10-Q 1 vgz-20190331x10q.htm 10-Q vgz_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

 

 

 

 

 

   

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

For the quarterly period ended March  31, 2019

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 ☒    

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Shares, no par value

 

VGZ

 

NYSE American

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 100,537,541 common shares, without par value, outstanding as of April 26, 2019.

 

 

 


 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

 

    

2019

    

2018

 

Assets:

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

378

 

$

1,071

 

Short-term investments (Note 3)

 

 

6,012

 

 

6,997

 

Other investments, at fair value (Note 3)

 

 

4,838

 

 

5,462

 

Other current assets

 

 

470

 

 

540

 

Total current assets

 

 

11,698

 

 

14,070

 

 

 

 

 

 

 

 

 

Non-current assets:

 

 

 

 

 

 

 

Mineral properties (Note 4)

 

 

2,321

 

 

2,421

 

Plant and equipment, net (Note 5)

 

 

5,663

 

 

5,635

 

Right-of-use assets (Note 2)

 

 

63

 

 

 —

 

Total non-current assets

 

 

8,047

 

 

8,056

 

Total assets

 

$

19,745

 

$

22,126

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity:

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

289

 

$

195

 

Accrued liabilities and other

 

 

478

 

 

435

 

Provision for environmental liability

 

 

242

 

 

242

 

Total current liabilities

 

 

1,009

 

 

872

 

Non-current liabilities:

 

 

 

 

 

 

 

Lease liability (Note 2)

 

 

63

 

 

 —

 

Total non-current liabilities

 

 

63

 

 

 —

 

Total liabilities

 

 

1,072

 

 

872

 

 

 

 

 

 

 

 

 

Commitments and contingencies – (Note 7)

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

Common shares, no par value - unlimited shares authorized; shares outstanding: 2019 - 100,537,541 and 2018 - 100,268,161 (Note 6)

 

 

457,009

 

 

456,938

 

Accumulated deficit

 

 

(438,336)

 

 

(435,684)

 

Total shareholders' equity

 

 

18,673

 

 

21,254

 

Total liabilities and shareholders' equity

 

$

19,745

 

$

22,126

 

 

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 March 31, 

 

 

 

2019

    

2018

    

Operating expense:

 

 

 

 

 

 

 

Exploration, property evaluation and holding costs

 

$

(946)

 

$

(1,545)

 

Corporate administration

 

 

(1,147)

 

 

(1,423)

 

Depreciation and amortization

 

 

(12)

 

 

(228)

 

Total operating expense

 

 

(2,105)

 

 

(3,196)

 

 

 

 

 

 

 

 

 

Non-operating income/(expense):

 

 

 

 

 

 

 

(Loss)/gain on other investments (Note 3)

 

 

(624)

 

 

2,028

 

Interest income

 

 

42

 

 

182

 

Other income/(expense)

 

 

35

 

 

38

 

Total non-operating income/(expense)

 

 

(547)

 

 

2,248

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(2,652)

 

 

(948)

 

Net loss

 

$

(2,652)

 

$

(948)

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(2,652)

 

$

(948)

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

100,323,736

 

 

99,445,750

 

Net loss per share

 

$

(0.03)

 

$

(0.01)

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

100,323,736

 

 

99,445,750

 

Net loss per share

 

$

(0.03)

 

$

(0.01)

 

 

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, 2017

 

99,412,007

 

$

456,053

 

$

(426,968)

 

$

(2)

 

$

29,083

 

Cumulative adjustment related to Accounting Standard Update 2016-01

 

 —

 

 

 —

 

 

(2)

 

 

 2

 

 

 —

 

Adjusted balances at January 1, 2018

 

99,412,007

 

 

456,053

 

 

(426,970)

 

 

 —

 

 

29,083

 

Shares issued (RSUs vested, net of shares withheld) (Note 6)

 

127,942

 

 

(39)

 

 

 —

 

 

 

 

 

(39)

 

Stock-based compensation (Note 6)

 

 —

 

 

338

 

 

 —

 

 

 

 

 

338

 

Net loss

 

 —

 

 

 —

 

 

(948)

 

 

 

 

 

(948)

 

Balances at March 31, 2018

 

99,539,949

 

$

456,352

 

$

(427,918)

 

$

 —

 

$

28,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2019

 

100,268,161

 

$

456,938

 

$

(435,684)

 

$

 —

 

$

21,254

 

Shares issued (RSUs vested, net of shares withheld) (Note 6)

 

142,380

 

 

(46)

