10-Q 1 vgz-20140331x10q.htm 10-Q d092d20345fe4a6

 

 ___________________________________________________________________________________________________________________________________________  

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 

FORM 10-Q

 

 

 

 

 

   

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

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-Logo-2-300dpi 

 

VISTA GOLD CORP.

 (Exact Name of Registrant as Specified in its Charter)

 

(Exact Name of Registrant as Specified in its Charter)r

 

 

British Columbia

   

98-0542444

(State or other jurisdiction of incorporation or organization)

   

(I.R.S. Employer Identification No.)

 

   

 

Suite 5, 7961 Shaffer Parkway

   

   

Littleton, Colorado

   

80127

(Address of Principal Executive Offices)

   

(Zip Code)

 

(720) 981-1185

(Registrant’s Telephone Number, including Area Code)

 

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 (§ 229.405 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, or a non-accelerated filer.  See definition of “Accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

      Large Accelerated Filer   Accelerated Filer   Non-Accelerated Filer Smaller Reporting Company  

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 82,275,217 common shares, without par value, outstanding as of April 21, 2014.

 

 

 

 

 

 

 


 

   

 

VISTA GOLD CORP. 

(An Exploration Stage Enterprise) 

FORM 10-Q 

For the Quarter Ended March 31, 2014 

INDEX  

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF     OPERATIONS

15 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

23 

ITEM 4. CONTROLS AND PROCEDURES

23 

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

24 

ITEM 1A. RISK FACTORS

24 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

24 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

24 

ITEM 4. MINE SAFETY DISCLOSURE

24 

ITEM 5. OTHER INFORMATION

24 

ITEM 6. EXHIBITS

24 

SIGNATURES

 

 

 

 

 

 

   

 


 

PART I

 

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in U.S. dollars and in thousands, except shares)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

March 31,

 

 

December 31,

 

 

2014

 

 

2013

 

 

 

 

 

 

Assets:

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

7,496 

 

$

5,475 

Marketable securities

 

213 

 

 

176 

Other investments (Note 3)

 

12,484 

 

 

 -

Current deferred tax asset

 

 -

 

 

2,353 

Other current assets

 

1,414 

 

 

1,840 

   Total current assets

 

21,607 

 

 

9,844 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

Mineral properties (Note 4)

 

7,134 

 

 

7,184 

Plant and equipment, net (Note 5)

 

3,484 

 

 

3,698 

Assets held for sale (Note 5)

 

6,500 

 

 

6,500 

Amayapampa interest (Note 10)

 

4,813 

 

 

4,813 

Long-term investments

 

65 

 

 

21,055 

Long-term deferred tax asset (Note 3)

 

4,105 

 

 

 -

   Total non-current assets

 

26,101 

 

 

43,250 

 

 

 

 

 

 

Total assets

$

47,708 

 

$

53,094 

 

 

 

 

 

 

Liabilities and Shareholders' Equity:

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

723 

 

$

705 

Accrued liabilities and other

 

540 

 

 

517 

Current deferred tax liability (Note 3)

 

4,105 

 

 

 -

   Total current liabilities

 

5,368 

 

 

1,222 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

Debt (Note 6)

 

 -

 

 

6,506 

Long-term deferred tax liability

 

 -

 

 

2,353 

   Total non-current liabilities

 

 -

 

 

8,859 

 

 

 

 

 

 

Total liabilities

 

5,368 

 

 

10,081 

 

 

 

 

 

 

Commitments and contingencies – (Note 9)

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

Common shares, no par value - unlimited shares authorized; shares

 

 

 

 

 

   outstanding: 2014 - 82,275,217 and 2013 - 82,275,217

 

404,470 

 

 

404,470 

Additional paid-in capital (Note 7)

 

32,901 

 

 

32,487 

Accumulated other comprehensive income (loss) (Note 8)

 

(6)

 

 

(59)

Accumulated deficit (including during exploration stage: 2014 - $195,953 and 2013 - $194,813)

 

(395,025)

 

 

(393,885)

   Total shareholders' equity

 

42,340 

 

 

43,013 

 

 

 

 

 

 

Total liabilities and shareholders' equity

$

47,708 

 

$

53,094 

 

 

 

 

 

 

 

Approved by the Board of Directors

 

Racy A. S

 

 

 

 

 

/s/ John M. Clark

                                          John M. Clark

Director

/s/ Tracy A. Stevenson

                                    Tracy A. Stevenson

Director

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS)

(Dollar amounts in U.S. dollars and in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Cumulative during Exploration

 

 

2014

 

2013

 

Stage

 

 

 

 

 

 

 

Operating income and (expenses):

 

 

 

 

 

 

Exploration, property evaluation and holding costs

$

(1,418)

$

(7,130)

$

(112,277)

Corporate administration

 

(1,275)

 

(1,910)

 

(50,910)

Depreciation and amortization

 

(217)

 

(275)

 

(3,636)

Loss on extinguishment of convertible debt

 

 -

 

 -

 

(1,218)

Gain on disposal of mineral property, net

 

 -

 

 -

 

79,766 

Write-down of mineral property

 

 -

 

 -

 

(250)

   Total operating expense

 

(2,910)

 

(9,315)

 

(88,525)

 

 

 

 

 

 

 

Non-operating income and (expenses):

 

 

 

 

 

 

Gain/(loss) on sale of marketable securities

 

13 

 

 

8,008 

Unrealized gain/(loss) on other investments (Note 3)

 

2,054 

 

(28,781)

 

(59,461)

Realized gain on other investments, net (Note 3)

 

155 

 

 -

 

155 

Write-down of marketable securities

 

