10-Q 1 c324-20180630x10q.htm 10-Q vgz_Current_Folio_10Q

 

 

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 June 30, 2018

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)

 

 

 

 

 

 

 

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, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

      Large Accelerated Filer    Accelerated Filer ☒  Non-Accelerated Filer

Smaller Reporting Company  □  Emerging Growth Company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No ☒    

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:  99,569,949 common shares, without par value, outstanding as of July 24, 2018.

 

 

 


 

2


 

 

 

 

PART I

 

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

 

    

2018

    

2017

 

Assets:

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,598

 

$

1,431

 

Short-term investments (Note 3)

 

 

8,978

 

 

15,144

 

Other investments, at fair value (Note 3)

 

 

5,774

 

 

3,746

 

Other current assets

 

 

341

 

 

794

 

Total current assets

 

 

17,691

 

 

21,115

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

Mineral properties (Note 4)

 

 

2,471

 

 

2,471

 

Plant and equipment, net (Note 5)

 

 

7,360

 

 

7,555

 

Total non-current assets

 

 

9,831

 

 

10,026

 

Total assets

 

$

27,522

 

$

31,141

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity:

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

109

 

$

830

 

Accrued liabilities and other

 

 

399

 

 

986

 

Provision for environmental liability

 

 

241

 

 

242

 

Total current liabilities

 

 

749

 

 

2,058

 

Total liabilities

 

 

749

 

 

2,058

 

 

 

 

 

 

 

 

 

Commitments and contingencies – (Note 7)

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Common shares, no par value - unlimited shares authorized; shares outstanding: 2018 - 99,569,949 and 2017 - 99,412,007 (Note 6)

 

 

456,614

 

 

456,053

 

Accumulated other comprehensive loss

 

 

 —

 

 

(2)

 

Accumulated deficit

 

 

(429,841)

 

 

(426,968)

 

Total shareholders' equity

 

 

26,773

 

 

29,083

 

Total liabilities and shareholders' equity

 

$

27,522

 

$

31,141

 

 

Approved by the Board of Directors

 

Racy A. S

 

 

 

 

 

/s/ Tracy A. Stevenson

Tracy A. Stevenson

Director

/s/ John M. Clark

John M. Clark

Director

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

 

 

3


 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

 

 

2018

    

2017

    

2018

    

2017

    

  

Operating expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration, property evaluation and holding costs

 

$

(1,055)

 

$

(1,308)

 

$

(2,600)

 

$

(3,060)

 

 

Corporate administration

 

 

(888)

 

 

(775)

 

 

(2,311)

 

 

(1,796)

 

 

Depreciation and amortization

 

 

(12)

 

 

(149)

 

 

(240)

 

 

(318)

 

 

Gain on disposal of mineral properties, net (Note 4)

 

 

 —

 

 

 —

 

 

 —

 

 

358

 

 

Total operating expense

 

 

(1,955)

 

 

(2,232)

 

 

(5,151)

 

 

(4,816)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating income/(expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(loss) on other investments (Note 3)

 

 

 -

 

 

(468)

 

 

2,028

 

 

(780)

 

 

Interest income

 

 

68

 

 

29

 

 

250

 

 

79

 

 

Other income/(expense)

 

 

(36)

 

 

(11)

 

 

 2

 

 

(12)

 

 

Total non-operating income/(expense)

 

 

32

 

 

(450)

 

 

2,280

 

 

(713)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,923)

 

$

(2,682)

 

$

(2,871)

 

$

(5,529)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized fair value decrease on available-for-sale securities

 

 

 -

 

 

(15)

 

 

 —

 

 

(21)

 

 

Comprehensive loss

 

$

(1,923)

 

$

(2,697)

 

$

(2,871)

 

$

(5,550)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

99,547,531

 

 

98,196,308

 

 

99,496,641

 

 

98,045,484

 

 

Net loss per share

 

$

(0.02)

 

$

(0.03)

 

$

(0.03)

 

$

(0.06)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

99,547,531

 

 

98,196,308

 

 

99,496,641

 

 

98,045,484

 

 

Net loss per share

 

$

(0.02)

 

$

(0.03)

 

$

(0.03)

 

$

(0.06)

 

 

 

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

 

4


 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other

 

Total

 

 

 

Common

 

 

 

Accumulated

 

comprehensive

 

shareholders'

 

 

    

shares

    

Amount

    

deficit

    

income/(loss)

    

equity

 

Balances at December 31, 2016

 

97,786,608

 