 

 

 —

 

 

 

 

 

(46)

 

Shares issued (exercise of stock options) (Note 6)

 

127,000

 

 

66

 

 

 —

 

 

 

 

 

66

 

Stock-based compensation (Note 6)

 

 —

 

 

51

 

 

 —

 

 

 

 

 

51

 

Net loss

 

 —

 

 

 —

 

 

(2,652)

 

 

 

 

 

(2,652)

 

Balances at March 31, 2019

 

100,537,541

 

$

457,009

 

$

(438,336)

 

$

 —

 

$

18,673

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

Three months ended  March 31, 

 

    

2019

 

2018

    

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss for the period

 

$

(2,652)

 

$

(948)

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

12

 

 

228

 

Stock-based compensation

 

 

51

 

 

338

 

(Gain)/loss on other investments

 

 

624

 

 

(2,028)

 

Change in working capital account items:

 

 

 

 

 

 

 

Other current assets

 

 

70

 

 

169

 

Accounts payable, accrued liabilities and other

 

 

137

 

 

(962)

 

Net cash used in operating activities

 

 

(1,758)

 

 

(3,203)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Disposition of short-term investments, net of acquisitions

 

 

985

 

 

2,226

 

Additions to plant and equipment

 

 

(40)

 

 

 —

 

Proceeds from option/sale agreements, net

 

 

100

 

 

 —

 

Net cash provided by investing activities

 

 

1,045

 

 

2,226

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Payment of taxes from withheld shares

 

 

(46)

 

 

(39)

 

Proceeds from exercise of stock options

 

 

66

 

 

 —

 

Net cash provided by / (used in) financing activities

 

 

20

 

 

(39)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(693)

 

 

(1,016)

 

Cash and cash equivalents, beginning of period

 

 

1,071

 

 

1,431

 

Cash and cash equivalents, end of period

 

$

378

 

$

415

 

 

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

 

 

6


 

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” 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 announced the positive results of an updated preliminary feasibility study (“PFS”) for Mt Todd. Subsequently, we completed additional metallurgical testing, including ongoing fine grinding and leach recovery tests, which demonstrate further improvements in gold recovery. Vista plans to integrate these and other improvements in a new update to the PFS, scheduled for release in the coming months.

 

The Company also holds 7.8 million 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, 2018 as filed with the United States Securities and Exchange Commission and Canadian securities regulatory authorities on February 25, 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

 

Lease Accounting

In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company adopted the standard on January 1, 2019 using the modified retrospective approach.  We recognized additional operating liabilities of $186 on adoption, with corresponding ROU assets of the same amount, based on the present value of the remaining lease payments. This standard does not affect the expense recognition of the leases currently held by the Company. On adoption, we also elected the practical expedients, which among other things, does not require reassessment of lease classification. The Company does not include short term leases in its ROU and lease liability calculations. As of March, 31, 2019, the asset and liability were $163.  These amounts are broken out into current and non-current assets. $100 is included in other current assets, and accrued liabilities and other, respectively.  $63 is included in other non-current assets and lease liability, respectively. The Company’s leases have remaining terms which range from 0.7 to 2.7 years as of March 31, 2019.

 

3. Short-term and Other Investments

 

Short-term investments

 

As of March 31, 2019 and December 31, 2018, the amortized cost basis of our short-term investments was $6,012 and $6,997, respectively. The amortized cost basis approximates fair value at March 31, 2019 and December 31, 2018. Short-

7

 


 

term investments at March 31, 2019 and December 31, 2018 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 

 

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 March 31, 2019 and December 31, 2018.  The gain/(loss) amounts are as of the three months ended March 31, 2019 and year ended December 31, 2018.

 

 

 

 

 

 

 

 

 

 

    

March 31, 2019

    

December 31, 2018

 

Fair value at beginning of period

 

$

5,462

 

$

3,746

 

Gain/(loss) during the period

 

 

(624)

 

 

1,716

 

Fair value at end of period

 

$

4,838

 

$

5,462

 

 

 

 

 

 

 

 

 

Midas Gold Shares held at the end of the period

 

 

7,802,615

 

 

7,802,615

 

 

 

 

4.  Mineral Properties

 

 

 

 

 

 

 

 

 

 

    

At March 31, 2019

    

At December 31, 2018

 

Mt Todd, Australia

 

$

2,146

 

$

2,146

 

Guadalupe de los Reyes, Mexico

 

 

 175

 

 

275

 

 

 

$

2,321

 

$

2,421

 

 

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

 

Pursuant to the terms of the Option Agreement, we 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 net smelter return (“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”).