 -

 

 -

 

(1,234)

Write-down of plant and equipment

 

 -

 

 -

 

(10,617)

Interest income

 

 

122 

 

2,818 

Interest expense

 

(78)

 

(6)

 

(4,737)

Other income/(expense)

 

(378)

 

(395)

 

(2,225)

   Total non-operating income/(expense)

 

1,770 

 

(29,054)

 

(67,293)

 

 

 

 

 

 

 

Income/(Loss) from continuing operations before income taxes

 

(1,140)

 

(38,369)

 

(155,818)

Deferred income tax benefit/(expense)

 

 -

 

10,963 

 

(2)

Income/(Loss) from continuing operations after income taxes

 

(1,140)

 

(27,406)

 

(155,820)

Loss from discontinued operations

 

 -

 

 -

 

(5,192)

Net income/(loss)

$

(1,140)

$

(27,406)

$

(161,012)

 

 

 

 

 

 

 

Other comprehensive gain/(loss):

 

 

 

 

 

 

Unrealized fair value increase/(decrease) on available-for-sale securities

 

53 

 

(220)

 

(6)

Comprehensive income/(loss)

$

(1,087)

$

(27,626)

$

(161,018)

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Weighted average number of shares outstanding

 

82,275,217 

 

81,597,452 

 

 

Net income/(loss) per share

$

(0.01)

$

(0.34)

 

 

Diluted:

 

 

 

 

 

 

Weighted average number of shares outstanding

 

82,275,217 

 

81,597,452 

 

 

Net income/(loss) per share

$

(0.01)

$

(0.34)

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

4

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollar amounts in U.S. dollars and in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

Common stock

 

Additional paid-in capital

 

Accumulated Deficit

 

Accumulated other comprehensive income/(loss)

 

Total shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2001

4,535,752 

$

197,900 

$

2,786 

$

(199,072)

$

 -

$

1,614 

Shares issued, net of transaction costs

66,968,131 

 

182,219 

 

9,917 

 

 -

 

 -

 

192,136 

Warrants and options

 -

 

 -

 

11,967 

 

 -

 

 -

 

11,967 

Dividend-in-kind

 -

 

 -

 

 -

 

(34,941)

 

 -

 

(34,941)

Other comprehensive income

 -

 

 -

 

 -

 

 -

 

175 

 

175 

Net loss

 -

 

 -

 

 -

 

(29,728)

 

 -

 

(29,728)

Balances at December 31, 2011

71,503,883 

$

380,119 

$

24,670 

$

(263,741)

$

175 

$

141,223 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, net of transaction costs

10,059,615 

 

23,464 

 

 -

 

 -

 

 -

 

23,464 

Warrants and options

 -

 

 -

 

7,485 

 

 -

 

 -

 

7,485 

Other comprehensive loss

 -

 

 -

 

 -

 

 -

 

(173)

 

(173)

Net loss

 -

 

 -

 

 -

 

(70,656)

 

 -

 

(70,656)

Balances at December 31, 2012

81,563,498 

$

403,583 

$

32,155 

$

(334,397)

$

$

101,343 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, net of transaction costs

711,719 

 

477 

 

 -

 

 -

 

 -

 

477 

Warrants and options

 -

 

410 

 

332 

 

 -

 

 -

 

742 

Other comprehensive loss

 -

 

 -

 

 -

 

 -

 

(61)

 

(61)

Net loss

 -

 

 -

 

 -

 

(59,488)

 

 -

 

(59,488)

Balances at December 31, 2013

82,275,217 

$

404,470 

$

32,487 

$

(393,885)

$

(59)

$

43,013 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants and options

 -

 

 

 

414 

 

 -

 

 -

 

414 

Other comprehensive income

 -

 

 -

 

 -

 

 -

 

53 

 

53 

Net loss

 -

 

 -

 

 -

 

(1,140)

 

 -

 

(1,140)

Balances at March 31, 2014

82,275,217 

$

404,470 

$

32,901 

$

(395,025)

$

(6)

$

42,340 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

5

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in U.S. dollars and in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

Cumulative during

 

 

2014

 

 

2013

 

 

exploration stage

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss for the period

$

(1,140)

 

$

(27,406)

 

$

(161,012)

Adjustments to reconcile net loss for the period to net cash used in operations:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

217 

 

 

275 

 

 

3,636 

Stock-based compensation

 

414 

 

 

876 

 

 

13,207 

Loss/(gain) on disposal of marketable securities

 

(13)

 

 

(6)

 

 

(8,008)

Loss on extinguishment of convertible notes

 

 -

 

 

 -

 

 

1,218 

Accrued interest and accretion of interest

 

 -

 

 

 -

 

 

3,519 

Gain on disposal of mineral property

 

 -

 

 

 -

 

 

(80,035)

Write-down of non-current assets

 

 -

 

 

 -

 

 

10,867 

Unrealized (gain)/loss on other investments

 

(2,054)

 

 

28,781 

 

 

59,461 

Write down of marketable securities

 

 -

 

 

 -

 

 

1,234 

Deferred tax benefit

 

 -

 

 

(10,963)

 

 

Other non-cash items

 

(162)

 

 

 -

 

 

1,735 

Change in working capital account items:

 

 

 

 

 

 

 

 

Other current assets

 

426 

 

 

50 

 

 

(216)

Interest paid

 

 -

 

 

 -

 

 

(7,586)

Accounts payable, accrued liabilities and other

 

41 

 

 

(1,153)

 

 

(189)

   Net cash used in operating activities

 

(2,271)

 

 

(9,546)

 

 

(162,167)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 -

 