$

455,443

 

$

(414,933)

 

$

15

 

$

40,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued (RSUs vested, net of shares withheld)

 

1,625,399

 

 

(264)

 

 

 —

 

 

 —

 

 

(264)

 

Stock-based compensation

 

 —

 

 

874

 

 

 —

 

 

 —

 

 

874

 

Other comprehensive loss

 

 —

 

 

 —

 

 

 —

 

 

(17)

 

 

(17)

 

Net loss

 

 —

 

 

 —

 

 

(12,035)

 

 

 —

 

 

(12,035)

 

Balances at December 31, 2017

 

99,412,007

 

$

456,053

 

$

(426,968)

 

$

(2)

 

$

29,083

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative adjustment related to Accounting Standard Update 2016-01

 

 —

 

 

 —

 

 

(2)

 

 

 2

 

 

 —

 

Adjusted balance at January 1, 2018

 

99,412,007

 

 

456,053

 

 

(426,970)

 

 

 —

 

 

29,083

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued (RSUs vested, net of shares withheld)

 

127,942

 

 

(39)

 

 

 —

 

 

 

 

 

(39)

 

Shares issued (exercise of stock options)

 

30,000

 

 

16

 

 

 —

 

 

 

 

 

16

 

Stock-based compensation

 

 —

 

 

584

 

 

 —

 

 

 

 

 

584

 

Net loss

 

 —

 

 

 —

 

 

(2,871)

 

 

 

 

 

(2,871)

 

Balances at June 30, 2018

 

99,569,949

 

$

456,614

 

$

(429,841)

 

$

 —

 

$

26,773

 

 

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

 

5


 

 

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 

 

    

2018

 

2017

    

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss for the period

 

$

(2,871)

 

$

(5,529)

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

240

 

 

318

 

Stock-based compensation

 

 

584

 

 

427

 

Gain on disposal of mineral property

 

 

 —

 

 

(358)

 

(Gain)/loss on other investments

 

 

(2,028)

 

 

780

 

Change in working capital account items:

 

 

 

 

 

 

 

Other current assets

 

 

389

 

 

54

 

Accounts payable, accrued liabilities and other

 

 

(1,309)

 

 

269

 

Net cash used in operating activities

 

 

(4,995)

 

 

(4,039)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sales of marketable securities

 

 

64

 

 

 —

 

Disposition of short-term investments, net of acquisitions

 

 

6,166

 

 

3,843

 

Additions to plant and equipment

 

 

(45)

 

 

 —

 

Proceeds from option/sale agreements, net

 

 

 —

 

 

358

 

Net cash provided by investing activities

 

 

6,185

 

 

4,201

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Payment of taxes from withheld shares

 

 

(39)

 

 

 —

 

Proceeds from exercise of stock options

 

 

16

 

 

 —

 

Net cash used in financing activities

 

 

(23)

 

 

 —

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

1,167

 

 

162

 

Cash and cash equivalents, beginning of period

 

 

1,431

 

 

1,904

 

Cash and cash equivalents, end of period

 

$

2,598

 

$

2,066

 

 

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

 

 

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Table of Contents

VISTA GOLD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

1. Nature of Operations and Basis of Presentation

 

Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration, and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration.  We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. 

 

The Company’s flagship asset is its 100% owned Mt Todd gold project (“Mt Todd”) in the Northern Territory (“NT”) Australia.  Mt Todd is the largest undeveloped gold project in Australia.  In January 2018, the Company received authorization for the last major environmental permit and we announced the positive results of an updated preliminary feasibility study (the “PFS”) for Mt Todd, which confirms the project’s solid economics at a  gold price of $1,300/oz.  With these important milestones complete, Vista is in a position to identify and pursue strategic alternatives that may provide the best opportunity for shareholders to realize fair value for Mt Todd.  We also hold 4.2% of the outstanding common shares in the capital of Midas Gold Corp. (“Midas Gold Shares”), a non-core project in Mexico and royalty interests in the United States and Indonesia. 

 

The interim Condensed Consolidated Financial Statements (“interim statements”) of the Company are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended December 31, 2017 as filed with the United States Securities and Exchange Commission and Canadian securities regulatory authorities on March 6, 2018 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by United States generally accepted accounting principles have been condensed or omitted. 

 

References to A$ are to Australian currency and $ are to United States currency.