 

8


 

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.

In October 2018, the Company agreed to extend the due date for the second $1,500 option payment for the GdlR Project by six months to April 23, 2019, at which time the payment was made. As consideration for the deferral, the Company received an additional $150 in cash, $50 of which was paid to Vista on October 24, 2018 and $100 of which Minera Alamos paid on January 23, 2019. In addition, Minera Alamos paid interest at a rate of 1.5% per month on the unpaid balance of the $1,500 payment beginning January 24, 2019. See also Note 10.

 

5.  Plant and Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

    

Cost

    

depreciation

    

Net

    

Cost

    

depreciation

    

Net

  

Mt Todd, Australia

 

$

5,238

 

$

5,075

 

$

163

 

$

5,197

 

$

5,062

 

$

135

 

Corporate, United States

 

 

333

 

 

333

 

 

 —

 

 

333

 

 

333

 

 

 —

 

Used mill equipment, Canada

 

 

5,500

 

 

 —

 

 

5,500

 

 

5,500

 

 

 —

 

 

5,500

 

 

 

$

11,071

 

$

5,408

 

$

5,663

 

$

11,030

 

$

5,395

 

$

5,635

 

 

 

6. Common Shares

 

Warrants

 

Outstanding warrants are 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 December 31, 2018

 

6,514,625

 

$

1.92

 

0.6

 

$

 —

 

As of March 31, 2019

 

6,514,625

 

$

1.92

 

0.4

 

$

 —

 

 

These warrants will expire in August 2019.

9


 

Stock-Based Compensation

 

Under the Company’s stock option plan (the “Plan”), we may grant options to purchase common shares of the Company (“Common Shares”) to our directors, officers, employees and consultants. The maximum number of Common Shares that may be reserved for issuance under the Plan, together with the Company’s restricted share units (“RSUs”) currently outstanding under the Company’s long term incentive plan (“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 of Directors of the Company (“Board”), with vesting periods and other terms as determined by the Board.

 

Stock-based compensation expense for the three months ended March 31, 2019 and 2018 is as follows: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

    

2019

    

2018

    

  

Stock options

 

 

$

50

 

$

146

 

 

Restricted stock units

 

 

 

 1

 

 

192

 

 

 

 

 

$

51

 

$

338

 

 

 

 

 

 

 

 

 

 

 

 

Phantom units (Discussed below)

 

 

 

22

 

 

 —

 

 

 

RSU costs in the three months ended March 31, 2019 are reduced by the cumulative effect of certain forfeitures that occurred in the period.

 

As of March 31, 2019, stock options, RSUs, and phantom units had unrecognized compensation expense of $109,  $108, and $135 respectively, which is expected to be recognized over a weighted average period of 1.1,  0.7, and 1.3 years, respectively.   

 

Stock Options

 

A summary of options under the Plan as of March 31, 2019 is set forth in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average

 

 

 

 

 

 

 

Weighted average

 

remaining

 

Aggregate

 

 

 

Number of

 

exercise price

 

contractual term

 

intrinsic

 

 

    

options

    

per option

    

(years)

    

value

 

Outstanding - December 31, 2017

 

1,144,500

    

 

0.42

 

1.15

 

$

346

 

Granted

 

1,142,000

 

 

0.71

 

 

 

 

 

 

Exercised

 

(218,600)

 

 

0.39

 

 

 

 

36

 

Cancelled/Forfeited

 

(748,751)

 

 

0.36

 

 

 

 

 —

 

Outstanding - December 31, 2018

 

1,319,149

    

$

0.71

 

3.84

 

$

 1

 

Exercised

 

(127,000)

 

 

0.52

 

 

 

 

29

 

Cancelled/Forfeited

 

(149)

 

 

0.52

 

 

 

 

 —

 

Outstanding - March 31, 2019

 

1,192,000

 

$

0.73

 

3.98

 

$

22

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable - March 31, 2019

 

718,997

 

$

0.75

 

3.89

 

$

 8

 

 

10


 

A summary of unvested stock options as of March 31, 2019 is set forth in the following table:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

average

 

 

 

 

 

average

 

remaining

 

 

 

 

 

grant-date

 

amortization

 

 

 

Number of

 

fair value

 

period

 

 

    

options

    

per option

    

(years)

  

Unvested - December 31, 2017

 

246,250

 

 

0.22

 

0.99

 

Granted

 

1,142,000

 

 

0.45

 