 

 -

 

 

(1,841)

Proceeds from sales of marketable securities

 

29 

 

 

62 

 

 

11,740 

Proceeds from sale of other investments, net

 

10,560 

 

 

 -

 

 

10,560 

Acquisition of long-term investments

 

 -

 

 

 -

 

 

(3,632)

Additions to mineral property

 

 -

 

 

 -

 

 

(11,571)

Additions to plant and equipment

 

(3)

 

 

(2,041)

 

 

(24,845)

Change in restricted cash

 

 -

 

 

(99)

 

 

 -

Proceeds from option agreement

 

50 

 

 

 -

 

 

6,790 

Proceeds from sale of mineral properties and plant and equipment

 

 -

 

 

 -

 

 

7,000 

Cash transferred to Allied Nevada Gold Corp., net of receivable

 

 -

 

 

 -

 

 

(24,517)

   Net cash (used in)/provided by investing activities

 

10,636 

 

 

(2,078)

 

 

(30,316)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from debt financing, net

 

 -

 

 

9,637 

 

 

37,995 

Proceeds from equity financings, net

 

 -

 

 

 -

 

 

161,529 

Repayment of debt

 

(6,344)

 

 

 -

 

 

(35,412)

Proceeds from exercise of warrants

 

 -

 

 

 -

 

 

40,754 

Proceeds from exercise of compensation options

 

 -

 

 

 -

 

 

733 

Proceeds from exercise of stock options

 

 -

 

 

 -

 

 

4,068 

Cash paid in lieu of capital stock issuances

 

 -

 

 

 -

 

 

(107)

   Net (used in)/cash provided by financing activities

 

(6,344)

 

 

9,637 

 

 

209,560 

 

 

 

 

 

 

 

 

 

Increase/(decrease) in cash and cash equivalents

 

2,021 

 

 

(1,987)

 

 

17,077 

Decrease in cash and cash equivalents - discontinued operations

 

 -

 

 

 -

 

 

(10,255)

Net increase/(decrease) in cash and cash equivalents

 

2,021 

 

 

(1,987)

 

 

6,822 

Cash and cash equivalents, beginning of period

 

5,475 

 

 

18,281 

 

 

674 

Cash and cash equivalents, end of period

$

7,496 

 

$

16,294 

 

$

7,496 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

1. Nature of Operations

 

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 or 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 are considered an Exploration Stage Enterprise.

 

Our principal assets include our flagship Mt Todd gold project in Northern Territory (“NT”), Australia, and a  11.2% holding of Midas Gold Corp (“Midas Gold Shares”). We also hold non-core projects in Mexico and California and royalty interests in projects in Bolivia and Indonesia.

 

2. Liquidity

 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business.  Accordingly, the continuing operations of the Company are dependent upon our ability to secure sufficient funding and to generate future profits from operations.  The underlying value and recoverability of the amounts shown as mineral properties, plant and equipment, assets held for sale, investments and other property interests in the consolidated balance sheets are also dependent on our ability to generate positive cash flow from operations and to continue to fund exploration and development activities that would lead to profitable production or proceeds from the disposition of these assets.  There can be no assurance that we will be successful in generating future profitable operations, disposing of these assets or securing additional funding in the future on terms acceptable to us or at all.  These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or liabilities which might be necessary should we not be able to continue as a going-concern.

 

Management is strongly committed to careful cash management and maintaining liquidity. At March 31, 2014, we had working capital of $16,239. The Company’s cash burn rate has been dramatically reduced since 2013 as several cash intensive programs at the Mt Todd gold project such as water treatment and preparation of the preliminary feasibility study were completed in 2013. In addition, several significant cost cutting measures were introduced in 2013 including a reduction of management positions, significant reductions in cash compensation for executives, senior management and the Company’s Board of Directors, and the delay or elimination of discretionary programs, including exploration activities. Cost cutting, particularly at the Mt Todd gold project, remains an on-going priority for management. The Company’s cash burn rate is expected to average less than $2,000 per quarter through the remainder of 2014.  

 

The Company believes that its cash position will be sufficient to fund the Company through 2014. The Company hopes to receive $1,000 in three installments over the next 12 months (first installment of $150 received in April 2014) pursuant to the Guadalupe de los Reyes gold/silver project option agreement with Cangold Limited (Note 12).  The Company also hopes to receive $6,250 in July 2014, related to the 2013 sale of the Los Cardones gold project, subject to the Purchaser’s option to elect to not make this payment (Note 4).  The Company will continue to seek additional financing with priority given to non-dilutive sources such as the sale of non-core assets, including our used mill equipment.  However, there can be no assurance that we will be able to timely monetize our non-core assets at a value acceptable to us or at all.     

 

3. Other Investments

 

Midas Gold Corp. Combination 

 

In April 2011, Vista completed a combination with Midas Gold, Inc. (the “Combination”), creating Midas Gold Corp, whereby Vista was issued 30,402,615 Midas Gold Corp common shares (“Midas Gold Shares”). Concurrently with the Combination, we purchased 1,400,000 Midas Gold Shares for an aggregate purchase price of $3,632 as part of a private placement. Following completion of these transactions, Vista held a total of 31,802,615 Midas Gold Shares representing 24.9% of the Midas Gold Shares outstanding as of December 31, 2013During February 2014, we sold 16,000,000 Midas Gold Shares reducing our total Midas Gold Shares owned to 15,802,615 or approximately 11.2% of the Midas Gold Shares outstanding, on a non-dilutive basis, as of March 31, 2014. During February 2014, we entered into a lockup agreement whereby we agreed not to sell any of our remaining Midas Gold Shares through February 2015.