 

2.  Significant Accounting Policies

 

Revenue Recognition

 

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09, as subsequently amended, supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, ASU No. 2014-09 supersedes some cost guidance included in Revenue Recognition-Construction-Type and Production-Type Contracts (Subtopic 605-35). Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. This includes significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  The new guidance is effective for interim and annual periods beginning after December 15, 2017.

 

Effective January 1, 2018, the Company adopted the new guidance retrospectively. The Company performed an assessment of the revised guidance and the impacts on the Company’s Consolidated Financial Statements and disclosures.  We also evaluated the potential for future variable consideration from option payments, net smelter return royalties (“NSR”), and other production related payments, and determined that there is no impact to the Company’s current accounting. The Company determined that the adoption of this guidance will primarily impact the timing of revenue recognition on certain option agreements based on the Company’s determination of when control is transferred

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Table of Contents

VISTA GOLD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

for accounting purposes. Based on the contracts outstanding as of December 31, 2017, there was no cumulative effect adjustment required to be recognized at January 1, 2018.  Under the Company’s adoption approach, results for reporting periods beginning after January 1, 2018, will be presented in the Consolidated Financial Statements under the new guidance, while prior period amounts will not be adjusted and continue to be reported under the guidance in effect for those periods.

 

Currently, proceeds received from option agreements are ascribed to recovery of the carrying value of the related project until the carrying value reaches zero.  After that, any additional proceeds received will be recognized as a contract liability until control has transferred to the buyer or the related contract has terminated.  None of the projects which could provide the Company with future variable consideration are currently in production, and in all cases, we believe there is low probability of future production from these projects. Accordingly, the Company believes its NSRs and other production related payments are fully constrained, and the Company did not record a receivable for them. When it becomes probable that a project which could provide the Company with an NSR or other production related payments could begin production, the Company will evaluate the accounting treatment at that time.   

 

3. Short-term and Other Investments

 

Short-term investments

 

As of June 30, 2018 and December 31, 2017, the amortized cost basis of our short-term investments was $8,978 and $15,144, respectively. The amortized cost basis approximates fair value at June 30, 2018 and December 31, 2017. Short-term investments at June 30, 2018 and December 31, 2017 are comprised of U.S. government treasury bills and/or notes, all of which have maturity dates on the date of purchase greater than 90 days but less than one year. 

 

Other investments - Midas Gold Shares 

 

Upon initial recognition of our investment in the Midas Gold Shares, we elected to apply the fair value option, and as such, the investment in Midas Gold Shares is recorded at fair value in the Condensed Consolidated Balance Sheets. Subsequent changes in fair value are recorded in the Condensed Consolidated Statements of Comprehensive Income/(Loss) in the period in which they occur. 

 

The following table summarizes our investment in Midas Gold Shares as of June 30, 2018 and December 31, 2017.  

 

 

 

 

 

 

 

 

 

 

    

June 30, 2018

    

December 31, 2017

 

Fair value at beginning of period

 

$

3,746

 

$

4,994

 

Gain/(loss) during the period

 

 

2,028

 

 

(1,248)

 

Fair value at end of period

 

$

5,774

 

$

3,746

 

 

 

 

 

 

 

 

 

Midas Gold Shares held at the end of the period

 

 

7,802,615

 

 

7,802,615

 

 

 

 

4.  Mineral Properties

 

 

 

 

 

 

 

 

 

    

At June 30, 2018

    

At December 31, 2017

 

Mt Todd, Australia

 

$

2,146

 

$

2,146

 

Guadalupe de los Reyes, Mexico

 

 

325

 

 

325

 

 

 

$

2,471

 

$

2,471

 

 

During October 2017, we entered into an agreement (the “Option Agreement”) to option our interest in the Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico (the “GdlR Project”) to Minera Alamos Inc. and its subsidiary Minera Alamos de Sonora S.A. de C.V. (“Minera Alamos”).

 

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Table of Contents

VISTA GOLD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

Pursuant to the terms of the Option Agreement, we granted Minera Alamos an exclusive right and option right to earn a 100% interest in the GdlR Project by:

·

making payments totaling $6,000 comprised of a payment of $1,500 made at the execution of the Option Agreement (“Option Grant Date”); two successive payments of $1,500 each to be made at the one-year and  two-year anniversaries of the Option Grant Date; and a final $1,500 payment to be made before the four-year anniversary of the Option Grant Date;

 

·

maintaining the concessions comprising the GdlR Project in good standing;

 

·

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

 

·

granting us a capped NSR on production from open pit mining (the “Open Pit NSR”) at rates that range from 1% (at gold prices of $1,400/oz or less) to a maximum of 2% (at gold prices above $1,600/oz) up to an aggregate of $2,000 in royalty payments;

 

·

granting us a perpetual NSR on production from underground mining (the “Underground NSR”) at rates that range from 1% (at gold prices of $1,400/oz or less) to a maximum of 2% (at gold prices above $1,600/oz); and

 

·

granting us the right to assume a 49% non-carried interest in an underground project if Minera Alamos decides to develop an underground mine at the GdlR Project (the “Back-in Right”).