 

 

Cancelled/Forfeited

 

(246,250)

 

 

0.22

 

 

 

Vested

 

(382,331)

 

 

0.45

 

 

 

Unvested - December 31, 2018

 

759,669

 

$

0.45

 

1.14

 

Vested

 

(286,666)

 

 

0.48

 

 

 

Unvested - March 31, 2019

 

473,003

 

$

0.44

 

1.08

 

 

No stock options were granted for the three months ended March 31, 2019. The fair value of stock options granted during the three months ended March 31, 2018 to employees, directors and consultants was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

    

Expected volatility

 

76.2

%  

 

Risk-free interest rate

 

2.7

%  

 

Expected life (years)

 

 5

 

 

Dividend yield

 

0

 

 

Forfeiture assumption

 

 —

%  

 

 

Option Amendment

 

In July 2018, the Company amended certain 2013 stock option agreements, expiring December 30, 2018 subject to the potential for a temporary extension under the terms of the Plan, for seven executives and directors (the “Option Amendment”). The amendment provided each grantee with the opportunity to receive a cash buyout of certain vested, unexercised 2013 options in lieu of exercising the option to purchase shares. This cash buyout was based on the intrinsic value of each option at the time of the buyout. Options exchanged for cash under the Option Amendment are considered canceled/forfeited.  

 

Restricted Stock Units

 

The following table summarizes the RSUs outstanding under the LTIP as of March 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average

 

 

 

Number

 

grant-date fair

 

 

    

of RSUs

    

value per RSU

 

Unvested - December 31, 2017

 

1,567,907

    

$

0.85

  

Cancelled/forfeited

 

(246,683)

 

 

0.90

 

Vested, net of shares withheld

 

(637,554)

 

 

0.88

 

Granted

 

319,000

 

 

0.75

 

Unvested - December 31, 2018

 

1,002,670

    

$

0.78

  

Cancelled/forfeited

 

(198,821)

 

 

0.76

 

Vested, net of shares withheld

 

(142,380)

 

 

0.75

 

Unvested - March 31, 2019

 

661,469

 

$

0.80

 

 

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

11


 

certain corporate objectives and the Company’s share price performance. The minimum vesting period for RSUs is one year.  

 

During the three months ended March 31, 2019, the Company withheld Common Shares with an equivalent value to meet the employee withholding tax obligations which resulted from RSUs that vested in the period. Common Shares withheld are considered cancelled/forfeited. 

 

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

 

Phantom Units

 

 

 

 

 

 

 

 

 

 

 

Weighted average

 

 

 

 

 

remaining

 

 

 

Number of

 

vesting term

 

 

    

phantom units

    

(years)

 

Unvested - December 31, 2017

 

 —

    

 

 

Granted

 

265,000

 

 

 

Unvested - December 31, 2018

 

265,000

 

1.50

 

Granted

 

 —

 

 

 

Unvested - March 31, 2019

 

265,000

 

1.25

 

 

The Company granted a total of 265,000 phantom units to certain employees. The value of each unit is equal to the Company’s share price on the vesting date and is payable in cash. The phantom units vest on fixed future dates provided the recipient continues to be affiliated with Vista on those dates. The Company will account for these units as awards classified as liabilities with $45 included in current liabilities as of March 31, 2019. The Company recognized $22 of compensation expense for these phantom units in the three months ended March 31, 2019. 

 

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 March 31, 2019

 

 

    

Total

    

Level 1

    

Level 3

 

Other investments (Midas Gold Shares)

 

 

4,838

 

 

4,838

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at December 31, 2018

 

 

    

Total

    

Level 1

    

Level 3

 

Other investments (Midas Gold Shares)

 

 

5,462

 

 

5,462

 

 

 —

 

Used mill equipment (non-recurring)

 

 

5,500

 

 

 —

 

 

5,500

 

 

12


 

Our investment in Midas Gold Shares is classified as Level 1 of the fair value hierarchy as it is valued at quoted market prices in an active market.

 

The used mill equipment is classified as Level 3 of the fair value hierarchy as  its value at December 31, 2018 was based on an independent third-party valuation. As of March  31, 2019, 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 2019, nor have there been any changes in valuation techniques.

 

9.  Geographic and Segment Information

 

The Company has one reportable operating segment.  We evaluate, acquire, explore and advance gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions.  These activities are currently focused principally in Australia. We reported no revenues during the three months ended March 30, 2019 and 2018.  Geographic location of mineral properties and plant and equipment is provided in Notes 4 and 5, respectively.