 

Upon initial recognition of its investment in the Midas Gold Shares, Vista elected to apply the fair value option, and as such, the

7

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

investment is recorded at fair value in the Consolidated Balance Sheets. Subsequent changes in fair value are recorded in the Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss) in the period in which they occur. 

 

The following table summarizes our investment in Midas Gold Shares as at March 31, 2014 and December 31, 2013.  

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

 

 

 

Fair value at beginning of period

 

$

20,990 

$

69,489 

Sale of Midas Gold Shares, net of costs to sell

 

 

(10,560)

 

 -

Unrealized gain/(loss) based on the fair value at the end of the period

 

 

2,054 

 

(48,499)

Fair value at end of period

 

$

12,484 

$

20,990 

 

 

 

 

 

 

Estimated tax benefit/(expense) for the period

 

$

(711)

$

17,915 

 

 

 

 

 

 

Midas Gold Shares held at the end of the period

 

 

15,802,615 

 

31,802,615 

 

The change in the presentation of the Company’s current and non-current deferred tax balances during the quarter is primarily attributable to the re-classification, from non-current to current, of U.S. deferred tax liabilities associated with our investment in Midas Gold Shares during the quarter.  Additionally, the classification of the deferred tax balances was also impacted by the sale of a portion of our Midas Gold Shares during the quarter, as discussed above.  The Midas Gold Shares sale resulted in a reduction of current deferred tax assets for U.S. net operating loss carry forwards and of non-current U.S. deferred tax liabilities associated with our Midas Gold Shares investment.

 

In 2014, we reclassified our investment in Midas Gold Shares from non-current assets to current assets as the shares were no longer subject to a pledge as debt security (Note 6) 

 

As we elected the fair value method to account for our investment in Midas Gold Shares, we are required to provide summarized information for the period in which we held a greater than 20% interest in the Midas Gold Shares outstanding.  As a result, summarized financial information for Midas Gold as of December 31, 2013 and for the three months ended March 31, 2013, which are prepared in accordance with International Financial Reporting Standards is as follows.    

 

 

 

 

 

 

 

December 31, 2013

 

 

 

Total current assets

$

14,742 

Total non-current assets

 

186,673 

Total current liabilities

 

2,432 

Total non-current liabilities

 

919 

Total equity

 

198,064 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twelve months ended December 31, 2013

 

 

Three months ended  March 31, 2013

 

 

 

 

 

 

 

 

Operating expense

$

3,908 

 

$

1,276 

 

Net loss

 

3,796 

 

 

1,355 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

4.  Mineral Properties

 

 

 

 

 

 

 

At March 31, 2014

 

At December 31, 2013

 

 

 

 

 

Mt Todd, Australia

$

2,146 

$

2,146 

Guadalupe de los Reyes, Mexico

 

2,702 

 

2,752 

Los Cardones, Mexico

 

1,536 

 

1,536 

Long Valley, United States

 

750 

 

750 

 

$

7,134 

$

7,184 

 

 

 

 

 

 

Guadalupe de los Reyes Gold/Silver Project, Sinaloa, Mexico

 

During January 2014, we announced that we signed a non-binding letter of intent (the “LOI”) to option our interest in the Guadalupe de los Reyes gold/silver project in Sinaloa, Mexico to Cangold Limited (“Cangold”). 

 

The LOI provided that a non-refundable $50 payment be made to Vista for which Cangold would have a 90 day period of exclusivity (the “Exclusivity Period”) to complete due diligence and negotiate and enter into a definitive option agreement with Vista (the “Option Agreement”).

 

During April 2014, Vista and Cangold entered in the Option Agreement (see Note 12 for complete discussion).    

 

Los Cardones

 

During October 2013, we and Invecture Group, S.A. de C.V. and RPG Structured Finance S.a.R.L. (the “Purchasers”) entered into agreements whereby we sold our 100% interest in the Los Cardones gold project located in Baja California Sur, Mexico (“Los Cardones Sale”) to the Purchasers for a total of $13,000 ($7,000 of which was paid in October 2013 and $6,000 was payable January 2014 subject to the Purchasers’ option to elect to not make this payment)As a result of permitting delays, we and the Purchasers have agreed to extend the due date of the $6,000 payment to July 31, 2014 for consideration of $250, payable July 31, 2014.  If the Purchasers elect to not make the $6,250 payment, we will retain the $7,000 already received and 100% of the Los Cardones gold project will be returned to us.       

 

5.  Plant and Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

 

December 31, 2013

 

 

Cost

 

 

Accumulated depreciation

 

 

Net

 

 

Cost

 

 

Accumulated depreciation

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mt. Todd, Australia

$

5,475 

 

$

2,185 

 

$

3,290 

 

$

5,472 

 

$

1,993 

 

$

3,479 

Guadalupe de los Reyes, Mexico

 

21 

 

 

 

 

16 

 

 

21 

 

 

 

 

16 

Corporate, United States

 

780 

 

 

602 

 

 

178 

 

 

780 

 

 

577 

 

 

203 

 

$

6,276 

 

$

2,792 

 

$

3,484 

 

$

6,273 

 

$

2,575 

 

$

3,698 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

 

December 31, 2013

 

 

Book value beginning of period

 

 

Write-downs during the period

 

 

Book value end of period

 

 

Book value beginning of period

 

 

Write-downs during the period

 

 

Book value end of period

Assets held for sale (mill equipment)

$

6,500 

 

$

 -

 

$

6,500 

 

$

10,000 

 

$

3,500 

 

$

6,500 

 

During the year ended December 31, 2013, given the relatively weak market conditions in the gold mining sector, based on an updated independent assessment from a third party, we recorded a Level 3 (Note 10) impairment charge of $3,500 to write-down the value of the mill equipment which is held for sale.  The impairment charge is based on an estimated sale value of $7,300, net of commissions

9

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

and other costs to sell of approximately $800 and has been included in our Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss) for the year ended December 31, 2013.