 

The Option Agreement provides that all cash payments are non-refundable and optional to Minera Alamos, and in the event Minera Alamos fails to pay any of the required amounts as set out in the Option Agreement, or fails to comply with its other obligations, the Option Agreement will terminate and Minera Alamos will have no interest in the GdlR Project. Provided it is not in breach of the Option Agreement, Minera Alamos may at its discretion advance the above payment schedule. 

 

Subject to Minera Alamos timely making all the option payments, and fulfilling its other obligations with respect to the Option Agreement, we will transfer 100% of the shares of the Company’s 100% owned subsidiary Minera Gold Stake S.A. de C.V., the entity which owns the GdlR Project, to Minera Alamos and the Open-Pit NSR and Underground NSR will be granted to us.

 

If Minera Alamos discovers, and decides to develop, an underground mine at the GdlR Project and we exercise the Back-in Right, we and Minera Alamos have agreed to form a joint venture to develop and operate the underground mine.  If the joint venture is formed, the Underground NSR will terminate.

 

The Company has determined that control of the GdlR Project has not been transferred for accounting purposes. The first option payment of $1,500 received in October 2017 has been accounted for as reduction to carrying value. Subsequent option payments received, if any, will be accounted for as further reductions to carrying value. After the carrying value has been reduced to zero, remaining option payment proceeds, if any, will be recognized as a contract liability until control of the GdlR Project has transferred to the buyer or the Option Agreement has been terminated. In addition, in accordance with our policy, potential royalty revenue and future option payments have been fully constrained.

 

Long Valley Claims

 

During the three months ended March 31, 2017, we sold our Long Valley unpatented mining claims located in California for consideration, net of transaction costs, of $358 which was paid at closing; a future payment of $500 one month after the start of commercial production; a future payment of $500 on or prior to the first anniversary of the start of commercial production; and a NSR on any future production from said claims at a variable rate between 0.5% and 2.0%

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Table of Contents

VISTA GOLD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

depending on the average gold price realized.  The Company has determined that control of the Long Valley claims were transferred to the buyer at the time of sale for accounting purposes.  This sale resulted in a realized gain of $358.    

 

5.  Plant and Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

December 31, 2017

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

    

Cost

    

depreciation

    

Net

    

Cost

    

depreciation

    

Net

  

Mt Todd, Australia

 

$

5,691

 

$

4,831

 

$

860

 

$

5,646

 

$

4,591

 

$

1,055

 

Corporate, United States

 

 

333

 

 

333

 

 

 —

 

 

333

 

 

333

 

 

 —

 

Used mill equipment, Canada

 

 

6,500

 

 

 —

 

 

6,500

 

 

6,500

 

 

 —

 

 

6,500

 

 

 

$

12,524

 

$

5,164

 

$

7,360

 

$

12,479

 

$

4,924

 

$

7,555

 

 

 

6. Common Shares

 

Warrants

 

Warrant activity is summarized in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

Weighted

 

 

 

 

 

 

 

 

average

 

average

 

 

 

 

 

 

Warrants

 

exercise price

 

remaining life

 

 

 

 

 

    

outstanding

    

per share

    

(yrs.)

    

Intrinsic value

  

As of December 31, 2017

 

6,514,625

 

$

1.92

 

1.6

 

$

 —

 

As of June 30, 2018

 

6,514,625

 

$

1.92

 

1.1

 

$

 —

 

 

Stock-Based Compensation

 

   

 

Under the Company’s stock option plan (the “Plan”), we may grant options to purchase common shares of the Company (“Common Shares”) to our directors, officers, employees and consultants.  The maximum number of our Common Shares that may be reserved for issuance under the Plan, together with RSUs currently outstanding under the LTIP, is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis at any one time. Options under the Plan are granted from time to time at the discretion of the Board, with vesting periods and other terms as determined by the Board.  