 

10. Subsequent Event

 

Subsequent to the period end, the Company received the second $1,500 option payment for the GdlR Project on April 23, 2019, together with interest of $67. See also Note 4.

 

At the Company’s annual general meeting on May 2nd, 2019, a deferred share unit plan (the “DSU Plan”) was approved by shareholders. The DSU Plan allows the granting of deferred share units to non-employee directors. The Company will pay one Common Share for each deferred share unit only after the non-employee director has ceased to be a director of the Company. Additionally, the DSU Plan amended the LTIP such that non-employee directors are excluded from participation in the LTIP.

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 months ended March 31, 2019, 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. The Company has invested substantial amounts to evaluate, engineer, permit and de-risk the Project, and we believe these efforts have added to the underlying value of the Project. In January 2018, the Company received authorization for the last major environmental permit and announced the positive results of an updated PFS for Mt Todd.   Subsequently, we completed additional metallurgical testing, including ongoing fine grinding and leach recovery tests, which demonstrate further improvements in gold recovery. Vista plans to integrate these and other improvements in a new update to the PFS, scheduled for release in the coming months. With environmental permitting complete and an updated PFS pending, Vista believes it is in an ideal position to identify and pursue those strategic alternatives that may provide the best opportunity for shareholders to realize fair value for Mt Todd.

 

The Company also holds 7.8 million 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.

 

Results from Operations

 

Summary

 

Consolidated net loss for the three months ended March 31, 2019 and 2018 was $2,652 and $948 or $0.03 and $0.01 per share, respectively.  The principal components of these year-over-year changes are discussed below.

 

The Company has $10,689 of working capital and no debt as of March 31, 2019.

 

Exploration, property evaluation and holding costs

 

Exploration, property evaluation and holding costs were $946 and $1,545 during the three months ended March 31, 2019 and 2018, respectively. These costs are predominantly associated with Mt Todd and are comprised of project holding costs and discretionary costs. For the three months ended March 31, 2019 and 2018, our project holding 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 lower in Q1 2019 compared to the same period in 2018 as water discharge

14


 

from the Batman pit was lower than planned as a result of the relatively lower precipitation during the wet season, which reduced the scope of certain baseline monitoring activities. We expect offsetting costs later in 2019 in both of these areas. In addition, the Australian dollar was approximately 9% weaker in 2019 compared to 2018.

 

The magnitude of discretionary program spending during the three months ended March 31, 2019 was also lower than the 2018 discretionary costs. For the full year 2019 we expect total discretionary costs, in Australian dollar terms, to be similar to 2018 total discretionary costs.  

 

Included in the first quarter 2019 and 2018 costs is non-cash stock-based compensation of $10 and $85 respectively.

 

Corporate administration

 

Corporate administration costs were $1,147 and $1,423 during the three months ended March 31, 2019 and 2018, respectively.  2019 first quarter costs do not include some of the additional costs experienced in 2018 related to the completion of the 2018 Mt Todd PFS update, which affected investor relations, regulatory and compensation costs.

 

Included in the first quarter 2019 and 2018 costs is non-cash stock-based compensation of $41 and $253, respectively.

 

Depreciation

 

Depreciation costs were $12 and $228 during the three months ended March 31, 2019 and 2018, respectively.  The majority of the Company’s fixed assets were fully depreciated 2018, resulting in lower 2019 depreciation costs.

 

Non-operating income and expenses  

 

Gain/(loss) on other investments

 

Gain/(loss) on other investments was $(624) and $2,028 for the three months ended March 31, 2019 and 2018, respectively.  These amounts are the result of changes in fair value of our Midas Gold Shares.  

 

Financial Position, Liquidity and Capital Resources

 

Operating activities

 

Net cash used in operating activities was $1,758 and $3,203 for the three months ended March 31, 2019 and 2018, respectively.  The decreased use of cash in 2019 was the result of $875 lower cash costs and a reduction in accounts payable and accrued liabilities of $962 during the first quarter 2018, which is non-recurring.  

 

Investing activities

 

Net cash of $1,045 and $2,226 for the three months ended March 31, 2019 and 2018, respectively, was provided primarily by the disposition of short-term investments, net of acquisitions.

 

Financing activities

 

During the three months ended March 31, 2019 and 2018, cash of $46 and $39, respectively, was used for the payment of employee withholding tax obligations arising from the vesting of RSUs, in lieu of issuing common shares of the Company.  $66 was received from the exercise of stock options during the three months ended March 31, 2019. No options were exercised during the same period in 2018.