 

6.  Debt

 

During March 2013, the Company entered into a credit agreement with Sprott Resources Lending Partnership (the “Lender”) for purposes of establishing a C$10,000 ($9,764) loan facility (the “2013 Facility”). The 2013 Facility bore an interest rate of 8% per annum, payable monthly and originally matured March 2014, with early repayment of the 2013 Facility allowed, at the Company’s option, provided that at least four months interest has been paid. In September 2013, the Company and the Lender reached an agreement to extend the maturity date of the 2013 Facility to March 2015.

 

The 2013 Facility was secured by a general security agreement (“GSA”) with certain exclusions and conditions with respect to asset dispositions and a pledge of all the Company’s Midas Gold Shares (Note 3). 

 

During February 2014, in accordance with the terms of the 2013 Facility, the Company repaid approximately C$5,516 ($5,000) towards the 2013 Facility principal outstanding using proceeds from the sale of Midas Gold Shares (Note 3) reducing the principal balance to approximately C$1,443  ($1,300).   During March 2014, we repaid the 2013 Facility in full.

 

7.  Additional Paid-in Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants

 

 

Stock options and RSUs

 

 

Other paid-in capital

 

 

Total additional paid-in capital

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2013

$

12,936 

 

$

7,987 

 

$

11,564 

 

$

32,487 

Stock options amortization

 

 -

 

 

104 

 

 

 -

 

 

104 

Restricted stock units expensed

 

 -

 

 

310 

 

 

 -

 

 

310 

As of March 31, 2014

$

12,936 

 

$

8,401 

 

$

11,564 

 

$

32,901 

 

Warrants 

 

Warrant activity is summarized in the following table: 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants outstanding

 

Valuation

 

Weighted average exercise price per share

 

Weighted average remaining life (yrs.)

 

Intrinsic value

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2013

 

19,977,743 

$

12,936 

$

4.63 

 

1.6 

$

 -

As of March 31, 2014

 

19,977,743 

$

12,936 

$

4.63 

 

1.3 

$

 -

 

The 19,977,743 outstanding warrants expire in the following time frames: 2,666,666 expire July 2014, 2,091,275 expire December 2014, and 15,219,802 expire in October 2015.    

 

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 (“RSAs”) to our directors, officers, employees and consultants.  The combined maximum number of our 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.    Options under the Plan 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.  The LTIP is administered by the Board, which can delegate the administration to the Compensation Committee of the Board or to such other officers and employees of Vista as designated by the Board.  Stock-based compensation expense for the three months ended March 31, 2014 and 2013 is as follows: 

10

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

2014

 

 

2013

 

 

 

 

 

 

Stock options

$

104 

 

$

108 

Restricted stock units

 

310 

 

 

768 

 

$

414 

 

$

876 

 

 

 

 

 

 

 

As of March 31, 2014, stock options and RSUs had unrecognized compensation expense of $1,341 and $1,500, respectively, which is expected to be recognized over a weighted average period of 2.11 and 1.65 years, respectively. 

 

Stock Options

 

A summary of option activity under the Plan as of March 31, 2014 and changes during the period then ended is set forth in the following table: 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of options

 

Weighted average exercise price per option

 

Weighted average remaining contractual term

 

Aggregate intrinsic value

Outstanding - December 31, 2013

 

2,882,500 

$

1.79 

 

3.07 

$

54 

Granted

 

175,000 

 

0.52 

 

 

 

 

Expired

 

(140,000)

 

2.15 

 

 

 

 

Outstanding - March 31, 2014

 

2,917,500 

$

1.70 

 

3.05 

$

145 

 

 

 

 

 

 

 

 

 

Exercisable - March 31, 2014

 

2,496,250 

$

1.92 

 

2.74 

$

108 

 

A summary of our unvested stock options as of March 31, 2014 and changes during the period then ended is set forth in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of options

 

Weighted average grant-date fair value per option

 

Weighted average remaining amortization period (Years)

Unvested - December 31, 2013

 

 

 

 

 

738,750 

$

0.22 

 

 

Granted

 

 

 

 

 

175,000 

 

 

 

 

Vested

 

 

 

 

 

(492,500)

 

 

 

 

Unvested - March 31, 2014

 

 

 

 

 

421,250 

$

0.25 

 

2.11 

 

The fair value of stock options granted to employees, directors and consultants was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions:

 

 

 

 

 

 

 

March 31, 2014

Expected volatility

 

69.17%

Risk-free interest rate

 

1.75%

Expected life (years)

 

5

Dividend yield

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option pricing models require the input of highly subjective assumptions, including the expected price volatility.  Expected price volatility is based on the historical volatility of our common shares.  Changes in the subjective input assumptions can materially affect the fair value estimate.  The expected term of the options granted is derived from the output of the option pricing model and represents

11

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

the period of time that the options granted are expected to be outstanding.  The risk-free rate for the periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.

 

Restricted Stock Units

 

The following table summarizes the RSU activity under the LTIP as of March 31, 2014 and changes during the years then ended:

 

 

 

 

 

 

 

 

Number of units

 

Weighted average grant-date fair value per unit

Unvested - December 31, 2013

 

2,594,464 

$

2.00 

Unvested - March 31, 2014

 

2,594,464 

$

2.00 

 

 

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 criteria, including the accomplishment of certain corporate objectives and the Company’s share price performance.  The vesting period for time based RSUs is at least one year. 