 

Stock-based compensation expense for the three and six months ended June 30, 2018 and 2017 is as follows: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2018

    

2017

    

2018

    

2017

    

Stock options

 

$

54

 

$

12

 

$

200

 

$

24

 

Restricted stock units

 

 

192

 

 

169

 

 

384

 

 

403

 

 

 

$

246

 

$

181

 

$

584

 

$

427

 

 

As of June 30, 2018, stock options and RSUs had unrecognized compensation expense of $206 and $475, respectively, which is expected to be recognized over a weighted average period of 1.2 and 1.0 years, respectively.   

10


 

Table of Contents

VISTA GOLD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

 

Stock Options

 

A summary of options under the Plan as of June 30, 2018 is set forth in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average

 

Weighted average

 

Aggregate

 

 

 

Number of

 

exercise price

 

remaining

 

intrinsic

 

 

    

options

    

per option

    

contractual term

    

value

 

Outstanding - December 31, 2017

 

1,144,500

    

$

0.42

 

1.15

 

$

346

 

Granted

 

820,000

 

 

0.75

 

 

 

 

 

 

Exercised

 

(30,000)

 

 

0.36

 

 

 

 

 

 

Outstanding - June 30, 2018

 

1,934,500

 

$

0.56

 

2.36

 

$

327

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable - June 30, 2018

 

1,134,912

 

$

0.51

 

1.64

 

$

246

 

 

A summary of our unvested stock options as of June 30, 2018 is set forth in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

average

 

 

 

 

 

average

 

remaining

 

 

 

 

 

grant-date

 

amortization

 

 

 

Number of

 

fair value

 

period

 

 

    

options

    

per option

    

(Years)

  

Unvested - December 31, 2017

 

246,250

 

$

0.22

 

0.99

 

Granted

 

820,000

 

 

0.48

 

 

 

Vested

 

(266,662)

 

 

0.48

 

 

 

Unvested - June 30, 2018

 

799,588

 

$

0.40

 

1.20

 

 

No stock options were granted for the six months ended June 30, 2017.  The fair value of stock options granted during the six months ended June 30, 2018 to employees, directors and consultants was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

    

Expected volatility

 

77.1

%

 

Risk-free interest rate

 

2.6

%

 

Expected life (years)

 

 5

 

 

Dividend yield

 

 —

 

 

Forfeiture assumption

 

 —

%

 

 

Restricted Stock Units

 

The following table summarizes the RSUs outstanding under the LTIP as of June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average

 

 

 

Number

 

grant-date fair

 

 

    

of units

    

value per unit

 

Unvested - December 31, 2017

 

1,567,907

    

$

0.85

  

Cancelled/forfeited

 

(101,392)

 

 

0.98

 

Vested, net of shares withheld

 

(127,942)

 

 

0.97

 

Granted

 

319,000

 

 

0.75

 

Unvested - June 30, 2018

 

1,657,573

 

$

0.81

 

 

11


 

Table of Contents

VISTA GOLD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

A portion of the RSU awards vest on a fixed future date provided the recipient continues to be affiliated with Vista on that date.  Other RSU awards vest subject to certain performance and market criteria, including the accomplishment of certain corporate objectives and the Company’s share price performance.  The minimum vesting period for RSUs is one year.  

 

During the six months ended June 30, 2018, the Company withheld shares with an equivalent value to meet the employee withholding tax obligations which resulted from RSUs that vested in the period.  Shares withheld are considered cancelled/forfeited. 

 

New RSUs will not be granted under the LTIP until the allocation of such awards is duly approved by the shareholders of the Company.

 

7.  Commitments and Contingencies

 

Our exploration and development activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. As such, the future expenditures that may be required for compliance with these laws and regulations cannot be predicted. We conduct our operations in an effort to minimize effects on the environment and believe our operations are in compliance with applicable laws and regulations in all material respects.

 

Under our agreement with the Jawoyn Association Aboriginal Corporation (the  “JAAC”), we have agreed to offer the JAAC the opportunity to establish a joint venture with Vista holding a 90% participating interest and the JAAC holding a 10% participating interest in Mt Todd. In addition, the JAAC will be entitled to an annual cash payment, or payment in kind, equal to 1% of the value of the annual gold production from the current mining licenses, and a 1% NSR on other metals, subject to a minimum payment of A$50 per year.