15


 

Liquidity and capital resources

 

Our cash and short-term investments as of March 31, 2019 decreased to $6,390 from $8,068 at December 31, 2018 due mainly to expenditures for operating activities. Our net working capital decreased to $10,689 at March 31, 2019 from $13,198 at December 31, 2018 due mainly to the decrease in cash and short-term investments to fund operating activities and the reduction 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 corporate and project holding costs and discretionary programs for more than 12 months. 

 

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. 

 

In addition to the potential sources of non-dilutive financing highlighted above, the Company has an at-the market offering agreement (the “ATM Agreement”) with H. C. Wainwright & Co., LLC (“Wainwright”) to provide additional balance sheet flexibility at a low cost. Under the ATM Agreement the Company may, but is not obligated to, issue and sell shares of the Company’s common stock through Wainwright as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $10,000 (the “ATM Program”). The ATM Agreement will remain in full force and effect until the earlier of August 31, 2020, or the date that the ATM Agreement is terminated in accordance with the terms therein.

 

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 future 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 March 31, 2019

 

 

    

Total

    

Level 1

    

Level 3

 

Other investments (Midas Gold Shares)

 

 

4,838

 

 

4,838

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at December 31, 2018

 

 

    

Total

    

Level 1

    

Level 3

 

Other investments (Midas Gold Shares)

 

 

5,462

 

 

5,462

 

 

 —

 

Used mill equipment (non-recurring)

 

 

5,500

 

 

 —

 

 

5,500

 

 

Our investment in Midas Gold Shares is classified as Level 1 of the fair value hierarchy as it is valued at quoted market prices in an active market.

 

The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 2018 was based on an independent third-party valuation. As of March 31, 2019, 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 2019, 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 March 31, 2019. 

 

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

2018 Program Results

In January 2018, we announced that the “authorization of a controlled activity” at Mt Todd, as required under the Environment Protection and Biodiversity Act, as it relates to the Gouldian Finch, had been approved by the Australian Commonwealth Department of Environment and Energy. With this authorization, Vista has all the major environmental approvals necessary to allow development of Mt Todd.

During 2018, we completed four additional large diameter 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 high pressure roll crushing, optical sorting tests using the same equipment as previous test work. The two 2.5 tonne tests were conducted to confirm the efficiency of sorting higher-grade ores. We are completing additional feasibility-study-level grinding tests with the manufacturers of the fine grinding mills in order to obtain material for ongoing metallurgical studies and specific operating data for future design and evaluation work. We have also completed additional testing with an impeller manufacturer in order to optimize the design of the leach tanks to achieve the lowest possible electrical power consumption at designed slurry densities.

In August 2018, we announced the results of fine grinding tests completed on low-grade samples, under the direction of Resource Development Inc. These tests suggest that the Mt Todd ore can be efficiently ground to a finer final product size with lower power consumption than estimated in the PFS (defined below). Leaching the finer final product size material has again confirmed higher recoveries at finer grind sizes. Based on these initial results, we are now completing additional testing to confirm higher gold recoveries over a broad range of feed grades. With the anticipated completion of the leach recovery tests in the next month, we expect to generate grind-size leach recovery curves covering a wide range of potential ore feed grades to confirm previous the results of tests previously established.

2019 Plans

Our 2019 plans include completion of the metallurgical program started in 2018. Specifically, we plan completion of additional fine grinding studies, leach recovery, and rheology studies. Upon completion of the confirmation metallurgical test work, Vista intends to update the January 24, 2018 PFS by incorporating the metallurgical test program results as well as updating capital and operating costs based on new quotes from suppliers. The areas of the PFS that we expect to be most impacted include higher gold recoveries due to the finer grind size and lower process plant operating costs with regard to reduced power consumption, reagents, and media.

17


 

2018 PFS

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 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

 

 

 

 

381

 

 

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.

 

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

                             * Approximate current conditions   †Assumptions used in the PFS

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

18


 

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

 

 

 

 

 

 

 

 

 

 

 

 

@ $1,300/oz Au

 

Years 1-5

 

Life of Mine (11 years)

Average Milled Grade (g Au/t)

 

 

0.95

 

 

 

 

 

 

0.90

 

Payable Gold Annual Average (000's ozs)

 

 

302

 

 

 

 

 

 

273

 

Payable Gold Total (000's ozs)

 

 

1,509

 

 

 

 

 

 

3,003

 

Gold Recovery

 

 

86.4

%