 

8.  Accumulated Other Comprehensive Income/(Loss)

 

 

 

 

 

 

 

Accumulated
other comprehensive
income (loss)

 

Accumulated
other comprehensive
income (loss), net of tax

As of December 31, 2013

$

(59)

$

(50)

Other comprehensive loss due to change in fair market value of marketable securities during period before reclassifications

 

40 

 

34 

Reclassifications due to realization of gain/loss on sale of marketable securities (1)

 

13 

 

11 

As of March 31, 2014

$

(6)

$

(5)

 

 

 

 

 

 

 

(1)

Reclassified to gain/(loss) on sale of marketable securities on the Consolidated Statement of Income/(Loss) and Comprehensive Income/(Loss).  

 

 

 

 

 

 

9.  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 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 90% and the JAAC holding 10% participating interests, respectively, in the Mt Todd gold project. 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 royalty on other metals, subject to a minimum payment of A$50 per year.

 

10Fair 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.  

12

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at March 31, 2014

 

 

 

 

Total

 

Level 1

 

Level 3

Assets:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

6,000 

$

6,000 

$

 -

 

Marketable securities

 

 

213 

 

213 

 

 -

 

Other investments (Midas Gold Shares)

 

 

12,484 

 

12,484 

 

 -

 

Amayapampa interest

 

 

4,813 

 

 -

 

4,813 

 

Mill equipment

 

 

6,500 

 

 -

 

6,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at December 31, 2013

 

 

 

 

Total

 

Level 1

 

Level 3

Assets:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

3,000 

$

3,000 

$

 -

 

Marketable securities

 

 

176 

 

176 

 

 -

 

Other investments (Midas Gold Shares)

 

 

20,990 

 

20,990 

 

 -

 

Amayapampa interest

 

 

4,813 

 

 -

 

4,813 

 

Mill equipment

 

 

6,500 

 

 -

 

6,500 

 

Our cash equivalent instruments, 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

 

The estimated fair value of the Amayapampa interest is based on probability-weighted cash flow scenarios discounted using a risk-adjusted discount rate (15%) and assumptions including future gold prices (average gold prices realized range from $832 to $884, depending on timing of assumed start-up), estimated 9 years life-of-mine gold production of 615,000 ounces and the expected timing of the start of commercial production (periods ranging from 2 to 4 years, or never), which are management’s best estimates based on currently available information.  Significant changes in any of the unobservable inputs in isolation would result in a significant change in fair value estimate.    

 

The Company incurred a Level 3 impairment loss on certain mill equipment (Note 5) for the year ended December 31, 2013. This equipment was valued at $6,500 at December 31, 2013, based on a third party assessment of the projected sale value given full consideration to current market conditions and an orderly sale process. This valuation was used to determine the Level 3 impairment charge taken in 2013. The mill equipment is categorized as assets held for sale on the Consolidated Balance Sheets.

 

At March 31, 2014, the assets classified within Level 3 of the fair value hierarchy represent 38% of the total assets measured at fair value. There have been no transfers between levels in 2014.  

 

11.  Geographic and Segment Information

 

The Company has one reportable operating segment, consisting of evaluation, acquisition, and exploration activities.  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 focused principally in Australia and North America. We reported no revenues during the three months ended March 31, 2014 and 2013.  Geographic location of mineral properties and plant and equipment is provided in Notes 4 and 5, respectively.

 

12.  Subsequent Events 

 

Guadalupe de Los Reyes Option Agreement

 

During April 2014, the Minera Gold Stake S.A. de C.V. (“MGS”), Vista’s wholly-owned subsidiary, entered into an Option Agreement to option its interest in the Guadalupe de los Reyes gold/silver project in Sinaloa, Mexico to Cangold.

 

Pursuant to the terms of the Option Agreement, Vista has granted Cangold the right to earn a 70% interest in the Guadalupe de los Reyes gold/silver project by:

13

 


 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All dollar amounts in U.S dollars and in thousands, except per share, per option, per warrant and per ounce amounts unless otherwise noted)

 

·

making payments totaling $5,000 in five payments over a three-year period, with payments totaling $1,000 in the first year ($150  of which was paid at signing), $1,500 in the second year and $2,500 in the third year;

·

operating the Guadalupe de los Reyes gold/silver project and maintaining the concessions comprising the Guadalupe de los Reyes gold/silver project in good standing; and

·

fulfilling all of the obligations of MGS to the Ejido La Tasajera (the “Ejido”) as set out in the temporary occupation contract between MGS and the Ejido.

 

The Option Agreement provides that all cash payments are non-refundable and optional to Cangold, and in the event Cangold fails to pay any of the required amounts on the scheduled dates or fails to comply with its other obligations, the Option Agreement will terminate and Cangold will have no interest in the Guadalupe de los Reyes gold/silver project. Provided it is not in breach of the Option Agreement, Cangold may at its discretion advance the above payment schedule and exercise the initial option for a 70% interest in the Guadalupe de los Reyes gold/silver project any time during the three-year period.

 

Subject to Cangold earning a 70% interest in the Guadalupe de los Reyes gold/silver project,  MGS has granted Cangold the option to earn the remaining 30% interest in the Guadalupe de los Reyes gold/silver project by notifying MGS of a production decision no later than the tenth anniversary of exercising the first option and by making a cash payment to MGS of $3,000 plus an additional cash payment based on a formula that includes the growth, if any, in estimated measured and indicated mineral resources of the Guadalupe de los Reyes gold/silver project, and the then prevailing spot gold price (“Escalator Payment”).