 

8.  Fair Value Accounting

The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at June 30, 2018

 

 

    

Total

    

Level 1

    

Level 3

 

Marketable securities

 

$

17

 

$

17

 

$

 —

 

Other investments (Midas Gold Shares)

 

 

5,774

 

 

5,774

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at December 31, 2017

 

 

    

Total

    

Level 1

    

Level 3

 

Marketable securities

 

$

90

 

$

90

 

$

 —

 

Other investments (Midas Gold Shares)

 

 

3,746

 

 

3,746

 

 

 —

 

Used mill equipment (non-recurring)

 

 

6,500

 

 

 —

 

 

6,500

 

 

Our marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market.  Marketable securities are included in other current assets on the Condensed Consolidated Balance Sheets for each period presented.

 

The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 2017 was based on an independent third-party valuation. As of June 30, 2018, an independent third-party evaluation was not deemed necessary.  The mill equipment is included in plant and equipment on the Condensed Consolidated Balance Sheets for each period presented.

 

There have been no transfers between levels in 2018, nor have there been any changes in valuation techniques.

12


 

Table of Contents

VISTA GOLD CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

 

9.  Geographic and Segment Information

 

The Company has one reportable operating segment.  We evaluate, acquire, explore and advance gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions.  These activities are currently focused principally in Australia. We reported no revenues during the three and six months ended June 30, 2018 and 2017.  Geographic location of mineral properties and plant and equipment is provided in Notes 4 and 5, respectively.

 

 

 

 

 

13


 

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

 

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2018, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States. This discussion and analysis contains forward-looking statements and forward-looking information that involve risks, uncertainties and assumptions.  Our actual results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors.  See section heading “Note Regarding Forward-Looking Statements” below.

 

All dollar amounts stated herein are in U.S. dollars in thousands, except per share and per ounce amounts and currency exchange rates unless specified otherwise. References to A$ are to Australian currency and to $ are to United States currency.

 

Overview

 

Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration.  We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. We do not currently generate cash flows from mining operations.

 

The Company’s flagship asset is its 100% owned Mt Todd gold project (“Mt Todd” or the “Project”) in the Northern Territory (“NT”) Australia.  Mt Todd is the largest undeveloped gold project in Australia.  In January 2018, the Company received authorization for the last major environmental permit and we announced the positive results of the updated PFS for Mt Todd, which confirms the project’s solid economics at a gold price of $1,300/oz. See “Project Updates” below for a summary of the PFS results.  With these important milestones complete, Vista is in a position to identify and pursue strategic alternatives that may provide the best opportunity for shareholders to realize fair value for Mt Todd.

 

Results from Operations

 

Summary

 

Consolidated net loss for the three months ended June 30, 2018 and 2017 was $1,923 and $2,682 or $0.02 and $0.03 per share, respectively.  Consolidated net loss for the six months ended June 30, 2018 and 2017 was $2,871 and $5,529 or $0.03 and $0.06 per share, respectively.    The principal components of these year-over-year changes are discussed below.

 

Exploration, property evaluation and holding costs

 

Exploration, property evaluation and holding costs were $1,055 and $1,308 during the three months ended June 30, 2018 and 2017, respectively, and $2,600 and $3,060 for the six months ended June 30, 2018 and 2017, respectively. These costs are predominantly associated with Mt Todd and are comprised of fixed costs and discretionary costs. For the six months ended June 30, 2018 and 2017, our fixed costs (which include cash expenditures necessary to ensure that we preserve our property rights and meet all of our safety, regulatory and environmental responsibilities) trended approximately 20% higher in 2018 compared to the same period in 2017 as baseline monitoring activities have been introduced as part of our compliance with the terms of the permit granted under the Australian Environmental Protection and Biodiversity Conservation Act of 1999 (“EPBC”) in January 2018.  In addition, we have added site employees to complement site environmental, maintenance and exploration activities.  We expect 2018 fixed costs, in Australian dollar terms, to continue to trend 20% to 25% (approximately A$650 to A$800) higher than 2017 fixed costs.

 

The magnitude of discretionary program spending during the three and six months ended June 30, 2018 was lower than the discretionary program spending during the three and six months ended June 30, 2017.  The principal 2018 program

14

 


 

was the drilling of four additional PQ core holes designed to extract approximately 6 tonnes of higher grade material from the Batman pit, for the completion of two additional 2.5 tonne bulk HPGR crushing, XRT and laser sorting tests using the same equipment as previous test work; and a single 1 tonne sample for completing an HPGR test with a competing HPGR manufacturer. The two 2.5 tonne tests are being conducted to confirm gold loss in the rejected material from higher grade ores.  The material 2017 discretionary programs included: the completion of the drilling program to generate the 20 tonne sample used in the ore sorting testing program; the ore sorting testing program and subsequent metallurgical studies including grinding studies to confirm the potential for improved gold recoveries and preparation of the draft mine management plan.  Based on these studies, the Company completed the PFS, the results of which were announced during the first quarter of 2018. See “Project Updates” below for a summary of the PFS results.  We expect 2018 discretionary costs, in Australian dollar terms, to be 45% to 50% (approximately A$2,000 to A$2,250) lower than 2017 discretionary costs.

