0 million to $2.2 million for the nine months
ended September 30, 2000. Significant cost reductions resulted from the
suspension of mining activities at the Hycroft and Mineral Ridge mines.
Production costs were as follows:
Nine Months Ended
September 30
------------------------
2000 1999
---- ----
Hycroft mine production costs $2,194 $ 9,696
Mineral Ridge mine operating costs - 7,515
------ --------
$2,194 $17,211
At the Hycroft mine, mining activities were suspended in December 1998, and as a
result, there were no mining costs during the nine months ended September 30,
2000. Processing and other operating costs decreased significantly during this
period reflecting reduced levels of operating activities and lower gold
production. During the nine months ended September 30, 2000, the cash operating
cost per ounce was $183 as compared to $280 for the same period in 1999.
Depreciation, depletion and amortization ("DD&A") for the first nine months 2000
decreased significantly from the same period in 1999. At the Hycroft mine, a
significant portion of the property, plant and equipment was 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 nine months ended
September 30, 2000 was $15,000 compared to $182,000 in the same period of 1999.
At the Hycroft mine, reclamation and closure costs were fully accrued in 1998
and no further provisions are anticipated, except for nominal amounts related to
ongoing severance accruals.
Mineral exploration, property evaluation and holding costs for the nine months
ended September 30, 2000 of $1.5 million, $0.7 million less than the same period
in 1999. The costs for the nine months ended September 30, 2000 included $0.5
million in holding costs for the Corporation's Bolivian properties, $0.7 million
in exploration and holding costs at the Hycroft mine and $0.3 million in other
exploration and evaluation expenditures.
Corporate administration and investor relations expenditures were $0.9 million
for the first nine months of 2000, unchanged from the same period in 1999.
Interest expense decreased from $0.6 million for the six months ended June 30,
1999 to a $0.1 million for the same period in 2000, reflecting the Corporation's
lower debt balance.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's consolidated cash balance on September 30, 2000 was $0.6
million, a decrease of $0.9 million from December 31, 1999. Operating activities
used $1.6 million, investing activities provided $0.4 million and financing
activities used $0.4 million of cash.
The Hycroft mine, operating activities for the first nine months of 2000
generated $1.1 million of cash, before reclamation expenditures and changes in
non-cash working capital, which used $1.2 million. The Corporation's Bolivian
holding costs required $0.1 million and corporate overhead costs required $0.3
million of cash during the third quarter of 2000. Net cash used for operating
activities during the first nine months of 2000 was as follows:
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2000
----
Hycroft mine $ (144)
Bolivian holding costs (577)
Corporate administration and investor relations (905)
--------
$(1,626)
Net investing activities during the first nine months of 2000 generated $0.4
million of cash. Proceeds received from the sale of mining equipment at the
Hycroft mine were $0.5 million and the amount spent on additions to property,
plant and equipment and other assets during the period was $0.1 million. The net
cash flow from investing activities was $0.4 million during the nine months
ended September 30, 2000.
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 $0.5 million of the outstanding debt balance during the
first nine months of 2000.
RECLAMATION AND ENVIRONMENTAL COSTS
Management estimates the reclamation and closure costs for the Corporation's
Hycroft mine to be $3.5 million. These costs were charged to earnings over the
life of the mining activity and the provision to date is $3.5 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 nine months of 2000, the Corporation incurred $0.9
million in reclamation and closure-related expenditures at the Hycroft mine.
REGULATORY COMPLIANCE AND OTHER MATTERS
During the first nine 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 $0.6 million as of September 30,
2000. If the current depressed market for gold prices continues, it may be
necessary for the Corporation to modify its 2001 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 or joint
ventures with other companies and the sale of property interests or surplus
assets. 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 reach 13,000 ounces for the year (an increase of 1,000
ounces over our previous estimate at the end of the second quarter). Gold
production continues to exceed expectations and the overall recovery from the
Brimstone heap is now close to 78-percent of cyanide soluble gold, compared to
previous estimates of 75-percent. Re-circulation of solutions and gold recovery
will continue into 2001 when we expect to produce in excess of 3,000 ounces of
gold from existing heaps. With the continuing low gold price environment, the
Corporation re-examined the feasibility study for restarting the
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run-of-mine heap leaching operation at Hycroft at a higher production rate.