 

Should Cangold determine not to put the Guadalupe de los Reyes gold/silver project into production, the Option Agreement provides MGS with the right to buy back Cangold’s 70% interest in the Guadalupe de los Reyes gold/silver project for a cash payment of $5,000 plus the Escalator Payment described above.  If MGS does not exercise its buyback option, MGS will still retain a right of first refusal should Cangold elect to sell its 70% interest in the Guadalupe de los Reyes gold/silver project to a third party.

 

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 months ended March 31, 2014, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). 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 amounts, per warrant amounts, per ounce amounts, gold price per ounce amounts, and exchange rates unless specified otherwise. References to C$ refer to Canadian currency, A$ to Australian currency and $ 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 or 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 are considered an exploration stage enterprise.

 

Our principal assets include our flagship Mt Todd gold project in Northern Territory (“NT”), Australia, and a 11.2% holding of Midas Gold Corp common shares (“Midas Gold Shares”). We also hold non-core projects in Mexico and California and royalty interests in projects in Bolivia and Indonesia.

 

Outlook

 

We do not currently generate operating cash flows. Our sources of financing in the past have been the issuance of our common shares, debt financing and sale of non-core assets. The prices for gold equities, particularly those with early stage projects, have decreased steadily during the past year, and capital raising has become more difficult for mining companies which do not have producing assets.  Consequently, raising sufficient amounts of capital on reasonable terms has become increasingly difficult. These conditions are expected to continue for the foreseeable future, and could affect our ability to raise sufficient capital on reasonable terms, if at all. We are committed to ensuring that the Company remains liquid and we will continue to identify and to execute meaningful cost cutting initiatives. The Company will continue to seek other financing sources with priority given to non-dilutive sources such as the sale of our used mill equipment and monetization of other non-core assets.  However, there can be no assurance that we will be able to timely monetize our non-core assets at a value acceptable to us or at all.

 

Management is strongly committed to careful cash management and maintaining liquidity. At March 31, 2014, we had working capital of $16,239. The Company’s cash burn rate has been dramatically reduced since 2013 as several cash intensive programs at our Mt Todd gold project such as water treatment and preparation of the preliminary feasibility study were completed in 2013. In addition, several significant cost cutting measures were introduced in 2013 including a reduction of management positions, significant reductions in cash compensation for executives, senior management and the Company’s Board of Directors, and the delay or elimination of discretionary programs, including exploration activities. Cost cutting, particularly at the Mt Todd gold project, remains an on-going priority for management. The Company’s cash burn rate is expected to average less than $2,000 per quarter through the remainder of 2014.

 

The Company believes that its cash position will be sufficient to fund the Company through 2014.  The Company hopes to receive $1,000 in three installments over the next 12 months (first installment of $150 received in April 2014) pursuant to the Guadalupe de los Reyes gold/silver project option agreement with Cangold Limited (see Note 12 to the unaudited consolidated financial statements).  The Company also hopes to receive $6,250 in July 2014, related to the 2013 sale of the Los Cardones gold project, subject to the Purchaser’s option to elect to not make this payment (see Note 4 to the unaudited consolidated financial statements).  The Company will continue to seek additional financing with priority given to non-dilutive sources such as the sale of non-core assets, including our used mill equipment. However, there can be no assurance that we will be able to timely monetize our non-core assets at a value acceptable to us.

 

 

15

 


 

 

Results from Operations

 

Summary

 

For the three months ended March 31, 2014,  we focused principally on water management and related activities and on advancing the permitting process at our Mt Todd gold project in NT, Australia. In addition to completing a pre-feasibility study and submitting a final environmental impact statement in the first half of 2013, in the second half of 2013 we introduced a range of cost cutting measures including the elimination of discretionary spending, downsizing the Company and voluntary reductions to cash compensation for senior management.    

 

Consolidated net loss for the three months ended March 31, 2014 and 2013 was $1,140 and $27,406 or $0.01 and $0.34 per basic 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 $1,418 and $7,130 during the three months ended March 31, 2014 and 2013, respectively. The lower 2014 costs were in part due to the cost reductions introduced through 2013. In addition, several capital intensive activities, including the Mt Todd gold project pre-feasibility study and related activities, permitting and water treatment and discharge from the existing open pit were completed in early 2013.

 

Corporate administration and investor relations

 

Corporate administration and investor relations costs were $1,275, and $1,910 during the three months ended March 31, 2014 and 2013, respectively.  The decrease in 2014 was primarily attributable to cost cutting initiatives introduced through 2013.      

 

Non-operating income and expenses  

 

Unrealized Gain/(Loss) on Other Investments

 

Unrealized gain/(loss) on other investments was $2,054 and $(28,781) for the three months ended March 31, 2014 and 2013, respectively.  These amounts are substantially the result of changes in fair value of our Midas Gold Shares.  The Company also holds approximately half the number of Midas Gold Shares in 2014 compared to 2013. 

 

Deferred Income Tax Benefit/(Expense)

 

Normal market changes in the fair value of our Midas Gold Shares result in fluctuations in the deferred income tax benefit/(expense). The 2014 deferred tax liability related to unrealized gain arising from the change in the fair value of our Midas Gold Shares was offset by a valuation allowance associated with our deferred tax assets associated with our net operating losses.  The 2013 deferred income tax benefit of  $10,963 was principally related to the unrealized loss arising from the change in fair value of our Midas Gold Shares.     

 

 Financial Position, Liquidity and Capital Resources

 

Operating Activities

 

Net cash used in operating activities was $2,271 and $9,546 for the three months ended March 31, 2014 and 2013, respectively.  The decrease is primarily the result of changes in operating expenses as discussed in “Results of Operations” above and is consistent with our prior disclosures. 

 

Investing Activities

 

Net cash provided by investing activities of $10,636 for the three months ended March 31, 2014 was mainly due to the sale of 16,000,000 Midas Gold Shares for gross proceeds of $11,640. Net cash used in investing activities of  $2,078 for the three months ended March 31, 2013 was primarily due to additions to plant and equipment of $2,041, mainly at our Mt Todd gold project. 

 

Financing Activities

 

Net cash used in financing activities was $6,344 for the three months ended March 31, 2014 was due to the repayment of the loan facility entered into in 2013 (the “2013 Facility”). 

 

Net cash provided by financing activities was $9,637 for the three months ended March 31, 2013 was primarily due to the draw-down 2013 FacilityDuring March 2013, we closed and drew C$10,000 ($9,764) 2013 Facility, which was fully repaid as of March 31, 2014

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Liquidity and Capital Resources

 

At March 31, 2014, we had working capital of $16,239 compared with working capital of $8,622 at December 31, 2013, representing an increase of $7,617. Our working capital increased primarily due to the reclassification of our Midas Gold Shares to current assets from non-current assets and receipt of proceeds from the sale of 16,000,000 Midas Gold Shares during the period, offset by the use of cash to fund operations. Included in the March 31, 2014, $16,239 working capital amount is $7,496 of cash and cash equivalents. Included in the December 31, 2013, $8,622 working capital amount is $5,475 of cash and cash equivalents.

 

During October 2013, Vista and Invecture Group, S.A. de C.V. and RPG Structured Finance S.a.R.L. (the “Purchasers”) entered into agreements whereby Vista agreed to sell 100% of its debt and equity interests in the Los Cardones gold project located in Baja California Sur, Mexico (Los Cardones Sale”) to the Purchasers for a total of $13,000, $7,000 of which was paid in October 2013 and $6,000 was originally payable in January 2014. In January 2014, we extended the due to date to July 2014 for additional consideration of $250 payable July 31, 2014.  If the Purchaser does not make the $6,250 payment, Vista will retain the $7,000 already received and 100% of the Los Cardones gold project will be returned to Vista.    Pursuant to the terms of Vista’s 2013 Facility, Vista repaid C$3,041 ($2,960) of the 2013 Facility using proceeds from the Los Cardones Sale.

 

During February 2014, we completed the sale of 16,000,000 Midas Gold Shares held by our subsidiary Vista Gold U.S. Inc. for gross proceeds of C$12,800 ($11,640). 

 

In the past year, capital raising has become more difficult for junior mining companies which do not have producing assets and these conditions are expected to continue for the foreseeable future. Consequently, we may not be able to raise capital in sufficient amounts on reasonable terms, if at all.

 

Management is strongly committed to careful cash management and maintaining liquidity. At March 31, 2014, we had working capital of $16,239. The Company’s cash burn rate has been dramatically reduced since 2013 as several cash intensive programs at the Mt Todd gold project such as water treatment and preparation of the preliminary feasibility study have been completed. In addition, several significant cost cutting measures have been introduced including a reduction of management positions, significant reductions in cash compensation for executives, senior management and the Company’s Board of Directors, and the delay or elimination of discretionary programs, including exploration activities. Other aggressive cost cutting measures, particularly at the Mt Todd gold project, are being pursued.  The Company’s cash burn rate is expected to average less than $2,000 per quarter through the remainder of 2014.

 

The Company believes that its cash position will be sufficient to fund the Company through 2014.  The Company hopes to receive $1,000 in three installments over the next 12 months (first installment of $150 received in April 2014) pursuant to the Guadalupe de los Reyes gold/silver project Option Agreement with Cangold Limited (see Note 12 to the unaudited consolidated financial statements).  The Company also hopes to receive $6,250 in July 2014, related to the 2013 sale of the Los Cardones gold project, subject to the Purchaser’s option to elect to not make this payment (see Note 4 to the unaudited consolidated financial statements).  The Company will continue to seek additional financing with priority given to non-dilutive sources such as the sale of non-core assets, including our used mill equipment.  However, there can be no assurance that we will be able to timely monetize our non-core assets at a value acceptable to us or at all.     

 

The continuing operations of the Company are dependent upon our ability to secure sufficient funding and to generate future profits from operations.  The underlying value and recoverability of the amounts shown as mineral properties, plant and equipment, assets held for sale, investments and other property interests in our consolidated balance sheets are dependent on our ability to generate positive cash flow from operations and to continue to fund exploration and development activities that would lead to profitable production or proceeds from the disposition of these assets. There can be no assurance that we will be successful in generating future profitable operations, disposing of these assets or securing additional funding in the future on terms acceptable to us or at all.  Our unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or liabilities which might be necessary should we not be able to continue as a going-concern.

 

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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 March 31, 2014

 

 

 

 

Total

 

Level 1

 

Level 3

Assets:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

6,000 

$

6,000 

$

 -

 

Marketable securities

 

 

213 

 

213 

 

 -

 

Other investments (Midas Gold Shares)

 

 

12,484 

 

12,484 

 

 -

 

Amayapampa interest

 

 

4,813 

 

 -

 

4,813 

 

Mill equipment

 

 

6,500 

 

 -

 

6,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at December 31, 2013

 

 

 

 

Total

 

Level 1

 

Level 3

Assets:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

3,000 

$

3,000 

$

 -

 

Marketable securities

 

 

176 

 

176