 

Corporate administration

 

Corporate administration costs were $888 and $775 during the three months ended June 30, 2018 and 2017, respectively, and $2,311 and $1,796 for the six months ended June 30, 2018 and 2017, respectively.  Higher 2018 fixed costs were incurred principally as a result of the completion of the Mt Todd PFS update, which affected investor relations, regulatory and compensation costs. In addition, insurance coverage was increased in 2018, resulting in higher 2018 insurance costs.  We expect 2018 fixed costs to trend approximately 15% - 20% (approximately $450 to $600) higher than 2017 fixed costs, as we expect to continue our increased emphasis on investor relations programs through the remainder of the year.    

 

Gain on disposal of mineral property

 

Long Valley claims

 

During the three months ended March 31, 2017, we sold our Long Valley unpatented mining claims located in California for consideration, net of transaction costs, of $358 which was paid at closing; a future payment of $500 one month after the start of commercial production; a future payment of $500 on or prior to the first anniversary of the start of commercial production; and a net smelter return royalty (“NSR”) on any future production from said claims at a variable rate between 0.5% and 2.0% depending on the average gold price realized. This sale resulted in a realized gain of $358.

 

Non-operating income and expenses  

 

Gain/(loss) on other investments

 

Gain/(loss) on other investments was $0 and $(468) for the three months ended June 30, 2018 and 2017, respectively, and $2,028 and $(780) for the six months ended June 30, 2018 and 2017, respectively.  These amounts are the result of changes in fair value of the common shares we hold in Midas Gold Corp. (“Midas Gold Shares”).  

 

Financial Position, Liquidity and Capital Resources

 

Operating activities

 

Net cash used in operating activities was $4,995 and $4,039 for the six months ended June 30, 2018 and 2017, respectively.  The increased use of cash in 2018 was driven mainly by the reduction in accounts payable and accrued liabilities during the first quarter. Relatively high discretionary program activity and completion of the Mt Todd PFS, in particular, resulted in higher than normal accounts payable at the end of 2017. 

 

Investing activities

 

Net cash of $6,185 and $4,201 for the six months ended June 30, 2018 and 2017, respectively, was provided primarily by the disposition of short-term investments, net of acquisitions.

 

15


 

Financing activities

 

During the six months ended June 30, 2018, in lieu of issuing common shares of the Company on vesting of RSUs, cash of $39 was used for the payment of related employee withholding tax obligations.  $16 was received from the exercise of stock options.

 

There were no cash transactions from financing activities during the six months ended June 30, 2017.

 

Liquidity and capital resources

 

Our cash and short-term investments as of June 30, 2018 decreased to $11,576 from $16,575 at December 31, 2017 due mainly to expenditures for operating activities and the reduction of payables. Our net working capital decreased to $16,942 at June 30, 2018 from $19,057 at December 31, 2017 due mainly to the decrease in cash and short-term investments to fund operating activities, partially offset by an increase in the market value of our Midas Gold Shares.

 

We believe that our existing working capital, together with potential future sources of non-dilutive financing, will be sufficient to fully fund our currently planned fixed costs and discretionary programs into 2020. 

 

Potential future sources of non-dilutive financing include the sale of non-core assets such as our used mill equipment and future option payments for the Guadalupe de los Reyes gold/silver project; and, depending on market conditions, the sale of some or all of our remaining Midas Gold Shares. 

 

The continuing long-term viability of the Company is dependent upon our ability to secure sufficient funding and ultimately to generate future profits from operations or sales of assets. The underlying value and recoverability of the amounts shown as mineral properties and plant and equipment in our Condensed Consolidated Balance Sheets are dependent on our ability to fund exploration and development activities that could lead to profitable production or proceeds from the disposition of these assets.