This scenario would produce approximately 350,000 ounces of gold over a five
year period instead of the seven year period first contemplated. The
accelerated production rate substantially improves the economics and shows
that the project would have a cash cost of $183 an ounce with an after tax
internal rate of return of 31-percent at a $275 gold price. The incremented
capital required to restart the Brimstone operation is $13 million plus
working capital of $5 million and if the Corporation is able to obtain this
additional capital, mining operations could restart immediately, as the
project is fully permitted, and infrastructure and key management is in place.
In addition to the defined mineral resources in the Brimstone pit and the
defined areas where additional exploration drilling could add up to 250,000
ounces of oxide mineral resources, compilation of existing geologic and drill
hole data has continued through the quarter confirming that Hycroft is a
large epithermal gold system with multiple targets for high-grade
mineralization (greater than 0.1 ounce per ton gold). The exploration
database for the Hycroft project area now consists of around 320,000 blast
holes, 3,000 exploration drill holes and various geochemical surveys, however
only six drill holes have penetrated the levels considered most permissive
for high-grade exploration targets.
In Bolivia while the Corporation continues to pursue funding alternatives for
the Amayapampa project, the ongoing low gold price has discouraged potential
investors. The project feasibility study is complete and the Corporation will
continue to maintain this project until such time that it can be developed.
Management has continued to focus on cost reduction measures, capital
conservation and the pursuit of strategic alliances to enhance shareholder
value. The Corporation has moved its administration office into more
efficient, less-expensive quarters with reduced overheads. At the end of the
quarter Michael B. Richings announced his retirement as president and CEO of
the Corporation and was replaced by Ronald (Jock) McGregor, Vice President of
Operations and Development.
With the Corporation's current cash position, the sale of gold production and
disposal of surplus assets at Hycroft, management believes the Corporation
will be able to pay its remaining indebtedness, of approximately $800,000,
and fund on-going activities 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
continues to investigate various alternatives, including debt financing, the
issuance of equity, mergers with other companies, and the sale or joint
venture of property interests.
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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 nine
months ended September 30, 2000 under "Item 1. Financial Statements - Notes
to Consolidated Financial Statements".
At September 30, 2000, the Corporation had no outstanding hedging contracts
or other hedging commitments.
INTEREST RATE RISK
At September 30, 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.
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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 Resources 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.
On August 25, 2000, United States Fidelity and Guaranty Company (USF&G)
brought a claim in the United States District Court of Nevada against Vista
Gold Corp., Vista Gold Holdings, Inc. and various other defendants for
approximately $800,000, which it alleges is the deficiency between the face
amount of the $1.6 million reclamation bond it issued for the Mineral Ridge
Mine and the collateral it holds from Mineral Ridge Resources Inc.
Mineral Ridge Resources Inc., a wholly-owned subsidiary of Vista Gold, is
presently in Chapter 11 bankruptcy proceedings as previously reported. The
claim alleges that Vista Gold is liable to USF&G as an indemnitor under the
bond and Vista Gold denies that it has any liability. An Emergency Motion for
Preliminary Injunction filed by USF&G on the 7th of September to compel
performance and the posting of additional collateral by Vista Gold and other
defendants under the same claim was denied by the court on October 16, 2000
on the basis that there was no evidence of Vista Gold ever agreeing to be
bound as an indemnitor.
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 Second 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 September 30, 2000:
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1. Report dated August 8, 2000 regarding the Corporation's
results for the six months ended June 30, 2000.
2. Report dated August 31, 2000 regarding a claim that USF&G
had filed in the United States District Court of Nevada.
3. September 7, 2000 regarding the appointment of Mr. Ronald
(Jock) McGregor as president and CEO.
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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: October 30, 2000 By: /s/ Ronald J. McGregor
-----------------------
Ronald J. McGregor
President and Chief Executive Officer
Date: October 30, 2000 By: /s/ Robert L. Folen
---------------------
Robert L. Folen
Vice President Finance
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ----------- ----
11.01 Computation of per Share Earnings 19
27.01 Financial Data Schedule 20
99.01 Third Quarter 2000 Report to Shareholders 21
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