 

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 June 30, 2018

 

 

    

Total

    

Level 1

    

Level 3

 

Marketable securities

 

$

17

 

$

17

 

$

 —

 

Other investments (Midas Gold Shares)

 

 

5,774

 

 

5,774

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at December 31, 2017

 

 

    

Total

    

Level 1

    

Level 3

 

Marketable securities

 

$

90

 

$

90

 

$

 —

 

Other investments (Midas Gold Shares)

 

 

3,746

 

 

3,746

 

 

 —

 

Used mill equipment (non-recurring)

 

 

6,500

 

 

 —

 

 

6,500

 

 

Our marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market.  Marketable securities are included in other current assets on the Condensed Consolidated Balance Sheets for each period presented.

 

The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 2017 was based on an independent third-party valuation. As of June 30, 2018, an independent third-party evaluation was not deemed necessary.  The used mill equipment is included in plant and equipment on the Condensed Consolidated Balance Sheets for each period presented.

 

There have been no transfers between levels in 2018, nor have there been any changes in valuation techniques.

16


 

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Contractual Obligations

 

We have no material contractual obligations as of June 30, 2018. 

 

Project Updates

 

Mt Todd Gold Project, Northern Territory, Australia

The following scientific and technical information about Mt Todd has been reviewed and approved by Mr. John Rozelle, Senior Vice President of Vista.  Mr. Rozelle is a qualified person as defined by Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

In January 2018, we announced the results of an updated preliminary feasibility study (the “PFS”) for Mt Todd project (the “Project”).  The PFS is based on the results of a comprehensive review of the Project and the re-design of elements of the process flow sheet, incorporating automated sorting and grinding circuit design changes. The process improvement efforts have resulted in reduced operating costs, increased gold recovery and higher gold production at Mt Todd. Management of Vista believes that the design changes have resulted in significantly improved Project economics compared to the previous preliminary feasibility study, at a $1,300/oz gold price.

 

The PFS evaluates two development scenarios: a 50,000 tpd project that develops more of the Mt Todd resource and generates a larger Net Present Value (“NPV”) (the “Base Case”); and a smaller and higher-grade 33,000 tpd project (the “Alternate Case”). 

 

Highlights of the PFS Base Case are presented in the table below: 

 

 

 

 

 

 

 

 

 

 

 

 

@ $1,300/oz Au

 

Years 1-5

 

Life of Mine (13 years)

 

Average Milled Grade (g Au/t)

 

 

0.98

 

 

 

 

0.82

 

 

Payable Gold Annual Average (000's ozs)

 

 

479

 

 

 

 

382

 

 

Payable Gold Total (000's ozs)

 

 

2,397

 

 

 

 

4,956

 

 

Gold Recovery

 

 

86.4

%  

 

 

 

85.8

%  

 

Cash Costs ($/oz)

 

$

571

 

 

 

$

645

 

 

Strip Ratio (waste:ore)

 

 

2.8

 

 

 

 

2.5

 

 

Initial Capital ($ millions)

 

 

 

 

 

 

$

839

 

 

Pre-tax NPV 5% ($ millions)

 

 

 

 

 

 

$

1,178

 

 

After-tax NPV 5% ($ millions)

 

 

 

 

 

 

$

679

 

 

IRR (Pre-tax/After-tax)

 

 

 

 

 

 

 

27.3 / 20.5

%  

 

After-tax Payback (Production Years)

 

 

 

 

 

 

 

3.2

 

 

 

Note: Economics presented using $1,300/oz gold and a flat $0.80 USD : $1.00 AUD exchange rate and assumes deferral of certain Northern Territory tax obligations as well as realization of equipment salvage values at the end of the mine life.

 

17


 

The following table illustrates the sensitivity of the Base Case after-tax economics to variable gold prices and foreign exchange assumptions:

 

Foreign

Exchange

(US$/AUD)

Gold Price

$1,100

$1,200

$1,300

$1,400

$1,500

IRR

NPV5

 

IRR

NPV5

 

IRR

NPV5

 

IRR

NPV5

 

IRR

NPV5

 

0.70

15.9%

$439

20.5%

$632

24.9%

$825

29.1%

$1,016

33.2%

$1,208

0.75

13.8%

$366

18.3%

$559

22.6%

$752

26.8%

$944

30.8%

$1,136

0.80

11.9%

$292

16.3%

$486

20.5%

$679

24.6%

$872

28.6%

$1,063

0.85

10.1%

$222

14.3%

$412

18.5%

$606

22.5%

$799

26.4%

$991

0.90

8.3%

$150

12.5%

$339

16.6%

$532

20.6%

$726

24.4%

$918

Note: Changes in Foreign Exchange rates are only applied to operating costs and not applied to either initial or sustaining capital costs.

Highlights of the PFS Alternate Case are presented in the table below: